When I interviewed Mike Brown for Business Day not long after he was appointed Nedbank’s CEO-designate in March 2009, he said one priority was to address the banking group’s “underweight retail, overweight wholesale” tag; another was to grow its presence in Africa over time.
Brown steps down at Nedbank’s AGM on Friday after three decades at the group, the past 14 years of them as CEO. They have been often-tumultuous years for Nedbank and for SA, years in which banking has seen significant changes globally.
But Brown has largely delivered on the first two of the priority areas, even if the third — Africa — remains a work in progress for the group.
The group has always been underweight in retail banking, especially in the mass market. But in 2014/15 it embarked on a complete rebuild of its “tech stack”. It has now spent R10bn on the project, which will be 100% complete by the end of 2024.
Its technology now benchmarks really well by global standards, Brown said in a recent interview with Business Day. The bank’s market share of main- banked customers has risen from 9% to 12% over the 14 years, making it one of only two big banks to have gained share (Capitec is the other).
“There’s still work to be done in our retail business, for sure. But the technology foundations we’ve laid are increasingly positioning Nedbank as a leader in digital, and being a leader in digital is foundational for long-term competitive advantage in retail,” Brown said.
“The technology has been created now. It’s a question of whether they have the appetite for the credit risk in this market,” said Denker Capital’s veteran banking analyst Kokkie Kooyman. “If we get the election out of the way and SA grows again, they now have the tools to do that.”
Nedbank has sought at the same time to grow its wholesale and business banking franchise, mainly by leveraging its “green” ESG credentials that date back to before Brown’s time. It has been involved in more than half of the government’s renewable energy programmes as well as being the lead bank on Anglo American’s Envusa Energy partnership.
“I think we positioned ourselves really well in that energy and infrastructure opportunity and it’s similar skills sets that I think will morph into logistics and water as SA resolves its infrastructure challenges through increasing involvement of the private sector,” said Brown.
Africa is less of a success story for the bank: it’s clearly going to be one of the priority in-tray items for Nedbank’s new CEO Jason Quinn, who joins the bank on Friday from Absa, where he was finance director while also doing a year-long stint as acting CEO before Arrie Rautenbach was appointed to the post.
Unlike rivals Standard and Absa, Nedbank has not built an extensive presence on the ground in the rest of the continent, at a time when Africa’s economies are growing way faster than SA’s, giving those rivals a big step up in earnings. Being underweight in Africa is an issue.
Nedbank has its own operations in SA’s immediate neighbours, but for the rest of the continent it chose instead a decade ago to go with a 21% stake in Ecobank and a partnership with the Togo-based pan-African bank that gives it access to 39 countries. One of Brown’s few regrets, he said, is that he exercised the option to buy the Ecobank stake two years too early — it would have been cheaper later.
Southern and East Africa
But he emphasises that it’s never been Nedbank’s strategy to be a “flag planter” in countries on the continent with no strategic logic and fit back to its businesses in SA. It wants to be Nedbank in Southern and East Africa; it has materially improved the performance of its businesses in Southern Africa and over time wants to do more in East Africa and on the rest of the continent, where it has plans to roll out that tech-stack to customers.
Brown counts the on-time, on-budget technology refresh as one of the high points of his 14 years; the ESG leadership has been another. But a third was the managed separation of Old Mutual, which in 2016 embarked on a process that saw it return from London to SA and separate out its life, wealth and banking businesses. That finally set Nedbank free in 2018 after a long stretch of uncertainty over its ownership.
In Brown’s first year as CEO, UK-based HSBC made an $8bn bid for the bank — then walked away two months later. It was only when Old Mutual unbundled its 55% stake in 2018 as part of the managed separation that Nedbank finally gained its independence.
For SA, the 14 years spanned the Zuma administration and the fight against state capture, a fight that drew business into politics in a major way for the first time — with the Covid-19 crisis later paving the way to a more collaborative partnership between business and the government under the Ramaphosa administration.
I try to stay very focused on the economy and the policies and outcomes that are required to improve economic growth and prosperity for all South Africans.
Brown was one of the founders of the CEO Initiative, which had its first meeting in 2016 at Nedbank’s Sandton head office. He has continued to support business’ partnership with the government led by Business for SA, to address the energy, logistics and crime crises weighing on growth.
As a business leader he’s tried never to be a political actor, he says. But he has been vocal on the economic costs of the crises, particularly the fiscal costs and what they mean for the economy.
“I try to stay very focused on the economy and the policies and outcomes that are required to improve economic growth and prosperity for all South Africans,” he says.
But as he bows out, Brown — always a master of the sound bite — is sounding more bullish than he has for some years. By fixing energy and logistics, SA can get an extra three percentage points of growth at least. “Then you’ve got a country growing at 4%, not 1%, and SA growing at 4% is a materially different country, both for banks and business and employment growth and for the government’s fiscal position,” he says.
He urges too that SA should be more proud of its financial sector, which is right up there with the best in the world.
One cloud over his tenure has been the allegation that Nedbank colluded with state capture at Transnet, through a 2015 interest rate swap deal it did with Transnet, who at the time were being advised by Regiments Capital on the now-notorious Chinese locomotive deal. Nedbank, which said this week that efforts at mediation with Transnet had terminated, has repeatedly emphasised it has to date found no evidence of any dishonesty, corruption or collusion on its part.
Brown turns 58 on Friday, and while he is stepping down, he is not leaving Nedbank yet. He has agreed to stay on for three months to facilitate the leadership transition: “A seamless passing of the baton is what you’re trying to achieve here”. Then he’s going to do some of the travelling he’s always wanted to do with his family, starting with the “great migration” in Tanzania’s Serengeti reserve in September.
He wants to get fit and get his golf handicap back to its former glory. And he will have a restraint of trade for the next two years, until what would have been his normal retirement date of 60. After that, he will see: “After 30 years of running on the corporate treadmill I’m quite keen to step off and control my own diary for a while.”
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