LONDON — At 12, Magda Wierzycka’s family risked their lives escaping communist Poland only to spend the next year in an Austrian refugee camp before her medical doctor parents were offered a new start in South Africa. That experience was a big motivator in this qualified actuary’s decision to lift her head high above the parapet when her new homeland needed it most. Last year, when resistance against Gupta-driven industrial scale plunder of South Africa was at its lowest, Wierzycka went very public with her concerns. Hindsight shows she helped greatly in turning the tide. With the old regime having been ejected, Magda has now returned to her day job. I caught up with her in a sweltering London where Sygnia’s founder and CEO is investigating ways to globalise her mushrooming business. We spoke about South Africa’s immediate past, its likely future and how she feels now about the very public position she adopted. An exercise in courage and, yes, testicular fortitude. – Alec Hogg
This is The Rational Perspective. I’m Alec Hogg.
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In this episode Sygnia CEO and anti-corruption crusader, Magda Wierzycka.
It’s been my privilege to have followed Magda Wiercycka’s progression from the time she helped build Coronation Fund Managers through to playing a leading role as CEO as the turnaround happened at African Harvest. When she left there, she created her own financial services disruptor, the ETF company, Sygnia. Then last year I watched in admiration as this super smart qualified actuary transformed into an anti-corruption crusader, the unlikely pioneer of a fightback against South Africa’s seemingly inevitable slide into a corrupt failed state.
One of my most popular tweets of the past year was the one where after a typical Magda outrage, I said that she possessed more testicular fortitude than pretty much every male of a JSE listed company, but the business community’s highest profile maverick paid a high personal price for putting herself out there. She needed full time bodyguards and was regularly attacked on social media as the corrupt systems antibodies fought back.
She’s come through it though and things have changed dramatically in South Africa. We caught up yesterday in London where she’s exploring global opportunities for her company and then we reflected on how South Africa managed to reverse away from the abyss, what happens next and touched on that infamous conversation that she had with the director of SAP, who admitted that in emerging markets bribery is standard practice for the German multinational.
It’s Magda Wierzycka; I’m the CEO of Sygnia.
Great to see you in London, are you here to drum up more business?
I’m here, really, it’s a bit of a dipstick visage to see whether we can expand into the UK, but on a very low note and on the cheap, to see what the opportunity set is in the UK. I don’t want to repeat the mistakes that other, particularly financial services companies have made in terms of making expensive acquisitions, so we want to see whether we can do something organically. In the UK, we’ve been doing quite a lot of research and we think there are some small opportunities that I can’t talk about just yet, but interesting ones.
Sygnia has been an interesting story, back in the early days, how long have you been going for now?
Well, we’ve been going since 2006, so time passes. It’s many more years than I’d like to think and I always think to our beginnings, which really was six people in a room sitting around saying, “What are we all doing next?” and trying to come up with a business model around a particular administration platform that we have built and really that’s all we had. We had no external shareholders, we had no capital, we just had the ideas and a system that we built. That was the origin of Sygnia.
And now?
Now we manage just over I think 200 billion in assets between our administration assets and assets under management. We are the second-largest multi-manager in South Africa and second-largest ETF manager after Absa on the Johannesburg Stock Exchange and one of the largest passive managers in the country.
The whole low cost drive that you are well, you’re famous for many things, but that’s one of the things you’re famous for.
Infamous. You know, we believe in fairness to consumers, so if I have one driving passion in life it is to educate people about their financial affairs. Just because so many people retire with no financial security. I look at my own parents and yes, their journey is a little bit different because they had to start their lives afresh in their forties after we escaped Holland, so they didn’t have much time to save for retirement. But obviously, they saved nothing, so the reality of an average 60-odd-year-old is that they are going to depend on their children for their financial security.
If there’s one thing that I would like to change is people’s awareness of their need to save and at the same time the awareness and appreciation of the fact that it’s not all about investment returns but actually costs and how much you pay has a much greater influence in terms of compounding over years of your saving life than the half a percent excess return that you might get by investing with Allan Gray versus Coronation. Hence, when we enter the South African market, the way we decided to differentiate ourselves is by literally slashing costs to the bare minimum.
Could you do that here in the UK?
I think you can do it here. Vanguard has entered this market with no brand name whatsoever. I know Vanguard is actually well known in South Africa, but it wasn’t well known at all in the UK. They are attracting huge amounts of money directly from consumers without having a brand name and without necessarily doing a big campaign. They just built a platform and offered a low cost savings product, so I think there is a space for doing that in the UK.
