Daniel Mminele. Picture: BUSINESS DAY
Daniel Mminele. Picture: BUSINESS DAY

In a milestone for Absa, new CEO Daniel Mminele assumes his job on Wednesday as SA’s big-four banks face increasingly fierce competition from digital newcomers vying for a slice of the R5.14-trillion market.    

Mminele, 54, who spent a decade as a deputy governor of the Reserve Bank, which he joined in 1999, was finally confirmed last week as the new head of Absa, taking over from René van Wyk, who has been running it temporarily after Maria Ramos retired about a year ago.

His appointment ticks an important racial diversity box. He’s only the third black person to head up one of the big-four banks after Sizwe Nxasana, who led FirstRand from 2006 to 2015, and Sim Tshabalala, current CEO of Standard Bank who describes himself as “a Zulu boy from Soweto”.

But his job is tougher than theirs. Other than an unforgiving external environment, in which a weak economy and job losses are crimping consumer and corporate spending, he will probably have to navigate rough internal politics as he takes over the company in the middle of executing a strategy he wasn’t part of conceptualising.  

While the chair, Wendy Lucas-Bull, said Mminele is aware of and supports the strategy, she also indicated he would have an open mandate and that Absa isn’t getting a figurehead leader.

Mminele is inheriting a company facing competition from nimbler newcomer digital banks that have triggered a banking price war in a market in which more than three-quarters of the population already have a bank account.

Among the big four, Absa has the weakest pretax profit margins … leaving it with little room to  join the banking-fees price war

Absa has also lagged behind its competitors under the ownership of Barclays, losing market share in several key segments, including card, new-vehicle finance and its flagship home loans business.

The Patrice Motsepe-backed TymeBank and Discovery’s new banking unit launched in 2019. As far back as August 2018, Tshabalala, who leads Africa’s largest bank, said he was worried about Discovery, which would be a “a fierce competitor in the wealth segment”. Due to Adrian Gore’s record of seismically changing how financial services products are priced in insurance he’s probably right to be worried.

Among the big four, Absa has the weakest pretax profit margins — how much the company earns after paying operational costs — leaving it with little room to join the banking-fees price war that has caused rivals to promise everything from zero-fee bank accounts to actually paying clients to bank with them.

To ensure Absa’s SA retail unit, which accounts for more than half of the group’s total income, does not lose ground, Mminele may draw upon his early career in working for several banks that include Germany’s Commerzbank and the UK’s African Merchant Bank.

He was closely involved in crafting the successful bailout and rehabilitation of African Bank after the lender collapsed in August 2014 under a mountain of unpaid unsecured loans.

Mminele will find that at Absa he has few levers to pull, the most obvious of which is superior customer service. It will not be enough.

Stamp authority

He may be compelled to modify Absa’s ambitious growth strategy drawn up almost two years ago by Ramos to substantially grow its business elsewhere on the continent, win back market share at home and expand corporate and investment banking division.

With Absa’s three top executives — Arrie Rautenbach, who leads its retail and business banking; Charles Russon, head of corporate and investment; and Peter Matlare, who heads the rest-of-Africa business — already implementing Absa’s new decentralised business model, Mminele will want to stamp his authority on the group.      

It’s not unreasonable to assume that any changes he may want to institute might put him on a collision course with some of the team that mapped out the growth blueprint with Ramos.  

If that’s the case, he will need to act quickly as the last thing he would want is to be bogged down by palace politics when his focus should be on customers.