HOW JOHAN VAN ZYL TOOK SANLAM OUT INTO THE WORLD
Johan van Zyl, who retires from Sanlam at the end of the year, turned a lumbering life insurance company steeped in the old South Africa into a financial services group characterised by diversity. THIS IS HOW HE DID IT.
Thirteen years ago, Johan va n Zyl ac c e pted t he position of CE of Sanlam − a company which had moved slowly while the world had changed quickly.
Some t wo years earlier, Sanlam CEO Marinus Daling had asked Van Zyl to join the group as the CE of subsidiary Santam. Daling’s death a year later led to a leadership crisis at Sanlam that was not properly resolved until Van Zyl’s appointment as CE in 2003.
The extent of Sanlam’s problems required some serious thought about its strategy. “Sanlam wasn’t the greatest place to be at the time − we really struggled, the markets had changed but Sanlam hadn’t. The world had opened up for South Africa, but Sanlam was entrenched in South Africa only, and 85% of business came from the white Afrikaans community,” he says.
Sanlam was also caught unawares by the switch from def ined benef it to def ined contribution. “We lost a massive amount of business, we lost money and the brand itself was a bit damaged.”
His appointment coincided with the start of a bull market, adding a small element of luck to what has been a thoughtfully staged strategy to expand the business.
The success of this strategy, and his particular management style, is evident in Sanlam’s evolution from a stagnant business to one of diversif ication – in terms of shareholding, diversit y of clients and employees, range of products, geography and distribution. The share price, which was at around R6 in 2003, is now at R75.60. Profit has grown strongly and consistently.
“It has been a staged strategy − first to steady the ship and then to build a platform for expansion,” Van Zyl says.
One of a few burning questions was to resolve Sanlam’s relationship with Absa, and its shareholding was sold to Barclays.
He f i xed management, got people to focus and slimmed down the bloated executive committee. He started to reward people properly. The unwieldy group was split up into smaller units − today there are over 70 units, which he has line of sight of and are performance rated.
And if Sanlam wanted to stay in SA with its sort of history, he had to bring in black shareholders, which he did in 2004. The BEE deal with African Rainbow Minerals executive chairman Patrice Motsepe and others in Ubuntu-Botho, is still, in Van Zyl’s eyes, a benchmark for BEE deals. At the end of the 10-year contractual period, value of R15bn was created for Ubuntu-Botho, after Motsepe’s initial investment of R200m and R2.1bn in debt funding. “We didn’t simply give the shares – our BEE partner had to pay for them. Added to this was a component that i f they brought in business, there would be more shares.”
Once the ship was steadied, the next priority was to grow. He used part of the R10.2bn from the Absa sale to build the business at the high end, strengthening Sanlam Private Investments (now Sanlam Private Wealth) and Glacier by Sanlam, which are both now either number one or two in their high-income market segments. Sanlam also grew aggressively at the low end, helped by some acquisitions including African Life and Channel Life.
The next step was international expansion, and Sanlam built on its strengths at t he lower end, where companies from developed markets f ind it diff icult to compete. Sanlam had a clear advantage in the rest of Africa and also expanded to India and Malaysia.
“Today, we are fairly diversif ied, and the business I leave behind has optionality. There is a range of things t hat we can do. We are i n several jurisdictions, and we serve the high, mid and low end of markets,” he says.
“There was no big bang, it was all incremental steps. Initially, it was tough to get the right people on board, now people and transactions come to us.” In the last few years, Van Zyl has been able to focus on some of the softer issues, and the brand was relaunched last year to entrench some of those issues.
The biggest testimony to the changes is, according to Van Zyl, a “beehive” analysis which original l y showed Sanlam f irmly entrenched in the
TODAY, WE ARE FAIRLY DIVERSIFIED, AND THE BUSINESS I LEAVE BEHIND HAS OPTIONALITY. THERE IS A RANGE OF THINGS THAT WE DO. WE ARE IN SEVERAL JURISDICTIONS, AND WE SERVE THE HIGH, MID AND LOW END OF MARKETS.
old economy with bureaucratic and mechanistic workplace practices.
