African Bank rings in changes to clear path for future

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JIMMY MOYAHA: In March of this year, the chief executive officer of African Bank, Kennedy Bungane, resigned abruptly with no real explanation as to what happened around that resignation.

Just last week we got confirmation that the chief financial officer of the bank has also stepped down. There are a couple of questions around where the African Bank leadership and the African Bank team find themselves at the moment.

We are privileged enough to be joined in the studio by the chair of the African Bank board, Thabo Dloti, to look at these developments and make sense of them.

Ntate, thank you so much for taking the time. Thank you for coming to the studio to discuss these matters.

Let’s perhaps start the conversation with an overview of what happened from a banking perspective. What was reported in the media, what we received, was a CEO resignation, a CFO resignation – and no real explanation from the bank as to what had happened.

THABO DLOTI: Well, firstly, thank you for having me on your show. It’s always great to have an opportunity to speak and engage on these matters for you and your audience.

We made an announcement when the CEO departed that we had taken a decision that the bank is entering a different phase.

We indicated that the bank had gone through an expansive phase where it had grown through acquisitions, among other things.

And those have had an impact on the bank in a positive sense that we acquired customers, we diversified our balance sheet. But they also had an impact financially.

At the time we did not have the numbers because it was before we released our numbers. We’ve since released our numbers. The real performance of the bank has become visible through the interims.

So yes, the key message that we communicated at the time was that we were going through a consolidation because the acquisitions we had acquired had needed to be consolidated, needed to be managed, and we needed to take costs out of duplication that came through those acquisitions.

So that is the story – and it’s the one that has played itself [out] in the finances that emerged. That’s been the big driver of the decisions we have taken to say how we make sure that the strategy of expanding through the acquisition, among other things, which have served the bank well, has not translated into the bottom line.

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How do we make sure we turn it to the bottom line, because the sustainability of the bank is not just about expanding but also about delivering the bottom line.

So the challenges we have are how these strategies we’ve embarked upon translate into a solid bottom line.

JIMMY MOYAHA: Ntate Dloti, I want to take a look at the ruling by the Financial Services Tribunal. They found that over R680 million worth of intercompany transactions were ‘less than commercial’ in nature, if I could put it that way – and that is something that would arguably concern any investor, any board, any management team.

That ruling has been upheld by the Financial Services Tribunal, and it has some bearings on and implications for African Bank. I want to look at that – how those transactions perhaps came about, and how they’ve been dealt with, or at least what’s been done in that respect.

THABO DLOTI: Yes, thanks Jimmy. I think the factual position is we had a dispute with the Prudential Authority regarding how we were going to represent our transaction.

That dispute resulted in us having differences.

We complied with the view of the Prudential Authority. Therefore our reported results at the end of the year last year reflected a reconciled view.

What we did though, in addition to having reconciled with them, is we decided to go to the tribunal to clarify the points of difference.

The ruling was on a matter that had been settled between the parties. So it did not have any financial implications whatsoever on the African Bank financials that were reported. There was no restatement required, because we had reconciled our positions before we went to the tribunal.

The board sought clarity through the tribunal so that on future transactions we are better informed. We don’t have an altercation with our Prudential Authority, which is not something we want to have.

So I want to clarify that – that that ruling really had no material effect on the results, nor did it affect anything that has since transpired.

JIMMY MOYAHA: I remember I caught up with the former chief executive, Kennedy Bungane, around those specific results that you mentioned at the end of the previous financial year, when the bank swung into a profit for that particular financial year.

Ntate Dloti, I want to take a look at the listing conversations and where the business finds itself today. You touched on the fact that there was a lot that needed to be looked at from a financial position, from an internal position.

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Perhaps take us through where African Bank finds itself today. The last conversation we had – and I had that conversation with the current chief executive officer, Zweli Manyathi – around the listing being deferred beyond what was anticipated.

Is it being deferred because there’s still a lot to be done within the business? Where does African Bank sit at the moment?

THABO DLOTI: Good question. The listing is deferred because the consolidation phase is a phase that we didn’t anticipate being as long as it’s going to be.

With that in mind, if you know you’re going to be consolidating for a period of a year to 18 months, you cannot be talking about listing.

Listing is a position of confidence where you know you have a track record of results that you are generating which the market can have confidence in.

So we’ve deferred listing until such time that we are comfortable with the results that we are generating.

JIMMY MOYAHA: In terms of the staffing complement, in terms of the management decisions that have been made, we know that a couple of appointments have been made subsequent to the resignations that we mentioned earlier in our conversation.

Could you just give us a sense of what strategic management decisions have been made in that respect in terms of the human capital aspects of the business?

THABO DLOTI: Thank you. I think it’s the same message we made earlier on. This is horses for courses.

If we are going through a consolidation and we are rebuilding a bank around a simple organisation that can touch customers differently, we need people with that relevant experience.

So we needed to make sure that we shore up the team with the right people.

We’ve got the experience that I believe we needed to complement the existing team, to make sure that we are able to really get down to consolidating, getting the customer proposition working so that we can get this phase that we are on implemented as efficiently as possible.

JIMMY MOYAHA: This current phase that we’re looking to implement – the one, I suppose, dark cloud that may be hanging over it is the obvious Section 189A conversations that have been reported around African Bank.

Nobody wants to discuss retrenchments, nobody wants to see those happen in any business at any point in time, but sometimes they’re unavoidable and sometimes they’re necessary from a business perspective.

Can you take us through what is happening there? We understand some of it might be a little sensitive to discuss at this particular moment.

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THABO DLOTI: I concur with you. A Section 189 is the last thing we wanted to do.

For us, the bank that we are, to be retrenching people in the order of 1 200 is absolutely unthinkable.

However, if we’re really serious about getting the consolidation phase to work, we need to make sure that we leave no stone unturned – and this was a necessary effort that was required.

We are making good progress. We are in the middle of consultations with the trade unions involved, and we hope that we can conclude on that.

JIMMY MOYAHA: Ntate Dloti, before I let you go, the African Bank that we’re going to see emerge from this consolidation phase – what does that bank look like? We’ve gone through an African Bank that has collapsed, we’ve gone through having to revive this bank, we’ve gone through having to pick it up and get it back to where we want it to be when we talk about things like listing, when we talk about things like servicing the market in South Africa.

Post this consolidation phase, what is the ideal environment that we expect to come out of, or to find ourselves in as a bank?

THABO DLOTI: The accelerated strategy delivered to us business banking, it delivered to us a diverse retail customer segment, it introduces new markets to us.

We are excited that African Bank is now playing in and serving a broader community. We just want to be more stable in providing those services.

We want to make sure our customers can rely on us to continue providing that service for a little bit longer.

So it’s really about simplifying what we do without changing much.

We are not changing strategy, we’re not coming up with anything new; we are making sure that we can actually execute on the promises we have made, and deliver on them reliably.

JIMMY MOYAHA: The strategy has been thought through, the plans are in place. It is the execution thereof that the business is going to be focusing on, and an execution that we look forward to seeing because we all want to see the day that African Bank does indeed list on the Johannesburg Stock Exchange.

For now we’ll have to leave this particular conversation on that note. Thank you so much to the chair of the African Bank board, Thabo Dloti, for joining us in the studio to discuss the corporate changes that have taken place at the bank of late, and where the bank finds itself today.

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