15 months and out
Absa struggled for a year to replace Maria Ramos. Her successor, Daniel Mminele, has left abruptly — what’s wrong at the bank?
ý Banking group Absa narrowly avoided a bruising legal battle when it reached a settlement agreement to part ways with its
CEO, Daniel Mminele, on Tuesday.
Tough separation talks raised fears of a legal skirmish that could have seen Mminele dragging the bank to court. Insiders tell the FM this sparked concerns of a repeat of the Old Mutual situation, where the group sought to part ways with CEO Peter Moyo two years ago.
Absa might have avoided a legal battle, but it is not out of the strategic woods yet following the shock departure of Mminele, who’d been in the role just more than a year.
“It’s a shock because they spent a long time searching for Maria Ramos’s replacement,” says Patrice Rassou, chief investment officer at investment group Ashburton.
Investors, predictably. reacted negatively to the news, with the share price tumbling 4.2% on the day — considerably worse than the other banks, which fell around 2.5%, on average.
“We waited for Daniel for six months,” says Rassou. “So for him to go now puts [Absa] in strategic limbo because it needs to restart a search.”
That six months refers to the period during which Mminele was “cooling off” after he left the Reserve Bank, where he was deputy governor.
His departure is a blow for Absa, since the search to replace Ramos, who’d been CEO for a decade, had taken a year, which was compounded by that extra six-month wait. That Absa must go on a hunt again raises sharp questions about its succession planning.
Mminele, 56, joined Absa in January
2020, and was 15 months into his five-year contract when the board declared an “irreversible breakdown” in the relationship.
Sources say there were two points of tension: between the CEO and some of his fellow executives, and between him and the board, chaired by Wendy Lucas-Bull.
Insiders say a difference of opinion erupted over Absa’s strategy — and the board chose to side with the executives. Deputy CEO Peter Matlare died last month of Covid complications, which robbed Mminele of a critical strategic ally, say sources.
Officially, the bank said it did not “manage to achieve alignment in relation to [its] strategy and the culture transformation journey”.
Lucas-Bull, who described it as a “very difficult decision”, said it “merely reflects divergent professional views and approaches”.
Mminele was equally coy, saying while it was “regrettable”, it is “important for the CEO to be in complete alignment with the board on critical issues such as strategy and culture”.
Sources say the separation had nothing to do with the bank’s performance. Since he started, Absa’s shares have fallen 15.8% — in line with other banks, which were all hit by the Covid economic slowdown. In that same time period, FirstRand’s stock has shed 15.6%, Standard Bank has fallen 29% and Nedbank has lost 32%.
The fact that Absa has not specified what the “culture” and “strategy” differences were, will leave a cloud hanging over the bank, and the
ability of any new CEO to implement his own strategy.
Mminele’s acrimonious separation from Absa is a second such recent incident, following the abrupt resignation of African Bank CEO Basani Maluleke in January — she reportedly fell out with chair Thabo Dloti.
While the departure of two high-profile black bank CEOs in such a short time has created a public relations risk for Absa, there were no signs that Mminele’s departure was linked to race at all.
Though it remains unclear what the “strategic differences” were, Absa has recently sought to rebrand itself as a “pan-African bank” after Barclays sold its majority stake in 2017.
Absa identified West Africa and key economies in East Africa as growth markets, though SA companies have often struggled with the panAfrican market, leading to big differences in the boardroom. Last week, reports emerged that Shoprite planned to sell its Nigerian business to property group Persianas, and MTN has also been hit by unexpected shocks in several of its continental operations.
“It could be that there was disagreement on an expansion strategy in Africa because, for instance, they always wanted to expand in West Africa,” says Rassou.
It could be that Nigeria, again, proved to be a source of contention.
Rassou says it could be that there was disagreement about a possible acquisition. “As you know, Nigeria went into recession, so maybe there was disagreement as to timing,” he says.
Either way, he says, the rapid departure of Mminele, so soon after he began, pours cold water on any efforts to “relaunch” Absa after its successful split from Barclays.
Jason Quinn, Absa’s finance director, is standing in as CEO until a replacement is found.
It’s a shock because they spent a long time searching for Maria Ramos’s replacement
Patrice Rassou