Basani Maluleke. Picture: SUPPLIED
Basani Maluleke. Picture: SUPPLIED

Talk about bad timing. Basani Maluleke’s decision to resign as CEO of African Bank, the lender that emerged from one of the worst banking collapses in the country, could not have come at a worse time. 

The departure of a respected CEO, especially when it is sudden and comes with no succession plan, always raises eyebrows, and this one has been no different. Maluleke’s impending departure leaves a void in the upper echelon of the lender at a time when the industry is facing one of its biggest challenges.

A glance at its annual results for the year to end-September highlights what lies ahead for the industry in 2021, and possibly for a few more years to come. African Bank swung into a R560m loss after increasing its provision for bad loans by a massive 58% to R3.4bn. That more or less mirrors what rivals have reported as the pandemic-induced economic downturn prompted executives to line up billions of rand to absorb an expected wave of consumers missing loan repayments. 

With new tighter lockdown restrictions to curb the second wave as we wait for SA to embark on its biggest immunisation drive,  the economy — forecast to contract by its largest margin since the 1930s — is expected to continue to bleed jobs, adding to the carnage seen during the severe lockdown of the 2020 second quarter.  

African Bank is  in a rebuilding phase after running into trouble in 2014 when its near collapse forced the Reserve Bank to team up with six commercial lenders and the Public Investment Corporation, which has R2-trillion of government employee pensions under its custody, to inject R10bn and carve a viable bank out of the holding company’s healthy assets.

One of the telling findings of the central bank’s investigation into the bank’s collapse was that it relied too much on unsecured lending — the risky but lucrative credit that relies solely on customer promises to pay it back, as opposed to mortgages and other loans backed by assets that can be repossessed.   

It was down to Maluleke and her predecessor, Brian Riley, to craft and carry a diversification plan. She had been making great strides in developing the bank’s transactional and retail franchise, but it was still far from what it should be.

As of September 2020, retail customer deposits were roughly R6bn while loan advances were around R17bn. It had virtually no transactional banking capability before its collapse in 2014. Even so, it pales in comparison with its closest competitor, Capitec, which is sitting on more than R87bn retail deposits while net advances totalled R65.4bn in the same period, meaning the Stellenbosch-based bank relies much more on cheaper deposits for funding its operations.

For African Bank to permanently stay out of harm’s way and build resilience, it needs to significantly reduce its over-reliance on unsecured loans. 

It’s not unusual for CEOs to leave companies in the lurch, especially if they are jumping ship for a better offer elsewhere, as was suggested by the board of African Bank in a statement this week, saying Maluleke is leaving to “pursue other career opportunities”, with the board adding it was as surprised as anybody else.  

But there’s clearly more to the story than the normal explanation that the boss has left to “pursue other career opportunities”, according to several people with knowledge of the matter. Maluleke was essentially forced out after a clash of personalities with the chair, Thabo Dloti, who declined to expand on the bank’s statement.

A leadership crisis and resulting vacuum was the last thing African Bank shareholders needed. Talk of a potentially toxic working relationship between the board chair and the CEO could also make it difficult for the lender to attract talent when it needs it most.

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