What’s the difference between Absa and the City of Joburg? The two entities have made leadership crises part of their DNA. And they get away with it because shareholders are indifferent to the chaos.
This week, Absa CEO Arrie Rautenbach fell on his sword. That means Absa has had seven CEOs in seven years if acting stints are counted. The boardroom at Nedbank headquarters in Sandton would have been a place of interest this week as news of Rautenbach’s departure became known.
Nedbank saw gold where Absa saw rubbish. Its board chair, Daniel Mminele, is a former Absa CEO who left the bank after what appeared to be a toxic battle and resistance from strong executive factions. Jason Quinn acted as CEO after Mminele and applied to be his permanent successor but was pipped by just one vote by Rautenbach. Quinn followed Mminele to Nedbank as CEO. Absa appears to have entrenched executive divisions, as though it is a political party. It’s common to hear talk of English cliques versus Afrikaans factions.
It has also been common for senior executive roles to go unfilled for long periods, suggesting board members and shareholders were turning a blind eye to vacancies. The elephant in the room has been the lack of black executives.
Reports by the Sunday Times of governance lapses under Rautenbach painted a picture of bad corporate culture that shareholders need to be concerned about. In the same month, the City of Joburg got a new mayor for the umpteenth time. Dada Morero replaced a man who must rank among the most underwhelming individuals in the history of politics. I follow public affairs and have found Kabelo Gwamanda to be the most inappropriate person ever to occupy an important public office.
Sadly he is not the last undercooked person for such a role. We are deep in the era of chaos, where anything goes because shareholders (in this case, voters) are not interested in public affairs. It evokes the classical Platonic expression: “The price good men pay for indifference to public affairs is to be ruled by evil men.”
Absa has to start looking for a CEO all over again. No-one worthy of such a role would be available in six months. The difficulty with such an appointment stems from the banking group’s failure to prepare a line of succession. Its competition does better at this. An example is Standard Bank, whose CEO Sim Tshabalala has been at the helm for more than a decade. Remember when some mocked this bank and ridiculed Tshabalala when he was co-CEO, alongside Ben Kruger? Nedbank’s Mike Brown was at the helm for 12 years before he retired.
There was an era in our democratic epoch when big companies like our top four banks would not make CEO appointments without considering how the political market would react. In a way, you don’t want our politicians to meddle in such affairs, but that corporate South Africa has not been bothered by the need for change, both as optics and necessity, says a lot about where we are as a nation.
There is, however, a price to pay for the shareholders. Absa’s competition is better poised in both South Africa and the rest of Africa. Return on equity at 14% is below Absa’s target of 15%, while Standard Bank’s numbers are eye-watering, with a return of 18.8%, one of the best-performing bank stocks on the JSE.
Representivity is a big issue in most parts of the continent and an obvious commercial necessity. It matters to Ugandan dictator Yoweri Museveni (bad example, I know) that a Tshabalala heads the Standard Bank Group and Absa has a Rautenbach. There’s another layer where companies domiciled in Joburg come across as too South African-centric and fail to appoint locals to head operations in other parts of the continent.
In Absa’s case, it is more than just a question of lacking diversity; it is an entity that seemingly needs deep soul-searching. The executives cannot do this on their own. They need serious prodding from shareholders. It is easy to identify the need for soul-searching but tough to execute. And it doesn’t appear that Absa has even reached the first stage of recognising the need. As for the City of Joburg, where do we even begin?
• Mkokeli is lead partner at public affairs consultancy Mkokeli Advisory.
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