Having won the confidence of the appointing authorities at Barclays Bank, Wilfred Mpai wants to remodel the way the bank does business ÔÇô and possibly set the direction for the industry.
The man who heads Botswana’s biggest commercial bank is not a career banker.
The third successive Motswana to be appointed MD of Barclays Bank, Wilfred Mpai’s DNA makeup couldn’t be more different from his predecessors’. Duncan Mlazie was a career Barclays man, who had risen through the ranks. Thuli Johnson was recruited from outside the bank to take over from Mlazie, but he was a veteran of the financial services sector.
Now, enter Mpai, who joined the bank in June 2007 as Finance Director having previously held various positions in the Debswana/De Beers group such as Administrative Manager ÔÇô Debswana Pension Fund, Financial Controller ÔÇô Diamond Trading Company (London), Group Management Accountant; Financial Manager; and Group Services Manager ÔÇô Debswana.
He assumed the top job in June, having acted as CEO since September 2010, after the departure of Johnson.
Coming from a mining business background, he had thought the banking environment would be easy sailing.
“I never imagined there would be as many challenges as I found here,” he says in retrospect. “I had never seen people work so hard in the banking sector. That was a real shock. The second shock was how different the processes were, not a lot as Debswana was at the time. A lot has now changed. I would say we are more developed. It was shocking the extent of manual work that happened in the banking environment. Part of it is necessary; we deal with forms and all that.”
It’s Saturday morning, and he is in casual wear. The executive suite on the top floor of Barclays House is deserted, except for one or two secretaries. The man who has been in the eye of the storm in recent weeks has a very calm demeanour about him. I can’t detect any sign of the flu that led him to leave the office early the previous day.
Mpai’s arrival at the bank coincided with heightened activity in the business. Barclays was opening new branches countrywide, and increasing ATMs. There were increased deposits, and the loan book also grew significantly, reaching a high of processing an average of 5000 loans a month. That would only taper off in 2009 on the back of the global economic slowdown.
If there had been an oracle, perhaps it would have forewarned him to beware the ides of March because one of his biggest challenges at the moment is a result of the headcount growth of that time. Of course, in 2007 nobody would have guessed that in just four years the metal plate on his door would be inscribed with the hallowed words, Managing Director. Same as the financial tumble that was some months away. There was no oracle.
For many people, the experience of the global meltdown was a practical demonstration of what it means to be part of the global economy. For the banks, the deposits plummeted, as customers withdrew money for household consumption.
Mpai points out that it was a given that at some point, the banking sector was bound to hit the wall, given the country’s tiny population, which translates into a small market.
“I always believed there would get to a point where there is saturation of sorts,” he says. “And, indeed, there was saturation.”
Now, add to this the effects of the global crunch, such as a marked slowdown in the demand for diamonds, then you have an economy ÔÇô and by extension, a banking sector ÔÇô that stares at flashing red lights. What government did was to put together a stimulus package that revolved around a lot of construction work to create an opportunity for continued economic growth and employment. Mpai looks at that intervention as a source of strength for the banking sector because banks were kept busy through provision of financing for the companies engaged in the civil works.
Today the turbulence has somewhat eased, and he is confident enough to declare that the economy is coming out of the recession ÔÇô though he qualifies it as cautious recovery.
“I don’t think we are at the highs of the previous years, say of 2008, but we are on our way to recovery,” he says.
One of the positive developments that he sees as a good omen for the economy is the prospect of increased downstream activities in the diamond sector.
“The downstream processing of diamonds should take us a lot further. Banks generally would have space to participate in the opportunities that are now available,” he says.
He believes we are on the verge of seeing more innovative ways of doing business from the banking sector. Increasingly, he points out, banks would approach the opportunities presented by the new environment around partnering with corporates, interfacing with them around particular projects. He gives an example of financing projects like the P8 billion Morupule Power Station expansion project, as an area where banks need to play in.
From the perspective of Barclays, his view is that in light of the changing business environment, the bank should pull back a bit from the consumer space.
“We have been heavily involved in the unsecured space,” he says. “We need to redefine our model proposition such that we get more secure and move away from unsecure space.”
