Is Equity Bank’s ‘King James’ finally grooming a successor?

Equity Group Managing Director & Chief Executive Officer James Mwangi during an Investor briefing Q1 2018 performance. [Wilberforce Okwiri/Standard]

 James Mwangi has been the invulnerable boss at Equity Bank who oversaw its growth into a regional behemoth.

He has shouldered the responsibility of overseeing its huge balance sheet in a fragile market.

Each of his moves is watched with magnified lenses as a signal of the markets - to try to predict the future of the bank he built from an insolvent building society.

With eight years to the end of his contract, Mr Mwangi recently announced the appointment of the long-serving Group Director of Strategy, Legal Services and Company Secretary Mary Wamae as Group Executive Director to oversee the Group’s subsidiaries, among other senior appointments.

This means the Group’s banking subsidiaries in the Democratic Republic of Congo, Rwanda, Uganda, Tanzania and South Sudan will all be reporting to Mrs Wamae - making her the second in command at the lender.

“Mrs Wamae has had an illustrious career spanning 14 years,” The lender said in a notice.

In July 2016, chief executives of Kenyan lenders were apprehensive over a proposal to cap their tenure as part of the efforts to enhance corporate governance and inject new blood into their leadership.

Central Bank of Kenya Governor Patrick Njoroge had mooted plans to set a term limit for the CEOs, a move that could have sent home more than half of the current bosses at the time.

When Financial Standard asked whether Equity had any succession plans for its CEO in 2016, Mr David Ansell who now chairs Equity Group Holdings said: “The board has discussed Mwangi’s succession. We have plans — both short-term if he is hit by a bus, and long-term. But we don’t anticipate he’ll leave any time soon if he is in good health.”

Speculation of Mr Mwangi’s imminent departure follows the exit of Peter Munga, the billionaire who had been until recently synonymous with the bank’s boardroom.

At 75 years, Mr Munga over the years had managed to skirt around limits to his time at the lender, including a Capital Markets Authority rule that required executives over 70 years to leave their roles in Nairobi Securities Exchange-listed firms.

However, in 2017, Munga pulled a surprise when he exited the Kenyan bank’s board and was replaced with Prof Isaac Macharia. He instead rose to chair the board of Equity Group Holdings Ltd. This was seen as a tactical move set to retain him in a different capacity.

Mr Munga looked set to continue riding his corporate mojo, even offering himself for re-election at the bank’s annual general meeting and successfully defended his post.

But a month after offering himself for re-election, Mr Munga suddenly called it quits.

His absence has now put Mr Mwangi in the spotlight and hinted at a regulatory push to ensure that Equity Bank is prepared for any eventuality and its survival is not pinned on the men who built it.

Equity Bank is part of the six major banks (out of 42) that control around 54 per cent of the banking system assets as at the end-2017. Ratings agency Moodys said that while Kenya has experienced the collapse of three lenders over the past couple of years, the Government is unlikely to allow the larger banks, including KCB, Equity Bank, Co-Operative Bank and Diamond Trust Bank to go down since “they are too big to fail and their fall can be catastrophic.”

“Larger banks, including the top six banks, will continue to benefit from some level of government support, if needed, given their systemic importance,” the rating agency said.

This is a clear indication that regulators may be pushing for a defined transition at the lender which has never seemed to figure out who will step into the shoes of Mr Mwangi once he exits.

As the years roll by, it is becoming increasingly difficult to prepare a successor because the incumbent is seen as larger than life and the next person is unlikely to measure up.

And after 26 years at the bank’s corner office, Equity Bank extended his term by a decade, which will bring his tenure to about 35 years by the time of his retirement.

At the time, all bets had been placed on the Chief Operations Officer Julius Kipng’etich. Speculation at the time was rife that Dr Kipng’etich had been transformed from a non-executive board member to an executive top manager in charge of daily operations in a well-calculated succession game plan.

Dr Kipng’etich joined Equity in 2004 as a board member.

He served as the lenders’ chief operating officer from 2012 until his appointment as Uchumi Supermarket’s chief executive, dashing those hopes.

