African Bank’s plan to realign its strategy to include acquisitive growth is part of an attempt to lessen the impact of the Covid-19 coronavirus pandemic on its business.
Despite a 10% increase in total customer growth to 2 million over the six months to the end of March this year, “the growth is not where it needs to be”, CEO Basani Maluleke, told GIBS’ interim dean Morris Mthombeni.
While continuing to focus on its digital platforms, the bank will also look to increase lending to middle income customers in order to help the financial services group diversify its fee income and “become a more resilient bank”.
Shift in strategy
According to African Bank’s interim results as at March this year, Covid-19 negatively impacted the group by R853 million, including an additional impairment charge of R550 million and an insurance entity charge of R303 million.
However, the bank has a robust balance sheet with a strong liquidity profile and high available cash resources of about R4 billion.
“We are still on course, despite the impact of the tough last few months,” Maluleke said.
The bank’s retail deposit book grew more than 150% to R4 billion as at end September this year, making progress towards reaching its target to have retail deposits comprise some 25% of the bank’s funding base.
The bank pays the highest interest rates in South Africa and “intends to continue to attract investors to our investment products, as this has helped diversify our liquidity base away from being wholesale funding only”, Maluleke said.
Shareholders offered support in September, agreeing to a funding arrangement to support any shortfall in funds, should the bank raise further wholesale funding in the domestic market.
“Liquidity has now shifted to a secondary concern,” Maluleke explained.
“Our main concern is how to gain access to more low risk customers to take up our loan products.”
As such, the strategic focus is to continue growing the lending book across the middle income segment who are lower risk, thus reducing impairments.
Maluleke, who was appointed CEO in 2018, served as director of Transcend Capital before joining African Bank. She has more than 10 years financial services experience in corporate finance and private banking with First National Bank and Rand Merchant Bank.
Good governance remains an important area of emphasis for the bank’s new board, after it was placed under curatorship in 2014 due to bad debt impairments.
A report by advocate John Myburgh found that the boards of both the bank and its holding company, African Bank Investments Limited, had acted negligently in underestimating the financial implications of the issues such as bad debts and impairment and acted recklessly in terms of making loans to Ellerines.
Maluleke said the near collapse of the bank was predominantly due to governance failures: “It was a phenomenally successful organisation from the outside, but poor decisions were made. Now we have a much stronger board with the right skills. There is a culture of understanding that compliance is very important that will maintain the strong governance that was put in place in 2016.”
Continuation of digital
African Bank considers itself as a digital business, empowering people through skills development and connecting digitally with customers.
A continued commitment to digital platforms and channels will “reduce the cost to serve customers and help us to remain relevant”, she said.
Such platforms would allow customers to engage with the bank, seamlessly and more cost effectively.
Maluleke believed African Bank had built the “gold standard” platform for South Africa, unimpeded by legacy systems.
Leadership, culture and empathy
She said the company remains true to the original vision of its founders, to create a bank for lower income earners and increase dignity and financial inclusion through access to financial services products and affordable banking.
“Empathy is woven into the culture of the organisation. We care deeply, invest in our people and understand what it is to live our culture,” she said.
As a result of Covid-19, the bank had increased communications to customers outlining financial options for relief, such as credit life and payment breaks where applicable, and approved R263 million in cash flow relief.
The SA Customer Satisfaction Index rated African Bank best bank for customer service in the country earlier this year, with high customer satisfaction levels.
Due to the demands placed on organisations and their staff as a result of Covid-19, it was important to create an environment where people feel safe to fail, she said.
Managers were encouraged to have conversations with their staff around their state of mind, as “people are experiencing unbelievable amounts of stress and fragility”.
“In order to understand how your team is doing, you have to create a sense of psychological safety. As a leader, if you don’t show your own vulnerability, you don’t create a space for people to get to know you.”
Maluleke said she believed in using emotive language in the workplace, words such as anxiety, empathy, love and kindness – and not only the vocabulary of delivery and metrics.
“We must acknowledge that we are people first, and then your team will deliver for you.”
She added that Covid-19 had taught her a lesson in patience: “I have learnt not to underestimate the resilience of South Africans and to be more hopeful about what is possible.”
.City Press is a media partner of the GIBS forums.