Shareholders this week endorsed a proposal to change the Group’s operations to attract and retain talent for delivery of the $5 billion marshal plan.
Equity Group shareholders have adopted a proposal to restructure the Group’s operations and introduce a variable employee compensation plan.
The latest policy shift seeks to help the regional lender attract and retain global talents in an effort to push through its ambitious Ksh700 billion ($5 billion) marshal plan crafted to support economic activities in East and Central African nations.
Under the proposed structure, the Group will split its business units into four sub-holding companies—Bank Holding Company, Insurance Holding Company, Technology holding Company and Equity Group Foundation— with an aim of increasing operational efficiencies and strengthening earnings in the respective business lines.
On the other hand, under the proposed variable employee compensation plan high performing staffs will be compensated through both short-term cash bonuses and medium term (three years) equity bank shares with a par value of Ksh0.5 ($0.003) per share.
An estimated 198 million shares valued at about Ksh7.6 billion ($54.28 million) have been reserved for the Employee Share Ownership Programme (Esop), accounting for about five percent of the group’s issued share capital.
This will increase the group’s maximum share capital to Ksh1.98 billion ($14.14 million) from Ksh1.88 billion ($13.42 million).
Equity, which is listed on the Nairobi Securities Exchange (NSE), abandoned a similar employee compensation plan four years ago, which would have seen the lender allot about 205 million shares to employees.
Under the new arrangement, employees whose individual performance and that of their business units decline during this three-year period would have the portions of shares under the Esop plan reduced.
“We have chosen to strengthen our leadership and that is why we have come to the shareholders seeking approval for the implementation of the Employee Share Ownership Programme (Esop),” Group CEO James Mwangi told shareholders on Wednesday.
“If we implement our Esop scheme it will help us to attract the best talents globally, increase staff performance and help us manage our variable and fixed costs. This process is adding to our ability to attract global talent.”
Equity Group has presence in six countries — DR Congo, Kenya, Uganda, Tanzania, South Sudan, Rwanda, and a representative office in Ethiopia.
The Group currently has a customer base of 17 million, with a branch network of 354 branches spread across the region including Kenya (191), Uganda (45), South Sudan (5), Tanzania (16), Rwanda (16) and DRC (81).
The lender is also in the process of acquiring Rwanda’s fifth largest bank— Compagnie Générale De Banque Plc (Cogebanque) — marking the latest in a series of deals that have seen Kenyan banks nearly double their profitability in the East African region in just a year.
Equity has signed an agreement to acquire a 91.9 percent stake in Cogebanque in a deal that values the Rwandan bank at Ksh7.26 billion ($51.85 million).
The shares will be purchased in cash using the lender’s internally generated funds.
Equity will buy the stake from the Government of Rwanda, Rwanda Social Security Board, Sanlam Vie Plc and Ms Judith Mugirasoni and plans to eventually make an offer to buy the remaining shares.
This is the second attempt by Equity to buy a bank in Rwanda, coming months after the collapse of a deal in which Equity was to buy 62 percent of the share capital of Rwanda’s Banque Populaire du Rwanda from Atlas Mara.
The deal flopped in July 2020 alongside that of buying 100 percent of African Banking Corporation of Zambia, African Banking Corporation Tanzania and African Banking Corporation Mozambique. Equity through its Africa Recovery and Resilience Plan has set aside about Ksh700 billion ($5 billion) to expand its lending business in the region with hopes of achieving 100 million customers by the year 2025.
Last year, Equity increased its investments in the Democratic Republic of Congo (DRC) by $76.7 million through the acquisition of additional 6.6 percent shares in EquityBCDC, the country’s second largest bank by assets.
The investment which was completed through a buyout of minority shareholders through a cash call underline’s the significance of the Congolese market in Equity bank’s bid to control the East and Central African banking market.
The Group also injected an additional capital of $10 million in Equity Bank Tanzania and capitalized retained earnings of Ush25.75 billion ($6.96 million) in Equity bank Uganda, leading to an increase in Uganda’s share capital from Ush94.24 billion ($25.48 million) to Ush120 billion ($32.44 million).