Absa CEO Daniel Mminele's exit reflects poorly on company culture
CEO’s exit reflects badly on Absa’s culture and leadership
● When Daniel Mminele stepped into the CEO’s office at SA’s third-largest banking group in January last year, he would have known just how complicated a past Absa had. But perhaps no-one could have prepared him for just how complicated was its present.
Mminele, a former deputy governor of the Reserve Bank, agreed this week to part ways with Absa on a “no fault” basis following a standoff with the board.
Both parties cited “misalignment” over culture and strategy as reasons for the unexpected departure, which shocked the market and on Friday saw Absa staff turn out in large numbers for a Covid-friendly mobile farewell outside the banking group’s downtown Johannesburg headquarters.
Mminele’s departure may have been sudden, but its roots go back longer, to Absa’s troubled history, and particularly to the stretch of leadership instability that preceded his appointment.
That helped to create an unusually tough environment for a new, external CEO who wanted to make the kind of changes the underperforming group needed if it was to become more innovative, inclusive and competitive.
It was, say some who know the bank well, a toxic environment in which a newly decentralised operating model, combined with the lack of a permanent CEO, enabled powerful incumbent fiefdoms to thrive.
It was never going to be easy for anyone to come in and ring changes that might curb that power. It was surely even harder for someone like Mminele who didn’t have the experience of running a large organisation or working with the board of a large listed company.
The banking group has its roots in a complex and difficult series of mergers in the early 1990s that brought together five banks and building societies, Afrikaans and English (hence the name, which originally was Amalgamated Banks of SA). After Sanlam and Remgro relinquished their control, Absa was bought by UK-based banking group Barclays in 2005, in what was then the largest foreign investment into SA.
That merger was really a takeover by London, which called the shots. It injected Barclays’ African operations into Absa but ended up significantly cramping the bank’s growth because Barclays didn’t have much appetite for SA risk.
Then, in early 2016, Barclays unceremoniously dumped Absa, selling down control — but agreeing to a $1bn (R14.5bn) divorce settlement, which paid for the complex separation process and, just before Covid struck, the rebranding of Barclays’ blue operations across Africa to Absa’s red and pink.
Freed from Barclays’ shackles, the banking group put a new strategy in place in 2018 that sought to regain its lost market share and reposition the group as a leading panAfrican player.
It also restructured Absa to allow for a more decentralised, federalised operating model in which the business unit heads increasingly called the shots.
Absa’s board had been courting Mminele, 56, for two years before he finally agreed to talk after he ended an illustrious 20-year career at the Reserve Bank in mid-2019, but he had been on the list as a possible successor to former CEO Maria Ramos for much longer.
By the time he finally arrived at Absa 15 months ago, after taking the required six months of “gardening leave” demanded by the Reserve Bank, there had been no permanent CEO for almost a year.
Ramos, too, had left suddenly in January 2019 after a decade at Absa, and the board, which apparently had no succession plan, parachuted in one of its own, René van Wyk, as interim CEO.
Mminele was enthusiastically welcomed by Absa’s staff at a series of crowded town hall meetings in Absa Towers and in branches across SA, Ghana and Kenya.
Initially there was enthusiasm too from the board, which gave him a mandate to review the strategy.
But there were mixed messages right from the start, with Van Wyk telling staff there would be no change to the strategy while chair Wendy Lucas-Bull said Mminele had an open mandate.
And, in retrospect, the divides should have been clear by the time of the year-end financial results last month, when Mminele announced the strategy “refresh”, especially in the light of the changes wrought by the Covid crisis. But some of his executives insisted to Business Times that the growth strategy was unchanged.
Lucas-Bull explains it wasn’t the strategy as such that was the issue of disagreement between board and CEO but the “how” and the “when” of implementing it. It was about the operating model and the timing, she says, and just as the bank’s turnaround strategy was starting to get traction.
Though she told Business Day Absa risked losing “talent” because of the standoff with Mminele, she told Business Times on Thursday that no-one actually threatened to resign. Rather, she insists: “What we saw was uncertainty in the business model leading to an inward focus and loss of confidence… we potentially had an unstable situation in which we weren’t going to be able to keep strong people.”
Lucas-Bull, whose term is due to end no later than March next year and is chair-designate of Shoprite, has been described as an “executive chair” with a tendency to intervene in operational matters. She says it is the board’s role to “check and challenge”.
Behind the scenes, though, Absa still has its old hierarchical and often secretive culture and people are scared to speak up.
Mminele had made it clear publicly that he wanted to change that and enable the group to become more transparent and more agile. He was working hard to do so — including bringing in talented people from the level below the executive committee to help with the strategy review, a move that apparently raised eyebrows at the top.
At the Reserve Bank he was known for exercising a high degree of control over the operations under his watch, and he would surely also have tried to bring more coherence to Absa’s operations and centralise reporting — a move that would also have ruffled feathers. And with Covid driving much faster digital takeup, chances are that the bank will have had to relook at the size of its branch network.
Mminele also signalled that it was no longer set on growth at all costs, in a postCovid world, and that it would have to look at new revenue models.
His exit follows a sadly long line of departures.
This is a group with a track record of losing competent senior executives, black and white, over the past decade — names such as David Hodnett, Louis von Zeuner and Stephen van Coller come to mind, as do Nomkhita Nqweni, Kennedy Bungane and Phakamani Hadebe.
The Barclays episode and Absa’s long history of underperformance couldn’t have helped. But there clearly is something about Absa’s culture and leadership that hasn’t worked for a while.
That’s more of a pity because now that it is finally liberated from Barclays, Absa is free to pursue its own course and become the leading pan-African group it aspires to be.
And it had finally started to regain lost market share, improve its share price performance and show financial results that compared favourably with those of its peers, through a period in which the Covid crisis savaged all of their models.
And despite the pandemic, it finally seemed to have a chance at a period of stability in which it could thrive.
But as Polo Radebe of the Association of Black Securities and Investment Professionals puts it, Absa has over the past two years parted ways with its first woman CEO and now its first black CEO. The optics do not look good, and the group will surely struggle to attract good new executive talent.
That’s not good for Absa. But the whole episode is not good either for confidence in SA’s banking sector, or indeed its economy.
What we saw was uncertainty in the business model ...
Wendy Lucas-Bull
Absa chair