It is now f irmly new economy with f lat structures and evolved “from a central boss who knows everything to a situation now where the boss knows nothing”, he quips, referring to one of his biggest successes – letting people get on with it and empowering them to do so.
This is a result of what he calls his “eclectic” management st yle forged through his experience at the World Bank and in academics. His position as vice-chancellor of the University of Pretoria taught him the longer term approach. He does not try to fix things in one day. He is also good at breaking things down. He accepts that things change, and companies must adapt. At any point, some businesses will have to grow, others will have to shrink. “For me, 80% is a good number, I don’t need to get to 100. It is horses for courses and sometimes the best leadership is to stand at the back.”
Van Zyl is aware that he has created challenging expectations. At over R75 (the share has come down a bit lately), and with a 44% increase over the past year and a forward price-to-earnings (P/E) ratio of 16, investors have come to expect a lot. Van Zyl agrees that the price is demanding. “If you look at the value of the underlining entities, our embedded value is R50 a share and we are at R70, and the only difference is the future, implying growth of 15% per annum. That is quite a challenge.”
The challenge of living up to the expectations will, from January, l ie with Ian Kirk, who, l i ke Van Zyl, comes through the ranks from Santam. Van Zyl leaves him a business that is operationally in good health and one t hat has consistently grown. “The business that is being left, while very monolithic in a way, is now f inancial services company focusing on a broad r a nge of South Africans, a nd is competitive outside of South Africa. What has been created is optionality. When I had cards to play I had very few options. Now, there is a lot of optionality. If something works in, for example, Nigeria or India, we can grow it, and if it doesn’t elsewhere, we can close it.
“Now we have several lines in the water and can focus on the future. The company is not only growing, it is less risky. It holds a range of cards and can play what cards it wants to.
“Ian is a great guy, and well placed t o t a ke over,” he s ay s . Kirk has already started as Van Zyl’s deputy. “Strategically, we agree on everything, but in execution it will be different. He will focus on a whole lot of stuff I haven’t even attempted. It is all about choices. And he will revisit things where I have already moved on.”
Van Zyl believes that invariably, a change at the top makes opportunities for others to move up, l i ke Lizé Lambrechts, former chief executive of Sanlam Personal Finance, who has replaced Kirk as CEO of Santam. Change at the top brings more scope and new ideas.
Van Zyl, who boasts two doctorates, studied agricultural economics because his mother told him that he had to go to university and that obtaining a qualification was the only way to get back to the family farm.
He stayed at t he Universit y of
ONE THING I CAN TELL YOU, I AM NOT A GREAT NONEXEC BOARD MEMBER WATCHING OTHER PEOPLE WORK, I WANT TO WORK AT THE SAME TEMPO UNTIL I AM 70.
Pretoria, where he became a professor at “thirtyish”, and also worked for the World Bank. He became a Sanlam board member in 1998.
His desire to farm has not left him, although now it is his wife who would prefer him to be gainfully employed. “She says between 7PM and 7AM you are very welcome, in fact, we want you here, but for the rest [of the time] you cause havoc.” He has a sheep and game farm in Beaufort West, where he spends time with his family. One son is a qualif ied CA with Deloitte, another is involved in business − working with his father − in property development in the Western Cape. His daughter started university this year.
Van Zyl is “not sure” what his future relationship with Sanlam will be. “We will have that discussion in the next year or so,” he says.
“One thing I can tell you, I am not a great non-exec board member watching other people work, I want to work at the same tempo until I am 70.”
Van Zyl, who comes f rom a modest fa r ming background, is less interested in the money than in trying to make a difference and have a sense of self-worth.
He has written a number of books on land reform. When the Business Trust disbanded in 2012, it had R150m of accumulated interest and he became involved in what is now the essence of the Vumelana Advisory Fund, which helps communities in the land reform programme to develop their land. The fund, which is chaired by Van Zyl, has run several projects and created many jobs.