TJ StrydomWhen Riaan Stassen and the executive team from Boland Bank arrived at Stellenbosch’s Techno Park, the microlenders of the entity that would soon become Capitec were furiously buying more branches. Early in 2000 the business consisted of 120 branches; a year later it had ballooned to more than 300. It was a mosh pit of activity. Transactions were constantly being concluded and a bell was rung every time a new branch was in the bag. No wonder the banking executive described it as “a rather shitty time”.
Stassen has the appearance of a marathon athlete. Taught and fit, his breathing creates the impression that he is pulling as much oxygen from the air as humanly possible. Though courteous, friendly even, he is certainly serious. The best way to describe him would simply be: intense. In an interview on his retirement he mentioned that he did not relax, even for a moment, during his 14 years at Capitec.
While the rest were acquiring cash-loan shops, the Boland guys took their positions to design a bank. “The five of us spent every day talking for eight months. We wrote our ideas down, we had a secretary that basically just typed everything that we said,” André du Plessis explained years later in a lecture to an American business school.
It sounds a bit like the chess team and the cricket side being bundled into the same minibus en route to a match at a rival school. Apparently, after another pair of ex-Boland employees joined the group of bank planners, they were referred to in the office as the “seven dwarfs”. And it did not matter who was Happy, who was Grumpy and who was Sleepy, because there were initially no official titles. The group sat together, workshopping ideas, and when something needed some deeper digging, they did it together. “We built the bank on the basis of a team, and not a person,” remarked Stassen nearly two decades later.
And this process of discovery was not only conducted behind closed doors in Stellenbosch. “We walked around the marketplace, we went to small towns, to townships, we talked to people to really understand their needs and what we could do for them,” explained Du Plessis in his lecture.
Stassen scoffs at the management teams of big businesses who never venture out into their clients’ world. “They believe you can develop an insight into the market by reading books and reports. It just does not work that way. You need to get out there if you want to understand how your client thinks, what his preferences are, how he drinks,” he said later.
It was this liquor-trade approach that helped them realise the real needs when it came to financial services. And that knowledge informed their approach to the design of the new institution. Michiel le Roux, another founder and later board chair, freely admits that his idea was to build a “boring” old traditional bank that would provide basic banking to the poor. “And Riaan sort of said, Ag, that’s a bad idea, if we build a bank it has got to be smart and innovative.” Stassen had a clear vision of a modern bank that would not limit itself to a specific market but would have crossover appeal.
At that stage, Absa, Standard Bank, First National Bank and Nedbank dominated retail banking. They had millions of clients. But there were many millions more potential clients who found their services intimidating, unaffordable and incomprehensible.
“We realised that the four traditional banks that dominated this market for so long had lost the ability to deal with their customers on a face-to-face basis,” Stassen explained in 2009. “They had complicated the bank offer to the extent that people found it difficult to manage their own financial affairs. And in the process made banking quite expensive.”
Banks treated people according to their income, added Le Roux. “People with a low income were badly treated.” In South Africa, with its unequal distribution of income between black and white, this also meant that access to banking services – even if by the 1990s, it was not intentional – also had a racial dimension to it.
A labourer who did not speak clear English would struggle to understand which forms to fill out. A bank teller realised that this client wouldn’t have a fortune in his account, that the bank would not make much from his transactions, that it would be a slog to help him, and would be less eager to assist by answering obvious questions, according to Le Roux.
Efforts by the Big Four banks to service lower-income clients often took the guise of a whole different brand, rather than using the high-street name their more well-to-do accountholders were used to. The idea might have been to provide banking services at a lower cost, but the result was a cheaper-looking offering. A Nedbank branch, for example, was fancy, but the interior of a Peoples Bank – aimed at the mass market – was an “experiment in linoleum and plastic”, according to veteran investor Kokkie Kooyman. That is why Stassen and his team, from the get to, wanted their bank to treat everyone the same and offer products that were easy to understand.
The key would be to offer a simple service at a low price. Not an inferior offering, but a good, basic service that wouldn’t cost the client much. For that reason, the bank itself simply could not be expensive to operate.
André Olivier, another one of the founders, was hesitant to leave his cushy job at Boland Bank and follow Stassen and the rest. At the time, Olivier was running an exciting project to take banking to the market – he was busy building Pep Bank. The project was in a testing phase for Boland, with eight kiosks in the Western Cape. It was a simple concept: stalls (about the size of two toilets) with a separate entrance were rolled out in Pep stores to provide the most basic banking services to clients.
If it turned out to be a success, every one of Pep’s shops would also be a bank branch. At this stage, Pep sported about 1,200 stores, while a banking giant such as Absa had barely 800 branches, so the potential was obvious. Unfortunately, given the corporate machinations in the larger banking group – where BoE had control over Boland – the project’s future was not nearly as clear. “I wasn’t so sure BoE Bank understood what the Pep Bank model was about,” said Olivier later. For that reason he placed his trust in Stassen, and joined the exodus to Stellenbosch.
The Pep Bank project enabled him to bring valuable insights about the mass market to the table. When, for example, accessibility was discussed, Olivier knew it entailed more than the hours the business was open, but also how quickly a client could be served. “They did not have much time to wait because they either had to get back to their workplace or catch a taxi before a certain cut-off time,” he recalled in a later interview.
Pep was a good frame of reference. The retailer’s stores were not in posh suburban shopping centres. A Pep was typically in the centre of town – close to taxi ranks or bus terminals to enable commuters to do their shopping then and there. Customers also knew exactly what they got if they went to Pep. The name represented something. And that was something that Stassen and his team were also after – they wanted to be the Coca-Cola of banking.
“You don’t ever have to walk further than 100m to see the Coke brand,” Stassen stated later in a newspaper interview. “Just like Coke, we want to offer a consistent product that is accessible to everyone.”
This is something the team learnt in an industry where Coke and ice were often mixed with some of its stronger products. In the liquor industry, they developed a good feel for logistics and distribution, recalls Gerrie Fourie, the operations boss who would later become CEO. “And it was always a strength of SFW or Distell – the fact that your products were available anywhere and in every small town, because you had that power of distribution.”
‘Capitec: Stalking Giants’ by TJ Strydom is published by Tafelberg and is available at a recommended retail price of R320.
Cover: Capitec Stalking Giants book cover illustration, supplied.
