The leadership of African Bank, a struggling lender with ambitions of a JSE listing, faces renewed scrutiny after the Financial Services Tribunal delivered a stinging rebuke, likening the firm’s attempt to artificially inflate its capital position to the outdated practice of “kite-flying.” The ruling, which sided with the Prudential Authority (PA), the banking supervision arm operating under the South African Reserve Bank, throws the bank’s governance into sharper focus following the recent acrimonious departure of its chief executive .
The dispute centres on the bank’s submissions in the Form BA 700 for January and February 2025, a critical regulatory document used to monitor capital adequacy, add-ons, and buffer requirements. According to the tribunal’s findings, African Bank faced a capital shortfall. In response, the lender orchestrated a complex intra-group transaction. The bank issued a multimillion-rand intercompany loan to its subsidiary, African Insurance Group (AIG). AIG then distributed these funds as a dividend to the parent holding company, African Bank Holdings. Finally, the holding company used these proceeds to subscribe to a single ordinary share in the bank, valued at R685 million, ostensibly to recapitalise the lender.
The PA took immediate issue with the transaction, ordering it to be reversed. The regulator argued that despite the stated purpose of unlocking liquidity for AIG, not a single rand remained with the insurer; the funds flowed in a complete circuit back to the bank. The tribunal upheld this view last week, finding that the transactions were conceived in a single committee meeting as a composite plan to evade capital rules. The ruling noted that the subscription price of a single share in an undercapitalised bank was “remarkable” and that no explanation was provided for the valuation. The tribunal described the scheme as involving simultaneous electronic entries where money left the bank only to return “under another name,” which it found reminiscent of kite-flying—a cheque-fraud scheme that creates artificial balances.
This regulatory setback compounds existing leadership turmoil at the bank. African Bank recently parted ways with CEO Kennedy Bungane, a separation that involved filings with the PA and followed a poor first-quarter performance. Bungane stepped down as group CEO and executive director on 6 March 2026, resigning from the Special Projects and Large Exposures committee—the very committee that approved the contested capital transaction. The board, chaired by Thabo Dloti, has appointed Zwelibanzi Manyathi as interim group CEO to lead a consolidation phase following recent acquisitions. The bank has stated that it respects the tribunal’s decision, noting that the ruling relates to specific facts involving the subsidiary AIG. African Bank has maintained that it held a different view from the PA regarding the transaction’s nature, obtained independent legal advice, and complied fully with the PA’s directive to reverse the transaction under protest, subsequently disclosing the matter to investors. However, with the bank’s governance and capital management now under a regulatory microscope, its path to a JSE listing appears increasingly uncertain.
In response to the tribunal’s findings, African Bank said that it respects the tribunal’s decision. The lender noted that the ruling and resultant outcome relate to the specific facts and nature of the transaction involving one of its subsidiary companies, AIG. The bank explained that at the time, it and the PA held different views regarding the nature of the transaction and the associated capital treatment. African Bank stated that its board obtained independent legal advice and, accordingly, resolved to refer the matter for reconsideration to the tribunal.
Notwithstanding the referral, the bank said it complied fully with the PA’s directive at the time. It added that it was transparent regarding its engagement with the PA during investor engagements following the interim financial results for the six months ended March 31 2025, announced in May 2025, and included a disclosure in the interim financial statements. With the bank’s governance and capital management now under a regulatory microscope, and its own admission of differing views with the regulator, its path to a JSE listing appears increasingly uncertain.