Uncertain succession at Alex Forbes

Former Alexander Forbes group CEO Edward Kieswetter, who was hired to restore its reputation after it was nailed for fleecing pensioners, says he was surprised by the board's response when he informed them he wanted to quit in a year's time.

Go now, he was told.

This has left the Johannesburg-based financial services company with no group CEO and on the wrong side of the King 3 code on corporate governance after it announced that its nonexecutive chairman, Sello Moloko, would take on an executive role.

It has also raised disturbing questions about its apparent lack of succession planning, which Kieswetter struggles to answer.

"I must say that my original offer was that I am quite happy to stay on and allow for an orderly transition and allow for the succession plan," he says. "We had a succession plan in place."

The board decided that he should hand over to group finance director Deon Viljoen and that Kieswetter would be available "as an elder statesman in the interests of continuity".

Was he happy with that?

"It was a decision I did not oppose," he says.

If this is his and the board's idea of a succession plan, then presumably Viljoen will be the next group CEO?

"Not necessarily," says Kieswetter. "No doubt he will be one of the candidates who will be considered. But we do live in South Africa, where the board, I think, feels duty-bound to look at the overall transformation of the company. Deon accepts that this is one of the South African realities."

Meanwhile, he is "a great pair of hands to have".

The point of succession plans is to provide for orderly successions. What Kieswetter is describing is a stop-gap measure while the board frantically searches for a politically acceptable replacement. What kind of succession plan is this?

"In business, we plan what we call a train crash scenario, and Deon has always been identified as the natural stand-in if anything were to happen to me."

Except that the train crash here is the board's peculiar decision to jettison its CEO a year before he wants to go, thus leaving an important listed company without a CEO.

Government needs to fulfil these social agendas using the dividends it receives as the shareholder of state-owned enterprises

Kieswetter says he wants to spend more time with his wife, whom he married a year ago and who lives and runs a business in Singapore, which is where they met. The board had agreed that he could spend one week a month running Alexander Forbes from Singapore. Not surprisingly, this "never really worked out like that. Because of business pressures I was only able to use that concession five times last year."

That explains why he decided to give a year's notice, but not why the board was in such a hurry for him to go.

There have been some disappointing figures recently, with operating expenses growing faster than income, a declining operating margin and declining share price.

"Naturally, we are concerned," commented chairman Moloko recently.

"We wanted to see results. We wanted to see an improvement. The investors are feeling unhappy and, going forward, we would like to improve that situation."

But Kieswetter denies there was any tension between him and the board, or disagreement about his measures to improve the situation and restore the market's confidence.

"Absolutely not. At my last engagement with the board there was an acknowledgment that the choices which had been made were the right choices, and an understanding that some of the short-term business results were a reflection of the environment rather than the fundamentals of the organisation."

As for himself, he is well pleased with his achievements at Alexander Forbes since his appointment in 2010, when its name was dirt and morale seemed in terminal decline.

"I turned it around, restored its reputation, improved the integrity and sustainability of the business, took it to market, had it listed [in 2014] and attracted significant interest from international shareholders."

He presented a five-year strategy to the board last year, which it supported, he says.

When it was announced, Kieswetter sounded like he had every intention of being around to implement it.

But he found that commuting between Johannesburg and Singapore was tougher than he'd imagined, he says.

"It might sound a fairytale in theory, but in real life it's quite tough."

Wouldn't it have made sense for him to lead the implementation of his five-year strategy for at least the first year before handing over to a chosen successor?

"When you put a strategic intent together, it's a team that delivers on it," he says. Teams need leaders, though.

Who better to lead implementation in its early phase than the person who oversaw the strategy's development?

"There are a number of options one can consider in a situation like this," he says. "At the end of the day the board felt this would be in the best interests of the group."

Kieswetter says he is "a young 57" and "not ready to go to the pasture". He has a majority stake in the Da Vinci Institute, a private business school in Johannesburg, and will be involved in teaching (his first love) and administration.

Although he has an honours degree in maths and science education and three master's degrees, including one in cognitive science, which is about the teaching of thinking skills, Kieswetter is an electrical engineer by training.

He was a senior manager at Eskom in the days when it commanded some respect. He credits then chairman John Maree with changing it from a parastatal culture to a business culture.

Kieswetter feels this is what needs to be done with our state-owned enterprises as soon as possible.

"Their commercial integrity must not be compromised to fulfil social agendas. Whether you're running a power station or an airline or a financial services company, the fundamentals are the same."

The government needs to fulfil these social agendas using the dividends it receives as the shareholder of state-owned enterprises.

After working at FirstRand, he was part of an impressive team gathered by the then South African Revenue Service commissioner Pravin Gordhan that turned the underperforming SARS into a world-class institution. This team was severely depleted by suspensions and resignations under the present commissioner, Tom Moyane.

Even if South Africa does avert a downgrade, it will take years to fix the damage that has been done to the economy

Kieswetter became deputy commissioner and many felt he should have been appointed commissioner when Gordhan became finance minister. He feels SARS is in danger of losing its image of integrity, which would bring Judge Denis Davis's warning of a tax revolt that much closer.

"The public is asking huge questions about SARS."

Like most other business leaders, his mind is focused on the looming threat of a credit downgrade to junk status.

"This is not just a theoretical possibility any more but a real possibility."

He applauds the government's recent overtures to business but fears they may be too little, too late. "Frankly, it would have been helpful to engage with the private sector earlier, but time will tell."

He has been encouraged by Gordhan's "messaging" at the recent cabinet lekgotla about the need to cut social spending.

For him to say this in an election year shows how critical Gordhan deems the situation to be, Kieswetter says.

Will he prevail over President Jacob Zuma and his ministers?

"I think he is determined to hold their feet to the fire. He, more than anyone, is aware of the fundamental factors that will lead to a downgrade. He will pull out every single stop to make sure we do the right things.

"As someone who relies on this economy for one's own wellbeing financially and otherwise, I hope it is not too little, too late."

Even if South Africa does avert a downgrade, it will take years to fix the damage that has been done to the economy.

"Even if we stem the tide we must all accept that it is going to be a long road to rebuild the confidence of investors and the international market.

"If they are not confident that we are beginning to make the right policy calls, if we continue to score own goals by not thinking through the ramifications of certain political choices we make, then ..."

Dodging junk status will be a very short-lived victory, he says.