Finance minister Pravin Gordhan prepares to put the finishing touches to the 2016 budget presentation. Picture: TREVOR SAMSON
COLLECTED: A ratings downgrade is probably on the cards despite Finance Minister Pravin Gordhan’s budget. Picture: TREVOR SAMSON

I WROTE in my column last week that predictions are a fool’s game. And a fool is what I am, because it appears the two I made are turning out to be incorrect, at least as things stand now.

I thought Finance Minister Pravin Gordhan would be able to avoid a ratings downgrade, drawing on increased revenue from value-added tax (VAT) and a new higher tax bracket. I also thought Barclays would come to a decision not to sell a controlling stake in its Africa business, most of which consists of Absa.

Mr Gordhan last week announced a budget that might, if economic growth suddenly picked up on the back of real delivery of policies that have been a confused mess for at least a decade, be enough for SA to keep its investment grade.

Of course, that is a massive "if" and we have no good reason to believe the government will be able to deliver it. So a downgrade is probably the most likely outcome during the course of this year, triggering a much tougher fund-raising environment for the government. Interestingly, the Budget Review does flag both VAT and a new top income tax bracket as future options to help meet the extra R15bn that it has said it wanted to raise next year and in 2018. So my prediction may yet be borne out with next year’s budget.

And then the Financial Times reported at the weekend that Barclays was set to announce that it was putting Barclays Africa up for sale.

I had thought that, given the major difficulties with selling an international bank in the current environment, it would rather focus on improving returns and selling smaller components. But apparently a complete disinvestment is now on the cards, driven largely by the poor returns the business has delivered because of the collapse of the rand.

It is worth remembering that Barclays Africa isn’t the only South African bank that a parent would love to get rid of.

Old Mutual has long wanted to dispose of Nedbank. It very nearly sold it to HSBC in 2010, before HSBC somewhat presciently made the last-minute decision that it was too risky.

Had it bought Nedbank, HSBC would have struggled with its thin capital levels to deal with the wave of regulatory changes it has faced since. But the fact that Old Mutual has not been able to find another buyer tells you something about how difficult a task Barclays is going to face.

A few years ago, I bumped into a then director of Old Mutual and asked him if Nedbank was still for sale. "Sure it is, how much have you got in your wallet?" was his facetious quip, but one that reveals just how tough things might be.

Barclays could just pull a rabbit out of a hat. One person who would love to buy Barclays Africa is Bob Diamond, the former Barclays CEO who was kicked out of the top spot in 2012 amid the London interbank offered rate rigging controversy. He was running Barclays Capital at the time the bank bought Absa and as CEO was a major proponent of its Africa strategy. On exiting, he set up Atlas Mara, a focused African banking group that has been buying small banks around the continent.

It has a market cap of just $327m, so nothing like the $4.6bn that would be required to buy Barclays’s 62% stake. But just maybe he is a good enough fund raiser to pull off a miracle — and a miracle it would take.

Apart from Mr Diamond, I can’t imagine anyone is ambitious enough to buy a major exposure to Africa, particularly SA, which is on the verge of a downgrade. As I argued last week, the Reserve Bank is going to insist on a serious shareholder of reference, which can step in in the event of a crisis, and I don’t think there are any potential buyers based in SA that would qualify. There will probably be suggestions that the sale provides an opportunity for a major black-owned bank to be created and just maybe such a scenario is feasible if the billions in capital can be mobilised and if it really is a good idea to put that money at risk by backing a bulge bracket bank.

Barclays’s disinvestment is overall a bad thing for Africa.

It would mean an overall increase in the cost of funding for our banking sector, with one bank losing the credit enhancement that having Barclays as a parent offers.

The budget speech must have been a disappointment to the Barclays crowd. They will be hoping that the government can boost growth, avoid a downgrade and drive recovery in the value of the rand.

A credible scenario for SA’s future is going to be critical to its chances of pulling a deal together. Right now I can’t see anyone betting on SA’s consumer and business sectors being anything other than a headache for bankers.