Capitec Bank in its formative stages saw an eruption of tensions between board and executive management over the strategic direction of the retail bank.
This is revealed in business journalist TJ Strydom’s recently published unauthorised book Capitec Stalking Giants, which traces the retail bank’s genesis and phenomenal growth over the past two decades.
The management of South Africa’s biggest bank by client numbers, which started as a microlender, declined suggestions from its board of directors to sell insurance policies and cellphone airtime. The then chief executive even compared selling the two products to selling potatoes.
This was in the early 2000s when other businesses were hopping onto the lucrative funeral policies and airtime retail market.
Capitec management decided to focus on growing the bank as a retail lender and transactional bank.
Then Capitec chairman Jannie Mouton is quoted in the book as having questioned the bank’s executive on their failure to expand the business to sell the two products.
“I have taken various propositions to them,” lamented Mouton, adding that he wanted to know why the bank was not leveraging on its hundreds of branches to sell airtime or funeral policies.
The suggestion came after Pepkor had learnt that its clients were using a large chunk of their income to make calls and send SMSes.
Pep started selling cellphones and the group immediately became the country’s largest provider of airtime.
The demand for cellphones and airtime was so high that by 2008 the sales skyrocketed to R2.5 -billion, which was almost a third of Pep’s total turnover.
“And then they (Capitec management) looked at me and said, ‘Nee, Jannie.’ And I said, but give me a reason, and they said, ‘You must just listen’,” recalled Mouton.
Strydom wrote that the requests for Capitec to sell airtime and funeral insurance were serious and that “at some meetings, the tensions ran high”.
“PSG had provided the capital that was used to start the business and, not unlike any other investor, it wanted to earn the best possible return.
“Perhaps airtime felt too much like a retail product. Even if Capitec often compared itself to retailers, it was, after all, a bank, so wouldn’t financial services then be a better product to peddle?” Strydom reflected.
By 2005, South Africans coughed up about R5-billion per year on funerals and over six million people formed part of burial societies, while over four million people had formal funeral policies.
“About half of the policyholders were in the low-income groups, a section of the market Capitec knew well. And, thanks to the lofty ideals of the charter, there was much more on the way, as the industry aimed for another 3.8-million such policies by 2014.
“The banks and major insurers had been selling funeral policies for ages but in the boom years of the early 2000s, they really rolled up their sleeves. Some even took a page or two out of retailers’ playbooks.”
Still, the then Capitec CEO Riaan Stasen was unmoved.
“I can’t stand all those strategies about cross-selling or upselling. We don’t sit around a table and ask ourselves how we can get more money out of our client base. We ask ourselves what our customers need and how we can give it to them in a way that’s different to, and will beat our competitors.
“We are not going to sell potatoes in the banking hall!”