In fact, our research of this market is much less regulated than South Africa and the fees are much higher than they are in South Africa. It’s the most amazing thing. Everyone always talks about the regulations in the UK and RDR in the UK, well, RDR, which is the Retail Distribution Review in the UK, is actually a diluted piece of legislation that we have had in South Africa for many years, so I think that there is a huge amount of opportunity for low cost providers in the UK.
That’s so interesting and we have seen some South African firms doing extraordinarily well here, Investec, Vitality amongst them, let’s hope Sygnia as well.
We are much smaller than they are.
Well, early days, but Magda you’ve been in the news a lot over the last 18 months. We had, I remember, a fascinating webinar the weekend after Steinhoff imploded, but if we were to describe the contribution you’ve made in the last couple of years in South Africa, it’s really been as an anti-corruption crusader. Are there any regrets because it took your profile from being a leading chief executive in financial services into somebody now who perhaps has made many enemies?
Look, there are absolutely no regrets, so you know, I didn’t start off by wanting to be an anti-corruption crusader, it was more the fact that being in the investment industry, what we did see on the ground is a country spiralling downwards under the Zuma regime and it was the truth that potentially was hidden from members of the public because people just don’t pay attention and they’re kind of passengers of life rather than being active participants in life, but you really couldn’t, you know, seeing what was happening in South Africa on the corruption front, on the political, the private sector involvement, you know like that corruption, it got to a point where you had to do something. I just felt you had to start speaking out; particularly after Gupta leaks appeared because the magic of Gupta leaks was that it was like a crime novel. You literally had the who, the how, the how much and it was all…
And all the evidence as well.
All the evidence and all the private sector participants implicated. What absolutely amazed me is that with all of that evidence out there in the public realm, no one was doing anything about it. That’s really what triggered this kind of involvement in starting to speak out and little did I know at the time that I would be a bit of a lone voice from the business side because I think that is what built up the profile.
Did you expect that others would follow you?
I expected business South Africa to stand up and say, “We cannot continue on this path because it’s a path of economic destruction for this country”. So, never mind the political issues, but just on the economic front it’s in the interest of business and would have been in the interest of business South Africa to speak out, so yes you know and when the Gupta leaks came into the public domain I fully expected leading business figures to speak out. Instead, no one did and in fact, you know what I found absolutely amazing is that all this evidence against KPMG was out there and we fired KPMG and that became a news story. It shouldn’t have been a news story.
Everybody should’ve fired them.
Everyone should have fired them, but in fact, people resented us for firing KPMG initially because it created problems in their own businesses because suddenly their customers would ask, “Well, who are your auditors?” and in fact, I faced complaints from my own client base who said to me, “Why did you fire KPMG, it created problems for us?”.
Do you not find it interesting, it’s just occurred to me now, was one of the few other companies that fired KPMG was Absa and both have female chief executives.
However, I think they only did it now.
Proportionately, yes, sure, they’ve only done it now, but it’s interesting. Both you and Maria Ramos.
Yes and yet Old Mutual hasn’t. They have fired, I mean I’ve never seen a better example of being half pregnant than Old Mutual. Half fired KPMG and now has two external auditors.
Well, AECI who had them for nearly a hundred years said, no it was finally time for audit rotation, so there’s another interesting spin on it I guess, but people seem to have withdrawn more and more.
No, completely, I think since the Zuma regime has collapsed and since Cyril Ramaphosa has come into power there’s a very different mood among business and look, business tends to swing with the wind, so there are winds of change blowing through South Africa, and everyone wants to be on the right side of that one. Therefore, it’s probably the politically correct thing to fire KPMG, whereas last year it was just a hassle that business didn’t need, so it wasn’t necessarily that they were implicated in any corrupt activities on behalf of those companies, it’s just changing your external auditors is a real pain in the butt.
So, it was brazen previously, whereas now it isn’t really anymore.
Exactly.
Before we got together today, I had a look at the speech that you made at the Brenthurst Moneyweb seminars where you spoke about a director from SAP who called you. It’s worth repeating.
Well, you know I’ve become a bit of a magnet for people. I kind of almost think back to my Roman Catholic roots and go, it’s like confessional. People come to me and confess their sins; I have no idea why. So I’ve become a magnet for people trying to come and explain themselves. Really, I don’t know why and somewhere in that process last year I got a phone call from, I think she introduced herself as a non-executive director of SAP and she was flown out from Germany to South Africa to look at this unfolding scandal around SAP paying off the Guptas to get various IT contracts and software contracts.
She said to me that this concept of SAP paying commissions to middle men is a widely used business not just by themselves and in fact, this PR person that phoned me a couple of days ago repeated this because obviously they listened to the tape recordings. I think they were looking for evidence to sue me for saying what I’m saying. She said to me that no, it’s not uncommon for them to pay commissions to middlemen, not all of them are bribes.
What did she mean by that?
