In December, I accepted the invitation of Capitec’s founding CEO Riaan Stassen to visit the group’s headquarters in Stellenbosch. It was a trip that changed my perception of the disruptive banking group which has taken big chunks of market share from the Big Four, providing enormous rewards for its shareholders. During the visit I met Stassen’s successor, his long-time right hand man Gerrie Fourie. On Friday, Fourie visited with the SA Reserve Bank and on his way home stopped off at the new Biznews.com offices at the JSE. This was his first in-studio radio interview for the new Capitec CEO and followed immediately after his first television interview on our CNBC Africa Power Lunch show. In it he  oozes confidence that the Capitec business model is on a different planet to beleaguered Abil – and is excited about presenting his first set of numbers when the financial results for the year to end February are released in late March. – AH Â
ALEC HOGG:  In this Biznews special podcast, Gerrie Fourie the new Chief Executive of Capitec Bank is with us in the studio. I say ânewâ. You took over in January?
GERRIE FOURIE: Officially, from the 1st of January, but Riaan (Stassen – his predecessor) always said you canât have two bosses at the same premises, so I was actually already acting but Riaan was attending all the meetings and was there to assist me. I basically started from the 1st of October.
ALEC HOGG: Itâs been an amazing adventure, many people didnât know you. You are fairly low profile, but youâve been with the business a long time.
GERRIT FOURIE: Yes, Iâve been there from the start-up. The 1st of April 2000 is when I started â April Fool Day. We were part of designing all the business plans and all the strategies. The team thatâs now working with me has also been there from the start. Only one â the HR Exec â joined about four years ago, so we had longstanding team that works together, we understand each other. Itâs an incredibly strong team.
ALEC HOGG: Â Thatâs part of your success?
GERRIE FOURIE: Yes, definitely. Itâs one of the thingsâŚwhen I was still looking after the operational side and you looked at the other execs, you never doubted their ability, their skills, and their intention so itâs a very nice working relationship that we have. What is interesting is that not one of us is friends, so we donât braai together and we donât socialise, but at work, we are focused on trying to achieve our goals.
ALEC HOGG:  Were you always the heir apparent to Riaan? Were you always going to take over?
GERRIE FOURIE: Yes, itâs difficult. I got that question â I think, yesterday â and Iâm not certain, because itâs a decision that the board makes. Riaan will give a lot of input. I think what helped is the fact that if youâre looking after operations, all the branches were reporting to me. The whole property side was reporting to me, so about 70 percent of the organisation was reporting to me. The other 30 percent is more the specialist functions. I worked very close to them, because whatever the operational needs were, I had to give that over to them. I need to focus now on areas that Iâm not that acquainted with.
ALEC HOGG: Â But I guess the key issue here is that thereâs nobody else who expected that they could become Chief Executive, so you havenât had a raft of resignations.
GERRIE FOURIE:Â There are surely other people that expected it â Iâm not certain â but we had no resignations in the team, and I think everything so far is going well.
ALEC HOGG:Â Often, when you have a central character – like Riaan Stassen, was synonymous with Capitec â when they depart, investors and the public generally become concerned but inside, there hasnât been that concern?
GERRIE FOURIE: No, as I said, the exact same team is there. We havenât lostâŚI canât even remember when last we lost a senior manager, so everyone is still there, and everyone is focusing.
ALEC HOGG:  And as far as Capitec is concernedâŚinto the future, is there going to be much difference in your style to your predecessor?
GERRIE FOURIE: Well, I think if you look, every individual has his own style, his own priorities, and his own focus area, but I think again, the business plans have been mapped out and it has been debated. Itâs how you actually implement those business plans and maybe where Iâll put a priority versus where Riaan would prioritise. I think our management styles are basically the same: open door policy. Everyone always says âopen door policyâ, but I enjoy it when people come in our offices; people come in freely and we have debates and discussions. I believe thatâs when you start getting innovative and think â is when you have these open debates about topics or issues.
ALEC HOGG:  There are so many things that are different about Capitec. You hardly know where to start, but I will start with your secretary. You have one lady who looked after the three of you. Youâre in one of the big four banks. If you donât have your own secretary, you havenât actually made it. Has she taken on a new responsibility now that Riaanâs left?
GERRIE FOURIE: No, sheâs still looking after me, Henk Lourens who has taken over from me as Operations Exec and moved into my shoes, and Andre Olivier is still there so Marissa is still there looking after the three of us. She actually had an operation now. She was off for a month and we just divided the work between the other secretaries, so we didnât even bring another secretary in. She is however, back on Monday and we canât wait to have her back.
ALEC HOGG:  That has to be one of the toughest jobs in South Africa: three senior executives at banks, but you do things differently. Your offices â what was it â R89.00 per square metre that youâre paying.
GERRIE FOURIE: Yes, the averageâŚwe have six offices in Techno Park, and thatâs just a matter of growth. We have about 600 people at Head Office working for us. On average, weâre paying about R85.00/R86.00 per square metre. The focus is therefore on the client and making it as accessible and cost effective for the client, as possible.
ALEC HOGG: Â And you donât hire other bankers.
GERRIE FOURIE: We generally donât like hiring other bankers. We focus on retailers because we believe retailers understand the client, and understand the needs. In the past â on the operational side – we have hired some people from other banks but generally, they werenât very successful.
ALEC HOGG: Â You get people who are in the retail industry and you train them.
