Out of the Reserve Bank and into Absa?
As Daniel Mminele cools his heels after a lengthy Reserve Bank career, pundits say he has what it takes to head Absa
Few people, it seems, want to take on the challenge of running the Absa Group since former group CEO Maria Ramos retired at the end of February. There is no shortage of strong transformation candidates among commercial bankers in SA, yet the frontrunner is a former regulator, Daniel Mminele, who retired as deputy governor of the Reserve Bank at the end of June.
Harry Botha, banks analyst at Avior Capital, says it would be great if Absa made an announcement sooner rather than later, especially as there has been speculation for a couple of months about Mminele taking over. Absa chair Wendy Lucas-Bull gave the strongest hint so far when she said the new CEO would be subject to a six-month cooling-off period before joining. This is standard practice for senior executives at the Bank. Mminele would still be only 54 after the period has ended, giving him a clear five-year run before retirement at 60.
An insider says Absa’s board feels under pressure as it has been criticised for its far-from-smooth succession planning. Most of the experienced commercial bankers who might be expected to apply for the job are shying away due to concerns over Absa’s strategy and its executive team, which the board wants to remain unchanged. "So that perhaps leaves a regulator, albeit a very smart and capable one, as the last viable option."
The market has taken a dim view of Absa for years now: consider that the bank has gained just 6% since July 2014, against a 46% rise in the banks index and Capitec’s colossal 461% rally, which gives it a market capitalisation of R150bn against Absa’s R149bn.
Absa has had a difficult decade, with some decisions being out of its control so long as it was a subsidiary of London-based Barclays. But Royce Long, a portfolio manager at Obsidian Capital, says while Absa is undoubtedly the weakest of the big four, "there is still a brand to work with".
Absa also lacks internal executives-in-waiting of the calibre of previous insider CEOs such as Danie Cronjé, Nallie Bosman and Steve Booysen, all of whom had better track records than outsider Ramos. The top inside choices would have been head of retail and business banking Arrie Rautenbach, who falls short on transformation grounds as well as having an abrasive personality, and Peter Matlare, who runs the rest of Africa division but has only three years’ experience of banking. Before that he did little to arrest the decline of the SABC in his time as CEO and was responsible, when he headed Tiger Brands, for its disastrous purchase of Dangote Flour Mills in Nigeria.
The star of an early favourite for group CEO, head of wealth investment management & insurance Nomkhita Nqweni, also appears to be waning.
But there are plenty of commercial bankers on the outside equipped for the role, including Ciko Thomas, the head of Nedbank retail & business banking, who has a background in marketing at Unilever and Barloworld, as well as Standard Bank SA head Lungisa Fuzile. The former director-general of the National Treasury would provide similar gravitas to Mminele.
Absa has introduced a decentralised structure, in which the business units have end-to-end responsibility for their own profit-and-loss accounts. The bank’s CEO will play the role of constitutional monarch.
Mminele is not the typical academic who inhabits the cloistered halls of the Reserve Bank. He was educated, improbably, at the City of London Polytechnic and later at the Wharton business school, after having completed his secondary education in Germany.
He had a banking apprenticeship with Sparkasse Paderborn-Detmold in northwest Germany. He then worked for the much larger Westdeutsche Landesbank in Düsseldorf and London, where he was given a special assignment to upgrade the operation in Prague, Czech Republic, to full-branch status, and specialised in power projects in the UK. He also spent two years schmoozing top 100 SA companies at Commerzbank in Johannesburg. This was his only stint in the private sector locally other than two years as head of special projects (such as infrastructure and project finance) at African Merchant Bank. His former colleague there, current CEO Zenzo Lusengo, calls Mminele a solid banker and a safe pair of hands.
Much of Mminele’s 20 years’ experience at the Reserve Bank would help him if he steps into the role of Absa chief. He has chaired some powerful bodies such as the reserves management committee and the corporation for public deposits. He has had 15 years on the monetary policy committee, and the national payment system fell under his control for five years. He is a regular on international investment roadshows.
Mminele is also well-equipped to manage the relationship with the former Barclays Africa subsidiaries around the continent, as he is familiar with regulators in each country.
Long, who used to run the RMB Financial Services Fund, says that even with his light experience in SA commercial banking, particularly retail, Mminele can be successful if he proves to be a natural leader: there are plenty of career commercial bankers around him.
Investec, for example, did not appoint a career banker to either of its joint CEO posts, giving them to fund manager Hendrik du Toit and private equity specialist Fani Titi. Group CEOs do not need to get involved in the nuts and bolts of the bank.