Is African Bank a likely suitor for Bidvest Bank?
For years, South Africa’s oldfashioned brick-and-mortar banks have been subject to predictions of their demise, along with the paper money they still largely deal with. Many people still cling to their old ways, making a cashless South Africa difficult to imagine.
I was recently in Shanghai, China, where locals have fully embraced digital banking. The Shanghainese people mostly use WeChat Pay, known as Weixin Pay in China, a hugely popular payment platform. It was founded in 2016 as an offshoot of WeChat, a widely used social messaging app from Chinese tech company Tencent. Weixin Pay is the second most used after Alipay in the Chinese digital payment market.
In Shanghai, payments for Didi, China’s Uber version, and food and other essentials are generally settled through WeChat Pay and Alipay. The wide acceptance of digital payments places China among the world’s largest cashless societies.
However, here at home in South Africa, cash is still king, as evidenced by the long queues at Capitec’s ATMs. Even with the easy option of making digital payments via the bank’s apps, many Capitec clients still prefer to stand in line to withdraw cash.
When it comes to banking services and client preferences it seems the more things change the more they stay the same.
Last week Bidvest, a heavyweight in diversified services, grabbed headlines when it announced it would end its 26-year presence in banking by selling Bidvest Bank.
African Bank, which appears to be building operational mass, could be a likely suitor. I believe that under the leadership of Kennedy Bungane it would be a good fit.
Bungane has already made a statement by buying Grindrod Bank for R1.5bn in May 2022, accelerating African Bank’s entry into the South African business banking sector.
African Bank, which is expected to go public in 2025 as part of its Excelerate25 strategy, has been on an acquisitive drive to bolster its value. It would make sense to strengthen its portfolio by acquiring Bidvest Bank.
Things are shaping up well for African Bank. S&P Global Ratings recently revised the bank’s outlook from stable to positive as it continues its resurrection — almost a decade after it nearly collapsed.
One hopes Bungane has an appetite for another bolt-on acquisition by buying Bidvest Bank.
Spoiler alert. Vodacom could scupper Bungane’s acquisition drive by snapping up Bidvest Bank.
Last September, Vodacom partnered with Bidvest Bank to offer a new digital wallet for its VodaPay platform, the latest move by South Africa’s biggest mobile operator to revive its mobile payment efforts locally after the failure of M-Pesa between 2010 and 2016.
Vodacom is using Bidvest’s banking platform to back its digital wallet — an online payment method enabling users to store payment information and virtual cash monetary value to make purchases without physical cash or cards.
The wallets can be used on mobile devices, computers and other connected devices. Vodacom’s VodaPay users can deposit money into a wallet through a network of stores across the country. Outlets include Vodacom stores and retailers such as Pick n Pay, Pick n Pay Express, Boxer, PEP, Ackermans, Makro, Rhino Cash & Carry, Game, Builders Warehouse and Cambridge Food.
Customers can also make deposits at spaza shops through Lesaka’s Kazang platform.
Given these developments, it would make sense for Vodacom to buy Bidvest Bank. However, I believe Vodacom may not have the appetite to buy a brick-and-mortar bank. It might be happy with the current arrangement.
Vodacom may not be interested in spending money to buy a bank because it has to retain cash for the proposed merger of its fibre business with Remgro’s Community Investment Ventures Holding’s new unit Maziv, created to house Dark Fibre Africa and Vumatel. That venture would require Vodacom to spend billions of rand to roll out fibre in South Africa and the rest of the continent.
This leaves African Bank as the only potential buyer for Bidvest Bank, as I do not see Patrice Motsepe’s TymeBank having an appetite for local acquisition. TymeBank is preoccupied with ploughing more capital into growing its local footprint and expanding its Philippines operations through GoTyme Bank and targeting growth opportunities in Southeast Asia.
It wouldn’t want to be distracted by the acquisition of Bidvest Bank and the long process of integrating it into the culture of its banking system. TymeBank, one of the fastest-growing digital banks, is also setting its sights on listing on the New York Stock Exchange without the distraction of Bidvest Bank.
I do not see Bidvest Bank fitting in with the strategy of Discovery Bank, which is centred on a shared-value banking model that considers individual financial behaviours to understand how financially healthy clients are.
So, this leaves African Bank as a potential buyer of Bidvest Bank.
I hope Bungane engages Bidvest Group CEO Mpumi Madisa to initiate talks, which would be transformational for African Bank.
While at it, Bungane should also be bold enough to go after Sasfin Bank as part of the acquisitive drive.
Sasfin Bank appears vulnerable. The bank is in a tug-of-war with the South African Revenue Service (Sars). Five months ago, Sars slapped Sasfin Bank with a civil summons for a staggering R4.9bn plus interest and costs. Sasfin is contesting this lawsuit. I believe once the dust has settled, and if Sasfin ends up paying Sars, then Bungane should pounce.
African Bank may be centre stage in pushing consolidation of smaller banking players in South Africa.
That said, South Africans must emulate the Shanghainese people and embrace digital banking.
African Bank may be centre stage in pushing consolidation of smaller banking players in SA