African Bank cuts 1 200 jobs as JSE listing is put on hold

About 1 200 people are losing their jobs at African Bank, and the lender has put its Johannesburg Stock Exchange listing on hold while it finishes folding its acquisitions into one business.

The bank’s board chair, Thabo Dloti, confirmed the scale of the retrenchment and the listing delay in an interview on SAfm’s Market Update. He said the bank had told the market it was entering a different phase when chief executive Kennedy Bungane resigned abruptly in March, and that the numbers behind that decision have since become visible in the interim results.

African Bank spent several years growing through acquisitions. That brought in customers and diversified the balance sheet, but it also duplicated costs across the businesses it bought. The consolidation now under way is about removing that duplication and turning the expansion into profit.

Why the listing has been deferred

Dloti said the consolidation is taking longer than the bank expected, between a year and 18 months, and that a listing cannot be sold to investors during that work. A listing, in his words, is a position of confidence, and it needs a track record of results that the market can rely on.

That is the plain reason the listing has moved. The bank is not there yet, and it has chosen to wait rather than list into a period of restructuring.

The R680 million dispute

Questions have also been raised about a Financial Services Tribunal ruling that found more than R680 million in intercompany transactions were less than commercial in nature.

Dloti said the bank had disagreed with the Prudential Authority over how those transactions should be represented, and that it ultimately accepted the regulator’s position. The bank’s reported results for the year reflected the reconciled view, and no restatement was required.

The bank then approached the tribunal to clarify the points of difference, so that it is better informed on future transactions. Dloti said the ruling had no material effect on the reported financials and no bearing on the changes that have followed.

A smaller, simpler bank

What emerges from the consolidation, Dloti said, is a bank that keeps the strategy it already has and executes it better. The accelerated strategy brought African Bank business banking and a broader retail customer base. The next phase is about simplifying the organisation so it can serve those customers reliably.

That phase has already reshaped the leadership. Bungane resigned in March, and the chief financial officer stepped down last week. New appointments have been made to strengthen the team for the work ahead.

For the roughly 1 200 employees in the Section 189A process, the consequence is immediate. Consultations with the trade unions are under way and the bank says it hopes to conclude them. Until those talks close, the final number and the terms of the exits remain open.

For African Bank’s customers, the stake is continuity. Roughly a decade after the old bank was placed under curatorship and rebuilt, this is the second time the institution has had to prove it can stand on its own. The listing was meant to be the proof. It now waits on the consolidation.

The bank has not set a date for the listing. The immediate milestone is the conclusion of the Section 189A consultations, which will determine how many of the 1 200 jobs go and on what terms.

Source: Moneyweb, African Bank rings in changes to clear path for future