At Sanlam’s i3 Summit last week, former FNB CEO Michael Jordaan said he expects his old bank’s future competitors to come from outside the Big Five – and from the telecoms sector. Industrial Conglomerate Bidvest has been incubating one of them. Having taken its time to bulk up in financial services, in the past few weeks Bidvest has engineered the takeover of Grindrod Bank and secured an important partnership with telco Vodacom. Bidvest Bank CEO Japie van Niekerk visited the CNBC Africa studio today to explain a strategy that promises to make competitors sit up and take notice. – AH
ALEC HOGG: Welcome back to Power Lunch. Bidvest Group and Grindrod have cleared the way for the acquisition by Bidvest Bank of Grindrod Bank. Japie van Niekerk, the Managing Director of Bidvest Bank is with us in the studio. You officially launched your Twin Track strategy this morning. What is very interesting is last week I was at a conference where Michael Jordaan (formerly of FNB) was one of the presenters. He was saying that the threats to the big banks are not going to come from the big banks. They’re going to come from elsewhere. The strategy that you’re following seems to be very different to the old-style ‘open a branch, advertise a lot, get a lot of customers, and get them into the branch etcetera’. You’ve done a lot of thinking clearly, about the way that you approach them. Let’s start off with your Grindrod Bank acquisition and the appeal there being the relationship with NET1.
JAPIE VAN NIEKERK: Well, that’s part of the appeal, thanks Alec. However, I think one of the major reasons that we like this deal is the fact that we get many skills that we don’t currently have. In their bank, they currently have investment banking skills and in the financial services entity, there’s stockbroking, private equity services, and mezzanine finance. We’re not able to provide any of these things.
ALEC HOGG: ETF’s – they have quite a strong…
JAPIE VAN NIEKERK: They have a very good ETF offering. I think it’s a fantastic product: low cost, really good, easy to understand, and it makes a lot of sense in our market. I think there are many other things – much more than just the NET1 piece.
ALEC HOGG: So how important is the NET1 piece?
JAPIE VAN NIEKERK: Look, it’s reasonably important in the short-term, but it’s absolutely part of a tender process and we don’t know what’s going to happen in that space. We haven’t been able to price that in for a long period of time, but it’s currently a good revenue driver for them.
ALEC HOGG: With your discussions with Grindrod Bank, did you say ‘if the social services part of their partnership with NET1 doesn’t come in’ or did you exclude that totally in your valuations? Was there an agterskot or something?
JAPIE VAN NIEKERK: No, we don’t like doing agterskots and things like that, so we try to make it a clean offer but we obviously had to take a view on value and on the kind of period that we think this might be in the business for.
ALEC HOGG: I’ll tell you why. We looked at your relationship with Vodacom and from the outside; it looks like you’re going for a mass market in innovative ways. With Mpesa, that clearly is focused on the mass market.
JAPIE VAN NIEKERK: Yes, so I think maybe that links to your opening statement, in that… For us, we can’t spend R500m to R1bn per year on advertising, which is what some of the big guys do. Even if we could, I don’t know if we’d like to. We’ve really said that we think alliance banking makes a huge amount of sense, and you have to do it in the right way. I’m allergic to the term ‘renting a bank license’ because that’s not what we do. We want to find partners that want to enter into a partnership, rather than a ‘clip the ticket’ (small revenue share) and we want to add serious value to their business but importantly, have them add value to ours. The power of the Vodacom deal for example, is that they have 30-odd million customers. They have a significant customer base to whom they want to offer other value-added services, one of which is the Mpesa banking product, which is a wonderful product.
It’s low-cost, flexible, it ticks all the right boxes for us as a country, and we are their banking partner. We think it makes a huge amount of sense for us because if we do this right, we think that in five years, we could have ten million customers on the platform.
ALEC HOGG: That’s interesting because again, it comes back to what Michael Jordaan was saying about the competitor of the future for the banking industry, and he reckons Telco’s are the competitors of the future. You’ve almost secured your partnership with the biggest Telco in South Africa.
JAPIE VAN NIEKERK: Yes. We like the agreement. The Group has a good relationship with Vodacom as it is, but there’s a good fit there. There’s a good cultural fit. I think the teams got on very well together. From our perspective, we were very flexible. We were able to do a whole bunch of things fairly quickly, which is one of the advantages of being small and nimble. We’ve also taken our responsibility as a bank very seriously because the compliance requirements are significant and we’ve had to really beef up the bank end – the compliance space – to make sure that we can deliver and that we don’t do irresponsible business in this space.
ALEC HOGG: Japie, we’ve seen Capitec carve away at the big banks in a particular sector of the market. Are you taking a cue from them? Do you think that you could be a Capitec lookalike – obviously, not product-wise, but in the way that they’ve built that business?
JAPIE VAN NIEKERK: Well, I think the first point to make is that we don’t do any unsecured lending, and that’s not likely to change in the short-term. The Vodacom thing is all pre-funded. This is obviously, these effectively pre-funded mobile wallets or a pre-funded card.
ALEC HOGG: The strategy: it’s not the product itself now. They’ve looked at an area of business. They’ve driven in hard, aggressively, and been very successful. Is that what you’re looking to do?
JAPIE VAN NIEKERK: Yes, we’re small, so we have some way to go but I do think that with the alliance strategy, what you’re able to do is you’re able to partner with bigger partners and in that way, have access to markets and affinity groups that you might not normally be able to access. That certainly is where we see the opportunity.
ALEC HOGG: Well, is Mr Joffe on your board – Brian?
JAPIE VAN NIEKERK: Yes.
ALEC HOGG: He is.
JAPIE VAN NIEKERK: He is.
ALEC HOGG: And does he play much of a part in these operations?
JAPIE VAN NIEKERK: He’s very hands-on. He knows exactly what goes on in the business.
ALEC HOGG: If he’s involved…watch out, competitors. I wouldn’t want to be a big bank at the moment. You have Capitec coming at the bottom end of the market. Now, you have the tech side coming through – an alliance there with Vodacom and Bidvest Bank. You have Mercantile Bank making strides in the entrepreneurial space – interesting times. That was Japie van Niekerk, who’s the Managing Director of Bidvest Bank. That’s all from us here in South Africa. After the break, you can catch ‘Tonight, with Bruce’. Till tomorrow, cheerio.
