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.

Finweek English Edition - - FRONT PAGE - BY MAR­CIA KLEIN

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.

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