Partly, he is talking from the unpleasant experience of the economic slowdown, when the bank found itself with a high impairment rate ÔÇô largely from the consumer space. It is a particular challenge faced by all local banks, not just Barclays, that the major segment of the market is at household debt. In a climate where household debt is excessive, as it currently is, this cripples the banks’ growth. The alternative path he wants to lead the bank to, is to develop a suite of products for corporate customers that answers to their various needs ÔÇô which could range from project financing, requirements for houses, as well as employee scheme loans. He sees this approach as creating a more robust relationship with the customer.
“Such a relationship is a lot more long term and long lasting, and it can yield you a lot of returns,” he says.
Another challenge that the banks are facing is excess liquidity in the market. The response to excess liquidity from the central bank’s point of view has always been to mop up the excess liquidity through making available Bank of Botswana Certificates. However, the central bank has recently limited availability of the Bank of Botswana Certificates.
Mpai’s assumption is that this change could be a signal of a desire by the central bank to get commercial banks to provide alternative products to customers.
“If you don’t have bank of Botswana certificates,” he states, “the treasurers of all banks will be going out there finding alternative products. In a way that is to ensure that banks do what they ought to be doing; which is to investigate alternatives and make them available to customers; investigate investment opportunities and make them available to customers. It is easy to take Bank of Botswana Certificates as a fallback position.”
One of the most common complaints among customers about banks is that they are too expensive. Mpai readily concedes that there is merit to the criticism. In response, he states, Barclays revised its entire pricing structure. In the end certain charges ÔÇô such as punitive charges for unpaid stop ordersÔÇô were eliminated. In some cases there was a reduction, such as the interest on unsecured borrowers, which was reduced by four percent.
Another charge that was eliminated, though not necessarily in response to the accusation that the bank is expensive, was the ATM charge. His explanation is that this was a way to harness the benefit of technology to reduce the number of people coming to the branches for various banking activities, and redirecting that flow to ATMs. Now, the only way to achieve that was to make ATMs cheaper. He talks of creating a new banking behaviour, where customers utilise ATMs, and become a lot more self-serving than going into branch. From a business perspective, this reduces operating costs because there would no longer be a lot of people serving customers in a branch.
Even as he puts the uptime for Barclays’ ATMs at 96 percent, Mpai admits that offloading more work to the machines calls for much more attention.
“It’s an area we are looking at,” he says. “Not just the number of the ATMs, but their capability. For instance, how multi-currency can they be? We need to improve the ATMs we currently have to ensure that the customer can do all the other requirements that they would otherwise do in a branch. So we need to relook at our ATM configuration and say we need better ATMs.”
Like a technology geek, Mpai is enthusiastic about more automation of the bank’s processes. Where this has happened, he states, the turnaround period has improved, leading to a reduction in costs.
“The less time you take on a process, the cheaper it is because you don’t spend too much time on that activity. In the end, it’s a benefit to the customer,” he says.
Now, this is one area that has set him in conflict with the unions, making him the number one hate figure in the financial service sector. He concedes that one of the unintended consequences of automation is bound to be redundancies, but he disputes the figures being quoted on the other side.
He goes through the numbers. In 2006, he states, the bank had a staff complement of 960, which went up to 1500 in 2007when new branches were opened, before dropping to the current 1350 employees.
“There was a point when it was necessary to be at that level. But now the business has embarked on a journey of automation. So you arrive at a point where you say there are too many people. In 2008, we were processing 5000 loans a month. We have now reached a point where we are processing 2000 loans due to the small population and market saturation. At that time we needed that number of people, but not now. So we need to relook at our structures and say, ‘Has time not come to lower our structures?’,” he says.
He says 96 employees were going to be affected, but because there were existing vacancies elsewhere, they were asked to apply to where they felt they could be redeployed. Only 71 responded and all were taken to the positions they had applied for, some on promotion. In the end, only 25 people were retrenched, while 40 opted for voluntary separation.
“The unions still quote 300. I don’t know where that number comes from,” he says.
I ask him if he worries about what the spat does to the Barclays brand.
“I am worried,” he states. “But I take comfort in that there has been active communication with all branches, and the message has been very well received. So, there is a lot more calmness coming from the employees.”