Absa boss Kenny Fihla has clamped down on the culture of wasteful expenditure at the group to rein in costs and free up cash to invest in productive efforts as he looks to gear up the lender to capture as much of the money he says it is “leaving on the table” for rivals to feast on.
Fihla used the group’s investor call on Monday to highlight key features of the lender’s new strategy, aimed at increasing the group’s return on equity to be on par with its bigger rivals.
To achieve its objectives in the medium to long term, the company needs to drive efficiency in terms of costs and capital allocation, he said.
“Improving our cost efficiency is a priority. We must structurally shift our costs and reduce our cost-to-income ratio to closer to 50% as quickly as possible. In the meantime, we are aggressively targeting low-hanging fruit such as wasteful expenditure. One example is we have closed the taps on outsourcing our thinking to consultants. We have made meaningful savings already.”
We are aggressively targeting low-hanging fruit such as wasteful expenditure.
Fihla took over as Absa CEO in June, becoming the umpteenth leader of the lender in the past decade, after a period of leadership turmoil that hurt morale.
The new strategy Fihla unveiled rests on four pillars: customer-led growth, building a diversified pan African business, driving excellence and pursuing new growth opportunities.
At the heart of the strategy rejig is the lender’s need to wean itself off dependence on South Africa, Kenya and Ghana for earnings ― a move Fihla knows well from his days at Standard Bank.
“From a geography point of view, we have an overconcentration in South Africa, Ghana and Kenya. South Africa still contributes about two thirds of our revenue and earnings. We expect the contribution from the Africa regions to increase over the medium term given the stronger GDP in the rest of the African markets,” he said.
“Within the Africa regions, we are over-dependent on Ghana and Kenya and we have to increase the contributions from the other countries. Looking at our footprint, we see massive opportunities in Tanzania and Uganda given the significant infrastructure investment [needed], as well as in Mozambique despite the current sovereign debt challenges that the country faces.”
One of his first stops as CEO was Uganda. The group plans to merge its two businesses in Tanzania to build scale.
To have laser focus on building the group’s Pan-African growth ambitions, Fihla in October appointed Charles Russon as CEO of Africa regions.
Absa is also present in Botswana, Ghana, Mauritius, Zambia and the Seychelles.
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