Adrian Gore ventures into a field that is already a discovery
“Excuse me. Next. Next. Next. Boring bonehead questions are not cool.” Nope, that’s not a Kanye West response to a question, nor is it a teenager with a bout of angst. It’s the riposte of one Elon Musk to questions from analysts this week, who had quizzed him on the profit potential of his troubled Tesla Model 3 car. It’s a project that has been beset by production bottlenecks and that could determine the future of the electric car. On such an issue, there are really no “bonehead” questions, it’s a matter that I suppose any executive from this planet would be well prepared to answer.
Musk subsequently apologised, acknowledging that he should have provided an answer. I suppose pressures were being brought to bear on him, such as the 5% fall in Tesla’s shares.
What we saw this week from the technology billionaire, a former South African, was the sort of retort you’d expect from a “superstar” CEO, maybe just not in such an abrasive manner. In the South African investment world, we have become accustomed to such business leaders. They may not be as brazen, but behind closed doors in their boardrooms and in analysts’ meetings, they sure can strut. Their every word is taken as gospel truth by a “thankful” investment audience — for those who choose to differ the price is being kept out of the inner circle.
Maybe it’s not fair to call it bullying — at worst it definitely is — but this sort of behaviour comes with some rather disastrous consequences and we need look no further than recent experiences with Steinhoff
International and its once untouchable Markus Jooste.
In fact, we should be a whole lot more sceptical of even the most charismatic of South Africa’s corporate leaders, men such as
Discovery’s Adrian Gore. What he has achieved at a mere medical insurer is quite staggering, and that in a relatively short period of time.
His adventures for the most part have paid off significantly, and while some shareholders might be unhappy with the expensive UK operation, it makes much sense. The company’s life insurance is larger than its core business and Vitality is unmatched, although rivals are replicating some aspects.
Its next step, the launch of a banking operation, may prove to be its most daring yet —but the investment community needs to keep a watchful and sober eye on this move.
While Discovery’s banking venture mostly has been welcomed, it’s been endorsed primarily on the basis that it is being driven by a genius, which is what Gore is believed to be.
Capitec grabbed market share from South Africa’s big banks by zeroing in on the low end of the market, where Standard Bank, Nedbank and FirstRand had no presence. Most exposed to this segment was Barclays Africa — the soon to be Absa — but it was more interested in climbing the LSM ladder.
Now when Discovery launches its banking operation, which is already well into the pilot phase, they’ll be going for a market the big four have been protecting fiercely, a market where customers not only get unsecured credit, but car loans and mortgages. It will be a rather expensive battlefront on which to plant a flag. This will be doubly so should National Health Insurance come into being in a few years — the provisional word here would be “successfully”.
The NHI system will bring significant risk to the company’s medical insurance arm, which is the backbone of its Vitality competitive advantage in the insurance landscape.
It will be interesting to see how Gore, one of those CEOs who come with a superstar billing, shapes up to the challenges ahead. Does he manage to attract the best banking talent from his rivals to gain a competitive edge, or does he build from the ground up? How much time will the market allow for that given the affliction of short-termism?
Investors, burnt by blind faith in Jooste, will no doubt be playing close attention to this, another in a long list of Discovery adventures. It could be the one that means more than all the others.
The investment community needs to keep a watchful eye