One focus, one aim: rebuild SA, says Capitec’s Gerrie Fourie
The whole of society must work together after corona crisis
● Gerrie Fourie, CEO of Capitec, says every cabinet minister, political party, business, trade union and civil society organisation needs more than ever before to have “one objective, and that is, how do we grow the economy and rebuild SA?”
“If everybody has one objective then we can really do things. That’s what we’ve done at Capitec.”
SA’s most successful bank, which started from scratch 20 years ago, this week reported a 19% increase in headline earnings for the year ending February to R6.28bn, and 2.5-million new clients.
“Good results, but they’re history given what is happening now,” says Fourie.
He concedes that getting everyone behind the same objective won’t be as easy as it was for the four founders of Capitec.
“No, but that’s leadership. That’s President Ramaphosa’s job.”
He is full of praise for the president’s “decisive leadership” in the coronavirus crisis. But the question everyone is asking is whether it will continue post Covid-19.
“It has to. Given the scale of the economic crisis, you need to make a lot of bold calls. Such as supporting SAA or the small business sector, which I believe is much more important.”
Public enterprises minister Pravin Gordhan rejected a request for R10bn more to fund the South African Airways business rescue process, but Fourie is not convinced the cabinet will accept this.
“Let’s wait and see,” he says.
Hours later, at its meeting on Wednesday, instead of approving Gordhan’s decision, the cabinet instructed him to prepare an updated report for discussion at its next meeting.
Fourie shares the confidence of other business leaders that the collaboration between business and the government during the coronavirus crisis will last.
Given the scale of the economic crisis, he says, “it has to”.
Giving an idea of the scale, he says that when 1,000 out of the 5,000 small businesses that are clients of Capitec were interviewed, 73% said they would not survive a three-month lockdown and 27% said they would not survive a one-month lockdown.
The banking industry has begun a twophase campaign to save the SMME sector from collapse.
Phase one has been focusing on payment breaks and rescheduling debt.
Now the industry is working with the government and the South African Reserve Bank on phase two, to give them working capital to pay suppliers and wages so they can start producing again.
“That’s where a lot of the focus of all the banks is right now. To say, how do we work together to help these businesses? Because we all understand that we need the SMME market to be healthy again, to grow the economy and create jobs.
“Everyone knows how serious this is. The question is on the ‘how’. What do we do, given our limited resources?”
Flexible, agile and digital
Fourie says he believes the crisis “is going to change business in its totality, where you thought you’re never going to do something and suddenly you’re doing it”.
In nine days Capitec turned 100 of its 850 branches into call centres operating from home and offering clients the same services they got from a branch.
He says the winners after the crisis will be the banks and businesses that are most flexible, agile and digital.
Fourie and three other executives from the liquor industry started Capitec as a micro lender in 2000. They got a banking licence within a year and moved to become a fully fledged bank.
It was profitable from day one but for eight years the share price, hovering between R3 and R7, barely reflected this.
“Our biggest challenge was the perception of unsecured lending and getting the market to understand we’re building a fully fledged bank,” says Fourie, a BCom and MBA graduate of Stellenbosch University.
“Only in the last seven years have people begun to understand the Capitec business model and that we offer what any other bank does.”
When he became CEO in 2014, the share price was about R180. He thought it would “probably” reach about R300 in the next five years. It reached R1,373 in March this year before collapsing to R539, reflecting market fears about the coronavirus pandemic. He says this didn’t worry him.
“In exco and management meetings we have never talked share price. Only fundamentals, process and what we need to do for the clients.”
Today it has 14-million clients, of whom only 1.2-million, or 8%, are borrowers, the rest being transactional clients and savers.
Capitec grew its retail loan book by 17% to R62bn during the year. Credit impairment charges for bad debts rose 14% to R5.6bn but effective recovery pushed its net credit impairment charge down 2% to R4.3bn. So in spite of the worsening economy, its writeoffs for bad debt declined.
It has 6.7-million clients on digital, more than any other South African bank.
Fourie says rather than worrying about the share price “the message always was don’t focus on the output, focus on the input, because it’s the input that creates the output”.
Its share price surge happened in the context of a Moody’s downgrade, the collapse of African Bank and the 2018 Viceroy saga, which was “scary not so much because of the share price [which plunged 25%] but because they were attacking our integrity and the principles on which we’d built the business”.
The Viceroy short seller had won a lot of credibility for its report on Steinhoff, “so we were terrified of being seen in the same light”.
He was able to manage the crisis swiftly and effectively.
“Because we know our business and our fundamentals and measure every single thing, it was quite easy to bring out the stats and what the true picture was.”
As for the crisis the whole country is facing right now, “short term it’s going to be stormy because of the effects of the coronavirus on the economy”, he says.
If the lockdown continues much beyond April,•“let’s say to August”, it will have a devastating effect on the economy.
“How many people will lose their jobs, how many companies will close down? It’s around those questions we’re going to need to manoeuvre.”
Everyone knows how serious this is. The question is on the ‘how’. What do we do, given our limited resources? Gerrie Fourie