15 FEBRUARY 2021

The Sunday afternoon of 10 August 2014 lingers on in the memory of many South Africans in the financial services sector. Following the discovery of the disastrous financial state of African Bank, the Governor of the Reserve Bank – Gil Marcus –announced that the Finance Minister Nhlanhla Nene had agreed to the recommendation for the bank to be put into curatorship. The events leading to the decision, reflected a toxic mix of flawed ambition, poor oversight and weak leadership. The question of who was to blame was initially difficult to unravel.
As a banking institution which earns its social license and legitimacy from the trust people place on it, a bank has a unique place in any society. The unique feature of the banking system, is how the fate of each is linked to the fate of all.

A loss of faith in the banking system when things go wrong, isn’t just a problem for the single bank but for the system at large. As history reflects, all major banking runs were initiated by the loss of trust in one bank and such a bank did not even need to be a dominant player in the market.

In 1930s, the bank runs that became a persistent feature of the Great Depression were triggered by the inability of small players to honour requests from depositors. Such lessons have not been forgotten by banking regulators across the world who understand that the loss of any of the institutions they oversee, invites serious questions regarding the effectiveness of their regulatory oversight role.

For Gil Marcus the dilemma was multifaceted. As a bank that had played a significant role in addressing the banking needs of the black community through its commitment to fostering financial inclusion, African Bank occupied a unique place in the South African financial architecture. Whilst the prevalence of banking institutions and banking products these days is diverse, the picture that prevailed when African Bank was founded mirrored the well-ventilated story of South African society which had left many citizens excluded from the formal economy. Its loss as a banking institution would have been a tragedy not just for the 3,2 million customers being served by the bank at that time; but also, for many South Africans who had seen an institution of transformation emerging and gaining prominence.

Under the curatorship phase, the Reserve Bank and a consortium of banks – no doubt influenced by the understanding that the loss of faith in one is a loss of faith in all – took on the unusual step of saving the institution. The result of that approach, was the emergence of the good bank which housed all the viable aspects of African Bank. The success of that model, is that by the end of 2019, just 5 years after that bleak Sunday when the bank went into curatorship and 3 years after its successful relaunch in April 2016, African Bank reported a net profit of R1,2 billion and an asset base of R29 billion.

In its 2019 annual report, the bank’s chairperson – Thabo Dloti – reflected on the bank’s transformation journey towards being a successful retail bank and the significant momentum gained towards that mission in just over 3 years. As he reiterated the Board’s commitment to the strategy, Dloti lauded the leadership of Chief Executive Officer Basani Maluleke for the ‘significant progress made towards delivering on the bank’s strategy.

The presence of Maluleke in the c-suite of African Bank, was an important variable of the bank’s journey from the ashes of curatorship. Having joined the bank on the back of a stellar career in banking – primarily within the FirstRand Group – Maluleke’s shadowing of ex-CEO Brian Riley and eventual accession, indicated a commitment to leadership transition that is a key feature of all banking institutions. Her unique position as the first black female CEO of a frontline bank, became an important milestone for transformation and gender representation in the financial services sector. The appointment mirrored African Bank’s longstanding stance on transformation which was championed by its stakeholders and board of directors.

Maluleke’s challenge over the past 12 months – just like most business leaders – was to chart a way for the bank to operate through unprecedented times emanating from the coronavirus pandemic. The litmus test for all leaders during such times, is not what the immediate returns look like, but whether the strategy they have championed withstands the unexpected headwinds. In the 2020 annual report, Dloti’s report refers to the efforts of the executive team led by Basani Maluleke in responding decisively and proactively to the challenges of 2020 and the pandemic. In summarising the effects of the pandemic on the bank’s performance, Dloti highlights that the bank was indeed on track to meet its performance targets on financial and non-financial measures. Once the pandemic altered the course of progress, Dloti indicates that the board supported the executive committee’s adjusted 2023 targets.

The sum of these reflections, makes the abrupt resignation of Basani Maluleke at such a critical time for the bank’s recovery trajectory all the more puzzling. In the statement issued by the bank, Maluleke resigned to pursue other opportunities and has been replaced by current CFO Gustav Raubenheimer in an interim capacity. The resignation on the eve of the release of the bank’s financial results; naturally generated hysteria and speculation. At the heart of it, is the unusual nature of immediate exits in a sector so regulated, each senior appointment is scrutinised by market watchers and regulators. African Bank’s own history in relation to Basani saw her work closely with the previous CEO before taking on the leading role in 2018.

