End of an era for African Bank after R5.7 billion Eskom deal collapses

The collapse of the sale of Eskom’s staff home loan business to African Bank has brought the bank’s acquisition spree to an end. 

In a statement on 8 May, the bank said that it will now focus on its existing operations and solidifying its diversified product offering. 

African Bank had previously announced that it would acquire Eskom’s staff home loan book, which is valued at around R5.7 billion. 

The utility had put the book up for sale following the National Treasury’s R254 billion debt relief programme in 2023, with one of the conditions being the sale of the business. 

Eskom has been trying to sell the home loan book for nearly a decade, with it first announcing a planned sale in 2018. 

Established more than 30 years ago, Eskom Finance Corporation was set up to provide lending solutions to staff members as a way to enhance efficiency and make the utility a more attractive place to work. 

While Eskom’s need for the deal to go through is clear, African Bank said the acquisition would further diversify its product offering. 

The bank has been on an acquisition spree to decrease its overall exposure to unsecured lending, which still makes up a significant chunk of its operations. 

This type of lending is higher-risk, requiring it to keep more cash on hand and is highly volatile, resulting in huge seasonal swings in profitability and growth. 

To increase exposure to other parts of banking, African Bank snapped up Grindrod Bank and Ubank in 2022, with it buying two divisions from Sasfin Bank in 2024 and 2025. 

This significantly increased African Bank’s business banking business, giving it exposure to vehicle and asset finance, as well as a higher-quality retail client base. 

It still lacked a significant home loan book, which is seen as one of the highest-quality forms of lending for a retail bank, with mortgages tending to be stable, predictable and highly profitable. 

However, this planned acquisition, despite being announced in 2024, has fallen through. Eskom announced on 7 May that the deadline for fulfilling deal conditions had lapsed and thus, the deal is over. 

African Bank’s board has responded by saying that it has decided not to proceed with the acquisition of Eskom’s staff home loan book and related assets. 

“This follows a decision by the Board to consolidate and embed African Bank’s organic and inorganic growth of the last five years, drive efficiencies and extract more value from the acquisitions done between 2022 and 2025,” the board’s statement read. 

“As the conditions of the deal were not fulfilled within the agreed timeframe, the agreements have automatically lapsed and are no longer of any force or effect.” 

African Bank’s transition hits a roadblock

The collapse of the Eskom deal has temporarily halted African Bank’s march towards becoming a diversified financial services provider. 

Instead, it will now focus on integrating the businesses it has bought over the past three years to build out its business banking capabilities. 

Interim CEO Zweli Manyathi said the decision underscores the bank’s disciplined approach to acquisitions and capital allocation. 

“In recent years, we have completed a number of strategic transactions, including Grindrod Bank (2022), Ubank’s asset and liability acquisition (2022) and two divisions from Sasfin Bank (2024/2025),” Manyathi explained.

“These acquisitions reinforce our focus on opportunities aligned to our long-term strategy and enhanced customer value.”

Crucially, Manyathi said that these acquisitions would support African Bank’s ambition to transform from an unsecured lender into a diversified, digitally-enabled business and commercial banking group. 

While only an interim CEO after Kennedy Bungane’s shock exit earlier this year, Manyathi has been charged by the board with overseeing this transformation. 

Manyathi does have extensive experience in the business banking space, having been Business and Commercial Banking CEO at Standard Bank for some time. 

He also has experience from leading FNB Branch Banking and FNB Corporate Banking. 

However, he has stepped into the CEO role at a time when African Bank is under increasing scrutiny from regulators and the broader market. 

Business Day first reported that Bungane was pushed out of the CEO role following a “highly charged directors’ affairs and governance committee meeting”.

During the meeting, the bank’s poor first-quarter performance and a regulatory reporting mistake to the Prudential Authority (PA) were allegedly used to force him to step down. 

The regulatory reporting issue stems from the implementation of Basel III+ rules in 2025 by the PA to improve transparency surrounding risk, leverage and capital adequacy.

This was followed by revelations that the bank had engaged in “kite-flying” to boost its capital adequacy ratio. 

African Bank had boosted its capital adequacy ratio by issuing a R720 million loan to African Insurance Group (AIG), which is owned by African Bank Holdings. 

African Bank Holdings is the parent company of African Bank and AIG. 

AIG transferred R685 million in dividends to the holdings company, which then used it to buy one share in African Bank and boost its capital adequacy ratio. 

The PA ordered the bank to reverse the transaction, which it did before taking the matter to the FST and asking it to reconsider the PA’s order. 

African Bank explained that the purpose of the loan was to recapitalise AIG. However, none of the funds stayed with the insurer, with it all flowing to the holdings company or the bank. 

Ultimately, the FST ruled in the PA’s favour, with the regulator’s evidence going uncontested.

The practice, termed “kite-flying”, effectively masks the true capital position of a bank, covering up its poor financial standing.