Absa boss Daniel Mminele expects a painful recovery
Daniel Mminele, who took over as Absa CEO just as the Covid-19 storm was about to hit SA, says he’s expecting a long and hard slog before the country’s economy recovers to its levels before the pandemic struck.
Speaking to Business Day, barely six months into his tenure as the leader of one of the continent’s largest financial institutions, Mminele, a former deputy governor of the Reserve Bank, said the eventual speed of the recovery would depend on what policymakers do.
Having joined in January ready to spearhead a growth strategy, he now finds himself leading the bank’s efforts to navigate what is likely to be SA’s worst economic crisis in the modern era.
“I am probably in the camp that estimates a three- to fiveyear horizon in terms of getting the economy back to pre-Covid levels, but the situation is very fluid and that makes it hard to predict,” Mminele said.
“The speed of the recovery will also be determined by the quality of the interventions that are made by policy makers.”
According to Mminele’s former colleagues at the central bank, where he spent two decades, SA’s GDP will contract 7% in 2020, a somewhat more optimistic forecast than the 10% drop estimated by Absa’s economists.
That has added to pressure on commercial lenders that were already struggling with a weak economy. Now they face an explosion in bad loans while spending billions of rand offering relief to clients hit by the pandemic and lockdowns.
The economic slowdown means Mminele has had to temporarily abandon the table set by the group prior to his arrival.
The cultural and strategic “reset” undertaken by his predecessor, Maria Ramos, after former parent Barclays’ decision to relinquish control meant that Mminele began his tenure with a clean slate and a focus on executing the bank’s plans to grow market share and complete its digital transformation.
“There has been a paradigm shift in our operating environment and that has meant we have had to focus on capital preservation and higher liquidity buffers. But there hasn’t been a change in what our overall purpose is,” Mminele said.
“Put differently, there has been an interruption in our growth strategy, as opposed to us abandoning it.”
While Absa, together with its peers, has previously expressed confidence that retrenchments would be unlikely during the lockdown, Mminele said the group would consider such only as an absolute last resort.
“But there is no question that in this environment there needs to be astute cost management.”
Absa was one of the banks that reduced staff in 2019 as it restructured its retail and business banking division.
The bank is one of the participants in the R200bn loan guarantee scheme that started in the middle of May, an initiative that has come in for heavy criticism for a low takeup of loans despite it being one of the key components of President Cyril Ramaphosa’s R500bn package to shield the economy. Mminele said there have been some contributing factors to the disappointing take-up in the governmentbacked loans designed to help small enterprises, including that some clients got relief before it started. Many were reluctant to take on more debt with the future of their businesses uncertain.
“One must also take into account that by the time it was implemented, we had already assisted a number of clients that qualified for the scheme as part of relief programmes already in place.
“But businesses were also weighing up how best to navigate the lockdown, and taking on more debt was not necessarily desirable,” said Mminele.
By the end of May, Absa anticipated that it would provide payment relief of R8bn to more than 398,000 clients between April and June.
It is likely to be a long, hard slog, says Mminele