STEPHEN CRANSTON: Book paints true picture of Capitec execs in tale of competence

There were several extraordinary business stories in SA in the 20th century, the Oppenheimers at Anglo American and the Ruperts at Rembrandt and Richemont.

In the 21st century the transformation of Nasionale Pers (later Naspers/Prosus) created the most value in absolute terms. But that is almost entirely attributable to the lucky early purchase of a stake in Tencent. 

Nasionale’s overall capital management is little better than some other large SA companies, such as Old Mutual, but nowhere near as competent as Nasionale’s cultural stablemate, Sanlam. 

The Capitec story is a much better tale of competent management. It was a pleasure to read the story in full, written by my former Financial Mail colleague TJ Strydom in his book Capitec: Stalking Giants (full disclosure: I am also a Tafelberg author). 

Capitec’s market cap of R364bn is now larger than that of Absa and Nedbank combined. In fact, it is just a whisker behind Standard Bank’s R374bn.

But if you were to hypothetically value Standard Bank’s SA retail business as a stand-alone it would be worth far less than Capitec — it is the poor relation to the Big Blue’s very good corporate banking and Africa regions businesses. 

Even FirstRand, which most fund managers would call a “quality” business, has a market cap of just R432bn. FNB SA — the only part of FirstRand that competes with Capitec — is clearly only part of this, once the corporate bank RMB and its (admittedly not so exciting) UK bank Aldermore are excluded. 

The Capitec founders and executives are wealthy, but they don’t live in the same Lifestyles of the Rich and Famous way as other tycoons such as Johann Rupert, Koos Bekker, Christo Wiese and the late Markus Jooste. The origins of the business as a microlender are hardly glamorous, after all. 

Strydom relates to the Capitec top management as they are still ordinary okes at heart. Most Afrikaans executives I know cringe at the stereotypes and clichés about rugby, braais, hunting and dops, but these are a recurring theme in the book. It’s not a criticism of Strydom, as it reflects the lifestyles and personalities of the Capitec management team to a tee.

Few of them are conventional bankers. CEO Gerrie Fourie cut his teeth (or wet his whistle) in the liquor trade. They understood the value of brands in a way bankers don’t — I can’t believe they would have come up with a name as silly as UCount for a loyalty programme. 

It is no accident that the executives prefer to enjoy life on the stoep in Stellenbosch rather than take their business model overseas. Granted, there has been a nominal expansion overseas through Cream Finance, a niche fintech firm based in Poland of all places, but that doesn’t take up much management time. 

It is almost the inverse of TymeBank, the group CEO of which, Coen Jonker, is based in Singapore and has ambitions to become a dominant direct bank in Southeast Asia.

That’s not to say Capitec executives sit in their ivory towers in the Boland, though nobody would blame them if they did. It’s not as if they still have to pay off their bonds. 

Fourie’s travel schedule in SA’s nooks and crannies was — and I am sure still is — extraordinary. He had a knack for finding the best sites for new Capitec branches. The Capitec team certainly made money the old-fashioned way — by taking risks and working hard. 

Yet it is counterintuitive that Capitec was such a success being based in Stellenbosch. Most other businesses had to move their mass market businesses from the Cape to Gauteng to be close to the mass market. Sanlam acquired Joburg-based African Life to turbocharge its mass market sales and made the former African Life head office the focus of that unit.

One of the main motivations for Paul Hanratty moving the Old Mutual head office from Pinelands to Sandton was that it made no sense for its successful mass market business (then called Group Schemes) to be based in the former suburb.

When he was CEO of Metropolitan Life Peter Doyle used to say (only half in jest) that for Bellville-based Metropolitan expanding into Gauteng was considered an international expansion. Metropolitan is now part of the enlarged Centurion-based Momentum Metropolitan group, though its nerve centre remains in Tyger Valley in Cape Town’s northern suburbs. 

But then Stellenbosch isn’t Bellville or Pinelands — it is a bubble, a college town that is also a centre for “fun” industries such as tobacco and alcohol. Yet it is conveniently situated to get to and from Cape Town International Airport. Fourie says in the book that once people move to Stellenbosch they are reluctant to go back to Joburg.

And don’t underestimate the demise of Boland Bank in nearby Paarl in 2002. Boland was subsumed into Nedbank just at the time Capitec was crying out for skilled staff for the front and back office. It snapped up Boland staff eagerly.

Capitec now has a “proper” office in Sandton, since its acquisition of the business bank Mercantile in 2019. And it is starting to shake up the business banking market, by common consent the sector in which banks enjoy the fattest margins.

But it is not as if Capitec managers are holding up their hands to move to Sandton. Capitec has opened a shiny new head office strategically placed on a hill in its hometown. The lord of all it surveys.

• Cranston is a former associate editor of the Financial Mail.