GERRIE FOURIE: Yes, thatâs correct. Itâs actually quite amazing. I attended the closing of Firm Foundations. That was our training program. It was our 175th function. If you take it on average, our firm is now doing about 80 to 100 people every second week. On average, that means we brought in over eleven thousand people in the last 13 years, that we actually hired for potential and trained for skill. I think thatâs one of the nice stories that we can actually tellâŚthe fact that we have eleven thousand people for whom we actually created jobs.
ALEC HOGG: Â How many of them have stayed?
GERRIE FOURIE: Alec, our staff turnover at branch level is round about 12 to 13 percent. If you compare that to retail, itâs about 20 percent. Remember, weâre bringing a very young profile. On average, the people are 22/23 years old. We find that if people leave they leave in the first year, but after that year, they stay and then we get very long service levels out of them.
ALEC HOGG:  What do you call themâŚCapitecâers or do you have a name for yourselves?
GERRIE FOURIE:Â No.
ALEC HOGG: Â You just work for the bank.
GERRIE FOURIE: Yes, when they graduate, we say to them âwelcome to the Capitec familyâ and thatâs what we are. We are a family. We are a team working together, and thereâs a lot of focus on people and teamwork.
ALEC HOGG:  Iâve spoken about these issues because it serves to distinguish you from Abel. Abel and Capitec are often coupled as similar-type businesses, but youâre very different.
GERRIE FOURIE: Yes, I think if you compare us to Abel, the only thing you can say is that weâre in the same market in unsecured lending. However, if you look at our business model itâs completely differently. Firstly, we have transactional income because weâre a full-fledged bank, so we get income from people transacting on their accounts. Secondly, our funding structure is completely different, whereby we get funding from the retail side. Currently, if you look at our funding structure, 60 percent is retail and 40 percent is wholesale.
ALEC HOGG: Â So 60 percent of the money that you lend out will come from people putting savings in.
GERRIE FOURIE:Â Yes.
ALEC HOGG: Â How stable is that?
GERRIE FOURIE: Itâs very stable. Youâll see on your shorter terms and lower amounts that there will be volatility but we donât use that. We use the more long term to fund ourselves, but thatâs fairly stable and itâs growing at quite a nice rate.
ALEC HOGG: Â The big issue is bad debts and how you treat those.
GERRIE FOURIE: Yes, the big difference is bad debts. We believe unsecured lending is risky, and because itâs risky, you need to be ultra-conservative on the provisioning side as well as in your credit-granting side. I believe thatâs where we also have a big difference.
ALEC HOGG: Â In what way?
GERRIE FOURIE: Well firstly, if you look at our up-to-date book for example, we are providing at seven percent already of our up-to-date book. If a client is one month in arrears, weâre already providing 33 percent so we donât wait until the bad news has occurred; we actually provide from the beginning.
ALEC HOGG:  One month in arrears, you provide 33 percent, so one in three loans where the person is a month in arrearsâŚyou think they could go bust or not pay.
GERRIE FOURIE: Yes, those figures come out of our historical facts. Many of our other banks and people in unsecured markets wait for six to eight months. We tend to take the bad news immediately and thatâs the way we run the whole business. From the start, weâve said weâre a start-up business. We need to grow it. We need to create trust in the brand, and one of the critical ways to create trust is to make certain that you are conservative.
ALEC HOGG: Â Do you ever get visits from the Reserve Bank?
GERRIE FOURIE: Yes, they have their regular visits. This morning I was at the Reserve Bank. We have a very good relationship with the Reserve Bank and we work together to achieve the results.
ALEC HOGG: Â And they understand exactly what the Capitec model is and why itâs different to Abil.
GERRIE FOURIE:Â One hundred percent.
ALEC HOGG: Â Sometimes investors donât, although the stock market doesnât seem to have affected your share at all, in the way that it has Abilâs share.
GERRIE FOURIE:Â Yes, if you look at the Abil results that came out: in the beginning, there was a direct correlation between their share price and our share price, but Iâm sensing that the market itâs in is different.
ALEC HOGG:  Looking into the future, Capitec has taken on very strong competitors in South Africa. The big four banks here are rated as among the best in the world in the operations. Youâve succeeded here. Surely, you should now be looking to other geographies.
GERRIE FOURIE: We get that question quite often. One of our successes is the fact that we have focused, and weâve had those debates in the last couple of board meetings. We believe thereâs still a lot of opportunity for individual or retail banking in South Africa and weâre going to focus on that, and then we will make the call later on to say âdo you want to take the model internationally?â I agree with you. Thereâs a lot of potential internationally, but if you have to take out key resources now to go and focus internationally, then you lose the focus on the South African market.
ALEC HOGG: Â So how much road do you have left in South Africa?
GERRIE FOURIE: Iâll give you an example. In our banking clients, according to AMS, we have a 12 percent market share and if you do a simplistic sum to say there are five major players in it, and then everyone should have a 20 percent market share. Weâre focused on that market, so we believe we could go higher than 20 percent.
ALEC HOGG: Â So your first objective would be 20 percent of the South African market and then start looking abroad.
GERRIE FOURIE:Â Thatâs correct.
ALEC HOGG:  Your first set of financial results will be out pretty soon. You have the year-end on the 28th of February. How quickly will you be having your numbers and be able to talk to analysts?
GERRIE FOURIE: Well, thatâs one of the things we pride ourselves on. The financial results will be available on the 25th of March, so the press releases etcetera will happen on that particular day. I think for a listed company to have your financial results within 25 days is an excellent results.
ALEC HOGG: Â Three-and-a-half weeks after year-end?
GERRIE FOURIE:Â Thatâs correct.
ALEC HOGG:  Well, we look forward to talking to you at that point in time. Gerrie Fourie is the new Chief Executive of Capitec.
