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Letter to stakeholders continued
develop a comprehensive
organisation-wide sustainability
strategy. Examples of such strategies
are aligning the organisation towards
a more client-focused orientation
and reducing the extent of the cross
subsidisation of poorer performing
clients by better performing clients.
3. Driving client focus
throughout the group
ABIL has thrived in a high-risk
industry as a result of two core
competencies: its ability to
underwrite and price for risk in a
high-risk market, and its ability to
effectively collect in this market.
Understanding client behaviour
underpins both of these.
Continuing to invest in and improve
the credit underwriting and
collection processes is key to the
group’s sustainability. Increased
client understanding opens up new
opportunities to develop
differentiating strategies for
different types of clients. ABIL is
in the process of implementing
behavioural scorecards throughout
the group to enable it to reward
good clients – which should lead
to improved client loyalty and
retention. Behavioural scorecards
will also assist in making progress
on the rehabilitation of clients in
financial distress.
4. Carefully exploring growth
opportunities in other
geographies
Currently, ABIL is a South African
organisation, with no business
interests outside the country’s
borders. This has been a deliberate
strategy; the aim was to first
succeed in the local market before
considering geographical expansion.
The group believes the time is right
to carefully explore business
opportunities outside South Africa
as part of its growth strategy.
Entering other geographies depend
on three key considerations:
the economic attractiveness of a
particular market;
African Bank Investments Limited 8
the suitability, stability and
effectiveness of the regulatory
environment; and
ABIL’s ability to sustainably compete
in that market.
In entering other geographies, the
group will follow a low-risk
expansion strategy, carefully testing
such markets, partnering local
complementary expertise and
piloting the appropriate business
model in each case.
5. Further cost efficiencies
Sustainability requires us to be the
lowest-cost producer in the markets
we serve. We have made progress
in aligning our cost structures with
customer requirements, and our
cost-to-income ratio is declining. At
the same time however, the cost-toassets
ratio climbed to almost 20%.
In some areas of the group’s
business – especially in overhead
costs, further opportunities for cost
alignment exist. The group intends
to manage costs in both relative
and absolute terms. In relative
terms, the goal is to decrease the
cost-to-income ratio to below 35%
and its cost-to-assets to 17,5% or
below. ABIL aims to manage its
costs towards a long-term
downward trend in real terms.
In the past year, we have reviewed
our business processes to identify
and implement cost savings. The
next year will see a continuation of
this, as well as progress towards
designing the right cost management
systems in all areas of our
business. In addition, we will refine
performance management systems
to create the cost culture we
require. Further cost reductions
will ensure that ABIL remain ahead
of anticipated changes in the
competitive landscape in the
medium term.
6. Creating a performance
culture throughout the group
During the year we measured the
culture in African Bank, and
identified the positive and negative
aspects of the culture. The main
requirements identified in the
culture audit included
communication of the African Bank
vision and strategy to employees in
a way they understand, developing
a corporate culture that leads to
increased trust and openness,
enhancing the financial and nonfinancial
levers of the performance
management system and improving
coordination and communication
around performance issues at
individual and organisational level.
Based on the results of this audit,
African Bank Retail is in the process
of designing a culture change
process, which will be implemented
during 2004. The goal of the culture
change will be to address these
areas of weakness.
No culture audits were done for
Specialised Lending. The aim is to
conduct these audits during 2004,
and address weaknesses identified.
Strengthening the board
and management team
As part of its commitment to maintaining
the highest standards of corporate
governance, the ABIL board, in 2002,
commissioned an independent review
of the group’s corporate governance
structures and processes by Woodburn
Mann, an associate of the Whitehead
Mann Group plc in the UK. The review
included:
The development of a board
composition and performance
model reflecting the committed
strategic direction of the group and
the requirements of King II.
An assessment of the alignment of
the skills, experience and expertise
available on the board and board
committees.
An evaluation of the performance
of the chairman, chief executive,
executive and non-executive
directors, by their peers.
The outcome of the review identified a
number of gaps within the board and
has informed the structuring and
composition of the various governance
structures over the past year. The board