After Kipngetich’s exit, Mr Mwangi tried to assuage shareholders when he named a number of possible replacements.

He sought to put to rest shareholders’ concerns when he said he had been flying the Equity plane with “co-pilots” who were equally or even better and able to guide the lender to its destination when their time comes.

“We have head-hunted some of the best brains in the global banking circles and they are all here at Equity.” One of those mentioned by Mwangi as his potential successors was Bhartesh Shah, who is currently the bank’s chief operations officer. Mr Shah previously worked for Midland Bank (HSBC) in the UK and has served in senior roles at Standard Chartered Bank in Kenya, Botswana and Singapore. John Staley, who was CEO at Credit Indemnity (Pty) Ltd in South Africa before joining Equity as chief officer of finance, innovation and payments, also made it to Mwangi’s shortlist of potential successors as did Harvard-trained Jumaane Tafawa, who works as the bank’s director for strategic partnerships and programme management.

Others were Rohit Kumar, the bank’s chief officer in charge of corporate and SME banking, Ronald Webb (group director of payments), and Anthony Emeka Ogbechie (group finance director), who Mwangi poached from Credit Suisse Investment Bank, London.

“We have put a succession-planning process in place. It is simply one element of a good business. Aside from the obvious preventative aspect, it also helps keep the board and my executive team aligned with our overall strategy and common goals while bringing us peace of mind,” said Mwangi.

But the latest development puts Mrs Wamae as a front-runner in the succession game plan.

Married into business mogul, Matu Wame’s family, she would bring to the table a valuable network of business contacts should she be bequeathed the responsibility of taking over from Mr Mwangi.

She joined the then Building Society in 2004 as the head of legal services before her promotion to Company Secretary and Head of Legal Services in 2005.

In 2008, Mrs Wamae rose to become director of corporate strategy, legal services and company secretary and in 2012 became group company secretary, director of corporate strategy and legal services. In 2014, she was promoted to group director of strategy, legal services and group company secretary, a position she has held until her recent promotion.

While still in her private legal practice, Mrs Wamae was the team leader who facilitated the first strategic investment in Equity Bank by AfriCap Microfinance Fund in 2002.

She has led the group in several strategic projects, including the conversion from Equity Building Society to a commercial bank in 2004, the listing on the Nairobi Securities Exchange in 2006 and private capital raising of $185 million (Sh18.5 billion new equity by Helios EB Investors in 2007 to become anchor strategic shareholder.

She has also helped set up greenfield operations in Tanzania, South Sudan and Rwanda as well as the acquisition of existing banking operations in Uganda and more recently Democratic Republic of Congo (DRC) as well as the subsequent listings on Uganda Securities Exchange (2009) and Rwanda Stock Exchange (2015).

Mrs Wamae is also credited with setting up the legal and secretarial division of the bank. Most large firms plan for seamless succession of the CEO by grooming key personnel at the executive level many years in advance.

In most companies, leaders are determined several years before the incumbent leaves the organisation. The talent pool usually has structures and performance cultures in place.

General Electric

Organisations that have successfully existed for decades offer good lessons on succession planning. General Electric, with leaders like Jack Welch, considered one of the best in US corporates, has found success and transformed over the years to expand and win over more customers.

While making every effort to grow the organisation, good leaders must be aware of limitations such as time — they will not be there forever and have to prepare the organisation for this.

Corporate Kenya also offers its share of great lessons on good planning where larger-than-life CEOs are concerned.

Michael Joseph dominated the communications landscape and it was difficult to imagine Safaricom without him. But then Bob Collymore took over.

Mr Collymore has succeeded as well as managed to keep growing the telco.

At the Kenya Commercial Bank, another financial services behemoth, many observers saw a succession plan in the making when Martin Oduor-Otieno was appointed deputy CEO in 2005.

He was plucked from a plum job at Barclays Bank’s regional office in South Africa and had to fight it out with other contenders to succeed Terry Davidson.

After taking over the mantle at KCB, Mr Oduor-Otieno established a new corporate structure where he sat as chief executive, with three assistants.