• COVID-19 will result in fundamental structural changes to how people live, interact and do business
• With economic activity significantly reduced, operations have to be tailored accordingly, while ensuring operational and business resilience
• The use of digital tools has surged and is likely to continue, as the bank looks to make some remote working arrangements permanent

What started as a public health emergency has now developed into an economic and social crisis in many countries. It is too early to offer any definitive views around how the coronavirus crisis will unfold. It will also play out in country-specific ways, depending on the quality of health infrastructure and availability of fiscal resources as well as monetary policy space to act as shock absorbers.

There is, however, a growing consensus that COVID-19 will result in fundamental structural changes to how we live, interact with each other and do business. Amid changing customer needs and preferences, businesses and industries have had to adapt to this new reality.

Ensuring the safety and health of employees and customers

Our first priority is the safety and health of our colleagues and customers. We implemented travel, hygiene and social distancing protocols. We also extended the systems we already had in place to enable more people to work from home.

We increased our capacity from about 8,000 remote connections to about 60,000 concurrent connections across our presence markets. We have screened and tested colleagues who may have had COVID-19 contact as well, and then supported them through our medical and wellness teams.

We introduced substantial customer relief measures suitable per market. We also offered our customers a repayment relief programme, which, by mid-June, benefited 719,119 accountholders in South Africa, amounting to $517  million (ZAR 8.85 billion) cash flow relief over the three-month period, across our retail and business bank. In markets outside South Africa, 65,000 retail customers and 3,600 business banking clients benefited from the programme by early June.

We have contributed $3.2 million (ZAR 55 million, as of early June 2020) to government initiatives and civil society efforts across our markets, since COVID-19 was declared a pandemic. These include a contribution of $575,000 (ZAR 10 million) to the Solidarity Fund in South Africa, $1.08 million (ZAR 18.8 million) so far for operations in nine countries across the continent, $794,000 (ZAR 13.8 million) for protective gear, testing and humanitarian assistance in South Africa, $288,000 (ZAR 5 million) for 1,000 learning devices and mobile data for university online or remote learning, and two million meals being delivered during May to October. In addition, senior management and staff also donated accumulated leave and cash donations worth $409,000 (ZAR 7.1 million).

Tailoring operations while ensuring operational and business resilience

Banking and financial services are inextricably linked to the fortunes of economies, and thus the sector will feel the expected significant deterioration of the macroeconomic backdrop.

Markets in which the Absa Group operates will be affected in varying degrees. Our main market, South Africa, will be the hardest hit, as our current projections suggest a gross domestic product contraction of just under 10% in 2020. Our other markets on average will fare better and could be fortunate enough to match last year’s performance. However, markets that rely heavily on sectors, such as tourism and leisure, will bear the brunt.

The impact on the banking sector is expected to be material as some governments, businesses and individuals will find it increasingly difficult to service their debt obligations. Impairments will likely rise to uncomfortable levels, and this will compound pre-existing cost pressures.

In most regions, banking services were declared an essential service and are allowed – as well as expected – to continue operations as multi-layered economic lockdown in many Sub-Saharan African countries were being implemented.

With economic activity significantly reduced, operations have to be tailored accordingly, while ensuring operational and business resilience. The banking industry rapidly implemented remote working arrangements, put in place appropriate health protocols as part of protecting the health and safety of our staff and customers and provided humanitarian support to the communities in which we operate.

In response to the fast deteriorating economic environment, the banking industry implemented various payment relief programmes and worked with governments, regulators and monetary authorities to ensure continued financial stability. We have witnessed very constructive and collaborative approaches from regulators, including relaxing certain regulatory requirements, which greatly assisted in managing the impact of the crisis thus far.

While there remains a large degree of uncertainty around the severity and duration of this pandemic, our careful planning resulted in us going into the crisis with good capital and liquidity positions. We remain well-capitalised in all jurisdictions where we have operations. Our actions during the crisis have been focused at preserving our capital and liquidity buffers, while carefully managing our cost base.  We regularly conduct stress tests, taking into account the latest available data and information, to ensure that we are able to withstand significant stress scenarios across all our markets.

An increase in digital adoption

The current health pandemic has become the catalyst for a step change in digital adoption. We believe that many customers and employees will continue to prefer the ease, efficiency and safety of digital tools well beyond the current crisis. For example, in March, Absa recorded an increase of 33% in the average rate of daily digital registrations in South Africa compared with February.

The use of digital tools among employees has also surged and it is likely that much of this will continue, particularly as we look to make more permanent some remote working arrangements implemented during the crisis.

Longer-term structural changes that we and the industry will need to respond to will become clearer as we continue to carefully monitor the effects of the crisis as it unfolds, and in particular once we have a clearer view of when the underlying health challenges will be brought under control.

Daniel Mminele is the CEO of Absa Group Limited, an Africa-based financial services group.