While we continued focusing on sustainable growth in 2016, a number of significant developments influenced our strategic considerations and performance. The most significant of these was Barclays PLC’s decision to reduce its shareholding in Barclays Africa due to regulatory capital requirements. Despite this and other regulatory, macroeconomic and geopolitical factors, our focus on strong corporate governance, our customers, clients, employees and appropriate responses to regulatory change enabled us to make progress on our Goal to be the financial services group of choice in Africa.

Global and local environments continued to influence business

While the full impacts are yet to unfold, significant global developments – such as the United Kingdom’s decision to leave the European Union (Brexit), the United States’ presidential elections, and other political and legislative developments in some of our markets – have caused us to pause and reconsider the economic and policy assumptions which had informed our plans at the beginning of the year. In most instances, we have had to adapt our approach to accommodate this dynamic environment and, in some instances, we have had to alter our approach.

South Africa is our largest single market, it only narrowly avoided a sovereign credit rating downgrade, and its economic growth remained weak – affecting our business performance. There is consensus that economic restructuring is essential in South Africa to accelerate growth in the medium term, but progress is being affected by continuing political and policy challenges.

We are reassured now that the Financial Intelligence Centre Amendment Bill has been adopted in Parliament and awaits the President’s assent. Effective compliance with local and international banking regulations is critical for a competitive and sound banking system which enjoys good international standing. South Africa’s financial system, and its ability to interact effectively with the global financial system (particularly our banking system’s access to foreign currency to support foreign exchange clearing, lines of credit to facilitate transactions with local businesses, and global payments), is key for the country and the region’s economic growth.

We remain committed to contributing to the efforts of government, business and labour unions that seek to achieve much needed economic reforms in South Africa. The progress is a demonstration of the power of collaboration. The business sector has made firm commitments in terms of small enterprise funding and development, and on-the-job training. Agreement on a national minimum hourly wage rate is progressing, which has proven difficult before.

We continue monitoring and responding to the impact of regulatory changes across all our markets. For example, in South Africa there were changes to the National Credit Act, while in Kenya regulators introduced minimum deposit and maximum lending rates. Such changes introduce unique challenges, and we will continue adapting our businesses to these.

Barclays Africa strives to be responsive to socio-economic challenges affecting the communities in which we operate. We recognise the challenges all our markets have in common, including education, enterprise development and financial inclusion. Shared Growth, as an integral part of our strategy implementation, ensures an appropriate response as part of our everyday business to deliver measurable socio-economic and commercial outcomes.

Barclays PLC’s sell-down of its shareholding in Barclays Africa

On 1 March 2016, Barclays PLC announced its intention to sell down1 its interest in Barclays Africa to a level which would permit deconsolidation from both regulatory and accounting perspectives. The first tranche of 12.2% was successfully sold through an accelerated book build on 5 May 2016 – reducing its shareholding to 50.1%. Barclays PLC continues to explore strategic and capital market opportunities to further reduce its shareholding to achieve regulatory deconsolidation.

As our banks are systemically important in all our markets, regulators are actively engaged in separating Barclays Africa from Barclays PLC, to ensure there are no systemic implications, and to secure an orderly separation, with operational stability and continuity across the Group.

As announced on 23 February 2017, Barclays PLC has submitted an application to the South African Reserve Bank to approve the reduction of its shareholding in Barclays Africa to below 50%. The application included the terms of the separation payments and transitional services arrangements. This includes the contracts securing Barclays PLC’s operational support for the next three years, while we implement new technologies and build additional capacity. Maria provides more detail on the agreements .

In response to the sell-down, we established a dedicated Board sub-committee, specifically to consider and provide guidance on the implications thereof.

1

Barclays PLC’s sell down of its shares in Barclays Africa (‘the sell-down’) refers to the regulated disposal of its shares with the aim to achieve regulatory deconsolidation. The ‘separation process’ refers to the broader short, medium and long-term operational and administrative activities which disengage the businesses from one another.

Our One Africa strategy remains relevant

Our Board devoted significant time to assessing our strategy against the backdrop of the Barclays separation, the continuing turbulent macro and sociopolitical environments, and a shifting competitive and technological landscape.

