African Bank shifts focus from expansion to execution

African Bank chair Thabo Dloti said the new leadership team announced this week is expected to hit the ground running as part of its mandate to execute the lender’s consolidation journey following a series of acquisitions to diversify the group’s portfolio.

The bank plans to go back to basics by ensuring it wins the battle to service its customers in a competitive environment and bed down acquisitions made under its previous “Excelerate” strategy.

The lender is on the back foot after posting a R624m half-year loss for the six months ended June this year and announcing a section 189 process to reduce costs, including possible job cuts.

Dloti told Business Times on Friday that African Bank is not changing its broad strategy but is simply consolidating its acquired assets, with an emphasis on execution.

“Execution is a big emphasis that’s very different, perhaps, from simply saying we are bringing visionaries that are going to rethink the whole strategy,” he said.

“We’re saying, how do we execute simply on what we have started and make sure that we achieve results out of it? That is very critical. Unfortunately, that requires hitting the ground running.”

Litmus test (Nolo Moima) Dloti said time was of the essence, as execution was not something that could be put off for long.

“It’s not where you choose to be, but that’s where we are. [The team’s] job is not to sit around and wait for things to happen or assess. It’s to provide guidance to the organisation and their teams at a time of massive change in an emotionally charged organisation. So, absolutely, we really expect them to hit the ground running,” he said.

The board ousted former CEO Kennedy Bungane in March following reporting issues flagged by the Prudential Authority and the group’s poor financial performance. It appointed veteran banker Zweli Manyathi as permanent CEO and increased the retirement age for executives beyond 65 to accommodate his appointment.

This week, African Bank announced additions to its leadership team, including:

The bank appointed Given Bhutana Mabena as acting group CFO following Anbann Chetti’s immediate resignation on September 11.

The lender’s consolidation follows its acquisition of Ubank, Grindrod Bank and Sasfin Bank’s commercial equipment finance and commercial property finance businesses.

Dloti said that while there may have been delays in implementing the acquisitions, they were well conceived.

“I don’t think the acquisitions were a mistake. In fact, they’ve added something quite unique to the vision of African Bank,” he added.

He pointed to the creation of business banking through the acquisition of Grindrod Bank, rather than building it from scratch.

We have grown our business banking since we acquired Grindrod [and] seen a lot of the markets where [there is] opportunity continue to open up for us. We have not seen a lack of market support for the capabilities which we have acquired—  Thabo Dloti, African Bank chair

“Acquiring Grindrod and some of the Sasfin businesses has taken years of work out of the equation. We could have taken five, six, even 10 years to get where we are today if we had actually tried to build it ourselves,” he said.

Similarly, Dloti said, the acquisition of Ubank had added new customers and deposits that the bank did not previously have. However, there had been unintended consequences of pursuing an expansionary strategy through acquisitions.

The challenges at African Bank come amid tough competition in the market, including from Old Mutual’s OM Bank and Pepkor’s entry into the fintech sector.

Dloti agreed that competition was tight but said the bank would capitalise on its strengths.

“We have grown our business banking since we acquired Grindrod [and] seen a lot of the markets where [there is] opportunity continue to open up for us. We have not seen a lack of market support for the capabilities which we have acquired.”

In July African Bank announced that it was embarking on a section 189 consultation process with organised labour that could potentially affect 1,200 employees and the closure of 90 branches.

Dloti said the section 189 consultation process is continuing.

“It feels drawn out if you are in the middle of it, because you want answers today,” he said. “What’s going to happen to me?

“Unfortunately we can’t go and tell people just what’s going to happen to you specifically until we have gone through the process. We have made sure — as a board, from a governance point of view — that we follow the process to the T, because we just can’t afford to be found wanting.”

The bank has also undertaken a cost-cutting exercise associated with IT and facilities.