Former deputy Reserve Bank governor Daniel Mminele is expected to be announced as Absa’s next chief executive officer (CEO) in 2020, according to CNBC Africa, citing sources familiar with the matter.
His start date is said to be 15 January 2020, six months after his resignation from the South African Reserve Bank in June 2019, aligning perfectly with the required ‘cool-off period’.
Mminele’s name has been pushed around frequently as the one to take over from long-serving Absa chief executive Maria Ramos, after she retired at the end of February 2019.
Mminele had been at the central bank since 1999 and served two five-year terms as deputy governor before resigning on 27 June.
When he resigned, he told President Cyril Ramaphosa that he won’t be available to remain in his position, without providing information about his future plans, fuelling speculation that he could be appointed CEO of Absa.
During its interim results announcement on Tuesday (13 August), the group confirmed that it had found its next CEO, but could not release the name as it had to comply with conditions imposed on it by the Reserve Bank’s Prudential Authority.
Absa Group chair Wendy Lucas-Bull previously indicated that potential CEOs that Absa was looking at had cool-off periods of at least six months imposed by the Reserve Bank – again pointing to Mminele.
Is he a good fit?
According to senior analyst at Rand Swiss, Viv Govender, Mminele may not be the best fit for Absa.
“Looking at the structural issues facing the banking sector at the moment – the introduction of these new kinds of banks, the TymeBanks, etcetera; the shedding of jobs, the shedding of branches, the shedding of infrastructure; things going increasingly online – I’m not sure if someone with good institutional knowledge of how the background of monetary systems works is suited to that,” he said.
“You’d want someone more from the information technology field to run these banks going forward.”
Govender said that in 20 years from now the banking system will look completely different, and much like the newspaper industry or the fixed-voice telecoms industry, changes are going to happen rapidly – not in a lifetime, but in ten or five years.
“The stuff behind the scenes, like how the banking sector works or how money works are not the main issue at the moment – maybe in 2008 it was.
“But what you need now is someone who can guide the banks to be more high-tech and less staff heavy,” Govender said.
This path to a more tech-focused business has been high on Absa’s priority list, and underpinned the group’s total rebrand in 2018.
In its interim results for the six months ending June 2019, the group reported that it has made good progress on developing its digital strategy.
After launching ChatBanking on WhatsApp, Samsung Pay, Timiza and Jumo, earlier, Absa significantly enhanced its Absa app in the first half of the year, resulting in a 20% increase in the number of app users.
However, it remains a legacy bank, operating in a difficult environment where consumers are under immense economic pressure.
While it managed to increase revenue and headline earnings, return on equity is expected to be lower in 2019, while the wider South African economy is expected to remain sluggish.
“South Africa’s economic growth outlook appears muted, with gross domestic product (GDP) expected to grow 0.5% in 2019,” the bank said.
“The prospects for stronger growth are constrained by the slowing global economy, plus weak business sentiment and decelerating household income growth in South Africa. In the group’s ARO markets, GDP is expected to grow 5.5%.”
“While Absa’s return on equity (RoE) is likely to be marginally lower in 2019, the group remains committed to its RoE target of 18% to 20% in 2021,” it said.
Financial highlights for the first half of 2019:
- Headline earnings increased 3% to R8.3 billion
- Headline earnings per share increased 5% to 920 cents per share from 880.3 cents
- Revenue increased 6% to R39.1 billion
- Operating expenses increased 6% to R22.1 billion
- Return on equity declined to 16.4% from 17.1%
- Dividend increased 3% to R5.05 per share