The Board and management concluded that our One Africa strategy remains relevant and targets the key areas for growth, while maintaining sound controls with a strong focus on risk management with sufficient stretch built in to deliver appropriate value for our stakeholders.

Firstly, as a customer and client-focused organisation, we aim to ensure that customers’ and clients’ experience remains our primary focus; secondly, we are investing in growth opportunities and providing access to the African and global capital markets; thirdly, we are simplifying our business processes to improve efficiency; and lastly, we continue making significant investments in technology and automation.

The near-term focus is on delivering on our current strategy while managing the separation from Barclays.

Strong oversight for effective governance and control

Our Board governance objectives for 2016 were focused on:

  • the execution of our strategy with a focus on our growth objectives and market commitments;
  • our IT strategy, with a focus on resilience and investment spend;
  • our adaptability in dealing with emerging global issues and management of our risk and capital frameworks;
  • running the business in an ethical and transparent way; and
  • our people and culture.

We have made progress on our strategy execution despite the macro-environmental and regulatory impacts on our performance. Our performance demonstrates the benefit of being a well-diversified group, both by activity and geography.

Our IT strategy is focused on resilience. We have successfully moved to a new data centre and continue to migrate services. We have had a marked improvement in service, stability and recovery in South Africa and, increasingly, in our other markets. Our innovation programme continues to drive new solutions for our customers and clients. We pay close attention to reporting on investment spend and the related returns.

We have put significant focus on the control and risk environment – both at Board and committee level – with detailed reviews of our payments and collections environments; fraud management; cyber and financial crime detection and prevention; supplier management; and regulatory reporting.

Our risk and capital management frameworks are updated when required, in the context of changing regulatory, risk and business environments. Major projects being monitored include IFRS 9 accounting standards and the Basel Committee on Banking Supervision’s regulation number 239 (BCBS 239) risk reporting.

We have conducted rigorous stress testing in multiple scenarios, and our capital and liquidity ratios remained at satisfactory levels each time.

Our leadership continues to build an organisational culture based on ethical values, transparency and accountability. We have a zero-tolerance approach to non-compliance, including matters arising from inappropriate conduct and other control failures. The relevant board committees focus on the actions taken by management in response to such failures.

We monitor ongoing progress on succession planning and leadership development – including cross-border placement opportunities. While we have improved our employment equity, diversity and inclusion, more needs to be done.

A strong and diverse board is key to value creation

The knowledge, skills, experience, diversity and independence of our Board is critical to sustainable value creation.

We have a diverse Board with strong commercial and technical skill sets to appropriately constitute our committees; deliberate, advise and decide on relevant matters; and to deliver on our responsibilities to our shareholders.

We have reviewed the composition and size of our Board to manage the technical demands of the various committees, to bolster specific skills-sets, to improve gender and race representation and to improve succession coverage. We made four new appointments – Paul O’Flaherty (February 2016), Daisy Naidoo (May 2016), Jason Quinn (September 2016) and René van Wyk (February 2017), and we intend to make additional appointments in 2017. Barclays PLC is reconsidering its Board nominees and changes will be subject to a Board and regulatory approval process.

A key function of the Board has been to consider the impact of the Barclays PLC sell-down and the resultant separation process. Our Ad hoc Board sub-committee, serves as an advisory committee to management, convening 19 times in the course of nine months. I wish to thank the members for their guidance, flexibility and commitment in this regard.

In March 2016, we advised that our lead independent director, Trevor Munday, was to step down as director in the second half of 2016. As a result of the increased demand on our Board due to the separation process, Trevor has delayed his departure and remains the Lead Independent Director of the Board. I would like to extend my thanks to Trevor for his continued leadership and contribution.

In conclusion

Once again, the year under review has been challenging, and I am proud of Maria and her leadership team’s achievements.

I extend my thanks to my fellow Board members for their diligence and dedication to the Group; and to the chairs of our Group Board committees for their ongoing support and challenge. My appreciation also goes to the chairmen and boards of our subsidiaries.

I also wish to thank all of our stakeholders including our customers and clients, colleagues, regulators, investors, and communities for their steadfast support and commitment.

Africa is a continent of opportunity. We are a strong African franchise. We have a robust One Africa strategy, and our near-term focus is delivering on this while we navigate the separation process from Barclays PLC. We will do this with the appropriate prioritisation and well-considered decisions.