As confusion and uncertainty continue regarding the goings on at African Bank and its future, market analysts and commentators have been sharing their sought after perspectives and insights. Everyone is curious and everyone has a theory, we are all seeking to understand the situation and the impact of the possible outcomes. Bert Griesel, who is now an independent management consultant has firsthand experience when it comes to turning around a flailing institution who is drowning in its unsecured lending debt book. He was the custodian of Unifer – Absa’s disastrous unsecured lending venture, and has a profound set of insights on Abil’s current situation. This interview is a must for anyone trying to get their head around the African Bank story. – LF
ALEC HOGG: Well, the biggest news of the week unquestionably was that surrounding Abil. In fact, in less than a week, last Wednesday the news broke first of all, and it’s been a rollercoaster ride for shareholders and people within the organisation ever since, including the Reserve Bank and other banks. Joining us for some insight on what it must be like behind those doors, is Bert Griesel, who is now an Independent Management Consultant but Bert, Unifer, is a story that dominated the headlines in the same way as Abil is dominating it now. How were you brought into the whole Unifer saga? Just for those that don’t recall, it too was a micro-lender, it was, bought by Absa; a company that you worked for at the time and then you were, given the ‘hospital pass’.
BERT GRIESEL: Yes, well 12-and-a-half years ago now that was an Absa venture to take us into the unsecured market and we thought best to acquire something that had the reputation of trading in that market and understanding that market, so we took a 53 percent shareholding and we later increased that to just over 60 percent. Soon thereafter, we became aware of very similar problems, than with the ones that we are now aware of at Abil, yes, then it was part of my Management Portfolio at Absa. I was, at that stage the Group Executive in charge of Retail Banking, and somebody had to step up. I took a team of about 50 Absa people, and we joined hands with the existing team at Unifer, and we launched a five-year turnaround plan there that turned out quite successfully, in the end.
ALEC HOGG: Just take us through that. Why was it required that you needed to go in? What were they doing wrong and where are the similarities with Abil?
BERT GRIESEL: Yes, well it is, obviously on a much smaller scale than what we are experiencing now. The market was much smaller at that point in time, but Unifer was a conglomerate of various lending books and insurance operations that joined hands and then listed itself. It then traded through brokers, in the market, predominantly and, with the Absa funding, the scaling at that point in time obviously happened. The market conditions also turned on them – at the same time, and soon the book was in trouble. It needed significant recapitalisation.
ALEC HOGG: Unsecured lending as well?
BERT GRIESEL: It was purely unsecured lending, in those days, yes.
ALEC HOGG: So, very similar to Abil?
BERT GRIESEL: Yes, very similar although, as I’ve said, a much smaller scale in those days and it was also more purely defined. It was maximum 36 months, and loans on the average size of about R9.000 to R15.000. That was the trading market that we were in, in those days.
GUGULETHU MFUPHI:Â What was the interest rate at that time?
BERT GRIESEL: It was, not controlled as now, so you had rates anything between 30 and 45 percent, on a per annum basis.
ALEC HOGG: So it actually was in a better situation because you could charge higher interest rates, if you like, than what Abil was able to.
BERT GRIESEL: Yes, as I said, it was before the NCR and you obviously had the normal controls  and supervision and so on, but it was not as regulated as now.
ALEC HOGG: It took you five years to fix.
BERT GRIESEL: Yes.
ALEC HOGG: How long do you think it’s going to take to fix Abil?
BERT GRIESEL: Well, it’s very difficult to determine now. The only good news is it will be better than what it seems to be today. That’s the positive news that I have for that team at Abil, and Mr. Winterboer but it is not a short-term operation. You have to appreciate the fact that you first need to look at the current strategic position of that organisation, and you have to then determine what is core to the ‘go forward’ business. Then you have to get detailed grips of the operations, especially the Debtor’s Book and we’ve now seen that they’ve divided the Debtor’s Book and then there’s an exciting phase, where you actually, you reposition non-core assets and you do all the things that we’ve done from the Absa stable, by de-listing the entity and we bought the minorities out.
We cancelled the Bank License, we migrated assets, and sold off a lot of non-core assets, which was the corporate finance, investment-banking side, which we all enjoyed, but then the hard work started of focusing on each individual debtor, the conditions under which his loan has been, granted to him. His repayment profile and then a team of dedicated ‘okes’ that worked with me for many years. It is not glamorous. You do the detailed slog, on a day-to-day basis. It’s not a month-to-month boardroom job. This is really hands-on but very rewarding in the end, if you look back and you see what systems and processes have been built. I’m quite impressed by the fact that there’s a decisive action and it looks like the correct action, in my mind, but the news is it is going to take a while.
GUGULETHU MFUPHI:Â So, in a nutshell, there is hope for Abil potentially?
BERT GRIESEL: Well, I would definitely say so. I’ve just looked at the Governor’s press release and the announcements and what they’ve done on all scores of the business now, by dividing the two books and dealing with Ellerines Operation, and I’m quite impressed with what I’ve seen there.
GUGULETHU MFUPHI: Well, Abil has been the centre of attention, not only on Power Lunch but also throughout our Live Market Shows. For most people who are, affected by Abil, the banks impact on CPI, the long and short-term exposure on the property market, and the lesson that South African’s big banks have learnt from Abil.