Time for government to act, says Capitec CEO
Stays optimistic about SA’s prospects
The head of Capitec, which has grown to be the country’s third most valuable bank just 18 years after it was founded, has joined a growing list of business leaders calling on President Cyril Ramaphosa to accelerate the pace of reforms to lift the moribund economy.
Speaking after the release of the company’s interim earnings, Gerrie Fourie, whose company is adding workers while some peers are retrenching, said he was still optimistic about the country’s prospects though the government needed to move faster to boost an economy that is being strangled by less than 1% growth and a 29% unemployment rate.
The country’s long-term prospects will depend on its ability to fix the education system and produce workers with the skills required in a modern, technology-based economy.
The optimism that accompanied the ANC’s election victory in May 2019, on the assumption that it would strengthen Ramaphosa’s hand against populist elements in the party, has waned as the government made little progress on key challenges, from the worsening fiscal situation to the financial and operational crisis at Eskom.
Since May 8, the rand has
dropped about 4%, while a measure of business confidence is at its weakest since the 1980s.
“I am optimistic long term,” Fourie said. “The changes we have seen in the country are starting to manifest that view, but we must just focus on one objective and that is economic growth. The government needs to take a growth plan and implement it.
Fourie said fixing the country’s educational outcomes would be fundamental to sustaining long-term growth. Out of 1.2-million children that started school in 2005, only about 55,000, or 4.5%, achieved a pass rate of 50% or higher in mathematics in 2016. Only 13% did well enough to be able to pursue further education at a tertiary institution.
“We are looking to hire engineers, data architects, business architects, chartered accountants and lawyers but there is a shortage of these skills,” Fourie said.
Capitec’s results certainly did not reflect the benign economic environment, with the bank reporting an increase in the number of branches and customers. It plans to hire 600 more workers in the next six months, which would take the total number of employees to almost 14,000.
The bank boosted headline earnings per share 20% in the six months to August, with its dividend also rising by a fifth, to 755c a share.
The bank, whose growth briefly came under threat when it was subjected to a negative report by short-sellers Viceroy in 2018, said its earnings were driven by growth in customer numbers.
It is averaging 200,000 new bank accounts and 90,000 funeral policies a month.
Fourie said he was not too concerned about the effect of the controversial debt-relief law signed into law by Ramaphosa in August, which some banks have said will discourage lending to poorer South Africans.
The law will allow for payments by overindebted consumers to be suspended or even cancelled in some cases.
The bank expects imminent regulatory approval for its acquisition of Mercantile Bank, which will allow it to expand to business lending.