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ABSA Continues Restructuring Tanzanian Bank Despite Union Opposition

By Ongeri John & Justin Arenstein, African Eye News Service (South Africa), 10 May 2000

Dar Es Salaam - South African bank ABSA warned Tanzanian unions on Wednesday that it would not be pressured into canceling large-scale restructuring at its newly acquired National Bank of Commerce (NBC).

ABSA bought a 70% shareholding in NBC one month ago for US$18,7 million and immediately warned it would need to trim the bank's bloated 1 100 workforce as part of a five year US$6 million modernisation programme.

NBC is currently Tanzania's largest commercial bank, with 35 branches on the Tanzanian mainland and island of Zanzibar. The government has retained a 30% shareholding in the bank.

ABSA assistant corporate affairs general manager Nick Cairns said Wednesday the proposed modernisation would include extensive computerisation and restructuring but he stressed no branches would be closed.

He added that retrenchments would only be used as a last resort after an unspecified number of excess staff were reassigned or retrained.

We've been plagued by negative media coverage since we took over, with ridiculous allegations that we planned to sack up to 700 staff and begin closing branches, said Cairns.

Attributing the reports and recent leaks of internal NBC memorandums to disgruntled union members, Cairns warned that ABSA would not be intimidated.

We want to be fair to staff but will have to act if staff cannot be retrained or are incompetent. We also need to weed out duplication, said Cairns.

Confirming that NBC's new MD Gerald Jordaan and his six-member ABSA management team were negotiating terms for retrenchment with local unions, Cairns said the bank was disappointed its internal memorandums were being leaked by union members intent on sabotaging the restructuring programme.

Unionists last week leaked a management memo from Jordaan to branch directors, warning that a run on security certificates held by the bank was of great concern.

The memo said management has observed with great concern the increasing number of applications for discharge of security documents by customers who have liquidated their liabilities. Whilst it is common practice for customers who have liquidated their liabilities to retrieve their Title Deeds, the rate at which customers are applying for discharge of security is alarming and needs to be addressed immediately.

Cairns said on Wednesday the issue was a storm in a teacup and stressed that only one customer per week had requested their security certificates over the past two weeks.

We had about 30 requests from small clients to surrender these securities, but we're back to previous levels, with about one client a week. So there's no problem and the bank is doing fine, said Cairns

He added that Tanzania had little private land ownership or mortgages, so customers were forced to use assets such as cars or shares as security for loans. Proposed property rights reforms might change this soon.

NBC has excellent potential. It is the biggest commercial bank in Tanzania and has the most extensive branch network. We have pledged a US$6 million capital investment over the next five years, which demonstrates our confidence in the bank, said Cairns.

The NBC deal is ABSA's biggest foray into continental Africa to date, and follows its purchase of a 26% stake in the Commercial Bank of Zimbabwe and a 35% stake in the Bank of Windhoek in Namibia.

Jordaan and the ABSA management team have been running NBC for the past six months, during buyout negotiations with the government.

The Tanzanian and other deals are part of our strategy to move into Africa along with our corporate clients, he said.