African Bank keen to expand SME lending footprint

African Bank says it welcomes the rising competition for a piece of the SME lending market, as both new entrants and traditional banks move to claim a larger share of the fast-growing sector.

“I’m very keen for more competition to come and support SMEs. I think it is the unlock that is needed for this country to get a higher GDP growth and lower unemployment rate,” CEO of the retail lender, Kennedy Bungane, told Business Times.

FNB currently holds the biggest share of the SME market — both as a banker and lender to small and medium businesses — but rivals are stepping up efforts to claim a bigger slice of the growing sector.

Capitec has introduced what it calls a “cheaper and transparent” fee structure for business clients. Last week, Investec announced plans to enter commercial and business banking to compete with the so-called big four banks.

African Bank has acquired Grindrod Bank for R1.5bn to accelerate its entry into the business banking sector. It also took over Sasfin’s commercial finance business and Ubank.

Bungane said they’ve launched a digital lending platform that helps qualifying entrepreneurs get approved for loans of between R5m and R20m within 24 hours. “We understand entrepreneurs need to make decisions quickly. This is groundbreaking in the SME [space]; we think we will be able to win in this space and make a difference.”

Analysts are saying to be able to advise investors how to treat our listing, they need to have a little bit of consistency and know that there are no big changes coming. That is why we thought 2025, 2026 and 2027 would [produce] financial results that will [show] a track record for investors

—  Kennedy Bungane, African Bank CEO

African Bank is also growing its home loan book, having acquired Eskom’s staff home loan business for R5.7bn. The bank is eyeing the “missing middle” — early work entrants and civil servants who earn above the threshold to qualify for RDP homes but cannot qualify for finance for homes priced above R1m. “It’s a gap in the market. This will be big in our space in diversifying.”

For the year ended September, African Bank reported that profit fell by 47%, net advances were 15% higher at R37.1bn, while the business and commercial banking division grew by 49%.

After delaying a decision to list on the JSE this year, Bungane said a decision would be made in 2027—and based on consistent financial performance, they are likely to list in 2028.

A year ago, they appointed a group of global investment bankers, who approached over 38 investors — locally and globally — to gauge market perception on their readiness to list.

He said the feedback was positive, with investors saying they bought into the African Bank story and listing plan. However, potential investors needed more time to study the company’s performance after a string of acquisitions as part of its diversification from being primarily an unsecured lender into a full personal and commercial bank.

“They think it’s difficult for them to model our performance, and they would want to have at least three annual financial years of performance post the acquisitions. In other words, [they want] to be able to track what African Bank looks like after these acquisitions have been bedded down.

“Analysts are saying to be able to advise investors how to treat our listing, they need to have a little bit of consistency and know that there are no big changes coming. That is why we thought 2025, 2026 and 2027 would [produce] financial results that will [show] a track record for investors,” said Bungane.

African Bank is 50% owned by the South African Reserve Bank; another 25% stake is held by the Government Employees Pension Fund. The remaining 25% has been shared by a consortium of local banks since 2016.

The bank was placed into curatorship in August 2014 due to a crisis caused by years of reckless lending, a high concentration of non-performing loans, and large financial losses announced by its then holding company.