The public interest in the bank’s leadership transitions is amplified by the unique nature of its shareholding. In a deal structured by Gil Marcus in 2014, the shareholders are the Reserve Bank itself, the Public Investment Corporation, and African Bank’s own competitors. And in a sector of such importance, any events that lead to an interruption or a reversal in transformation gains warrants scrutiny. The duty of the board of directors, is to ensure that the best interests of the bank are achieved within the context of the operating environment. In the South African case, this requires a heightened level of sensitivity in matters of transformation.

Providing strategic support to the first black female CEO of a bank is an important instrument of supporting transformation. In the way the Maluleke exit has worked out, the board of directors of African Bank doesn’t seem to have factored in the impact of this step on the transformation pathway of the sector and the country. Little insight has been provided by the bank relating to the type of support that was offered to Basani in her role as the CEO.
That is not to say that Maluleke or anyone is entitled to a post on the basis of transformation alone; however, in light of the chairperson’s own statements in the recent annual reports, we have to assume that performance was not the basis for the exit. And if that isn’t the factor that led to the resignation, the need to explore other contributing factors is unavoidable. A few years ago, when Liberty parted ways with Thabo Dloti – the question of institutions offering support to black executive leaders was a topical point. The lesson for all black professionals, was the need to start engaging on how the provision of strategic support to black executive leaders can amplify transformation. The tragedy of the current state of affairs is that little evidence exists of institutions initiating such support structures in a way that ensures substantive transformation is achieved.

As ABSIP we have taken the approach of engaging the board of directors in order to obtain an understanding of the issues at play. Regrettably, we remain unconvinced about the explanations offered by the board. As an organisation that understands the importance of strong leadership in banking and advocates for transformation in the sector, ours is not to lobby for personalities but for principles. Of greater concern to us, is that African Bank – in spite of its stated commitment to transformation and the highly regulated nature of its operations, has undergone a change at the board level that is antithetical to the transformation mandate.

At the beginning of March 2019, when Thabo Dloti succeeded Louis von Zeuner as the chairperson of African Bank, it was regarded as a welcome development as the two most critical roles in the bank were now occupied by black people, which is not a common occurrence. Since then however, a disturbing trend has emerged in the leadership of African Bank. As an institution that requires the depth and experience that comes from directors who have been involved in governance of financial institutions, the leadership transition at board level is as important as it is at executive level. For African Bank in particular, a common feature of its descent into curatorship in 1995 and again in 2014, was the lack of sufficient expertise at the board level. Regrettably, since the beginning of 2020, no less than 7 of the 12 directors that served on the board of African Bank have resigned under the leadership of Mr Dloti. The resignation of Basani Maluleke in January 2021, followed the exits of Brian Riley, Frans Truter, Louisa Stephens, Marjorie Ngwenya, Mark Harris and Sybille McCloghrie in just a 12-month period. In fact, a year ago, the board of African Bank had 4 black women, today, just one remains.

The high turnover of the directors from the board, reflects a profound instability in governance at such an important institution.
Perhaps more alarmingly for ABSIP, is the fact that a board that has lost 7 directors and had the opportunity to replace them with qualified directors that advance the transformation mandate has rather chosen to replace the directors with three white men – Mike Field, Robert Hutchinson-Keip and Spyridon Georgopolous. An organisation that lauds the performance of a black female CEO and then summarily cuts ties with her whilst actively recruiting white males to the board leads us to believe that a purge has been undertaken with Basani Maluleke at the receiving end of it all.

That such a transition can happen under the leadership of Mr Dloti leaves a sour taste not just for ABSIP but for all advocates for transformation across the country. As it stands today, the board of African Bank has 5 white men, 2 black men and 1 black woman. That such a board can be constituted by a bank whose shareholding is held by public institutions like the Reserve Bank and the PIC is the type of anomaly that has no place in South Africa today. And in a case where the question of Basani Maluleke’s exit remains mired in uncertainty, the choice of Gustav Raubenheimer as interim CEO should alarm all South Africans who remember that back when African Bank was mismanaged into curatorship, Mr Raubenheimer served in the executive team of the bank alongside Leo Kirkinnis.

And in a country with far too many exhibits of the competence of white men being an assumed trait and the competence of black professionals subject to perpetual scrutiny, the developments at African Bank simply extend the perceptions curse of black professionals. That a man whose history in the bank intersects with its darkest period can be called upon now to replace a black female leader whose own achievements have been lauded by the board; is an epic setback for governance and transformation in the country.

The African Bank story isn’t just a story about Basani Maluleke, but as we all know that in banking the fate of one is the fate of all; it is a story about the fate of black professionals at large and more specifically, black women whose most prominent trailblazer – has been professionally guillotined with no cogent explanation provided.