Well, in fact, not all of them are bribes is what the PR person said to me two days ago, that he has to pay commissions, but not all of them are bribes.
Oh, so some of them are bribes.
So some of them are bribes, the flip side, well, she said to me that it’s common practice for them to pay commissions to middle men, but as a consequence of what has happened in South Africa, all of this coming to light and obviously the negative publicity they have decided to discontinue payment of commissions in countries which fall below this level 50. I don’t know why this particular level, but they struck it on the World Corruption Index. They’re not going to pay commissions in those kinds of countries and I must appreciate that that is a very significant give on their side because it would really cost them business.
Extraordinary.
I was supposed to applaud them for that.
But surely Germany has very strict laws about its citizens participating in corruption outside of the country, certainly the Americans have.
The Americans do, the Germans well, there are many German companies implicated in many corruption scandals around the world, some of the cleverest scams have been perpetuated by German companies. You have your Volkswagen carbon emission scandal going on right now, so there is something that happens where German companies do often find themselves on the wrong side of the law. I’m not sure whether the laws are the same as in the US. Look, in the US mostly the US Department of Justice fines people and they name and shame, so people do seem to be afraid of the US.
What about McKinsey, given we’re talking about the US, Kevin Sneader came to South Africa, he’d been in office for a week, and he started his speech by saying, I’m sorry”, went through to explain he was sorry, but he didn’t see any corruption and then ended by saying, “I’m sorry again. What did you make of all that?
Look, I think I had a bit of an unfair advantage there in that I employed one of the Trillian whistleblowers who I always call the South African national heroes, Bianca Goodson and she was involved, she was the nominal CEO of Trillian at the time that McKinsey was striking the deal with Trillian in order to effectively rob Eskom of a lot of money by providing them with consulting services while paying off Trillian in the background. She basically said that they had sushi parties where they were joking about the fact that (and that’s with McKinsey in the room), so sushi parties between Trillian and McKinsey guys laughing and joking about the fact that this is all done on behalf of the Gupta family and that they’re going to rob Eskom blind.
So Kevin Sneader obviously doesn’t know any of this because he says there’s no corruption.
Probably not, well, I’m sure.
Have they approached you, McKinsey to talk to you about this?
Yes, last year they also came to speak to me and I brought Bianca into the room when they did. She got very upset because she basically said that they’re lying and they’re misrepresenting the situation, that certain people helped at McKinsey, knew exactly what they were doing, that the whole contract was as a scam. I was also told that McKinsey once they got the Eskom contract sent in a whole host of very young consultants on site at Eskom at various power stations and people at Eskom were told to find them jobs, any jobs, whatever they could manufacture that would fall under the pretence of provision of consulting services. So there was a mad scramble at Eskom to try to pretend that these people actually were adding value.
I don’t know what books McKinsey keeps in terms of what services they provided to Eskom for the almost billion rand fee that they charged, but it will be interesting to see how if it isn’t corruption, what services they actually provided and what value add did they provide, given that you know, you look at the financials of Eskom that have just come out. And you have a bankrupt company with a huge amount of irregular expenditure.
Of course Trillian, there was 600 million that it received thanks to McKinsey, which hasn’t been recovered yet, but it does seem from what we saw from Eskom earlier this week that the numbers are far bigger than we anticipated. Jabu Mabuza saying they have R19 billion worth of expenditure that they can’t account for.
Correct.
It does appear as if the cavalry has arrived now though.
Yes.
So what’s your role in all of this given that people are starting to uncover the muck, is there more muck that still needs to be brought to the daylight?
Look, I think we’ve had 12 years of corruption in South Africa, really we’ve had 12 years where corruption became an institutional way of doing business and that’s really Zuma’s legacy, I mean among others you know, destroying the education system, but that’s his legacy. He’s made corruption an acceptable way of doing business, both for the public sector and the private sector and it’s you know, very naive to suppose that we can get rid of that cancer and that mind-set in a space of a few months. You know, it will take us years to get over what has happened, it will take years to weed out the bad seeds to change the way people do business. So I think that there is a lot more that will still come to the table. I think we’ve only started scratching the surface of it of this.
But what about you, what’s your contribution going to be from here? Are you now saying you’re in London, you’re going to grow the business globally?
I do have a day job, which is running Sygnia. It is not being an activist really. You know, I found myself in very particular circumstances last year. I certainly didn’t expect to be a lone voice, which is why I think I became better known than I was before because I really wasn’t known, I was just a CEO of a financial services group. I hope to play a role as a commentator really. I think the one skill I have is the skill that I’ve cultivated, is to try to make complex issues simple, so I’ve played a role in the financial arena, and it’s a bit of an educator role. I’ve always tried not to use jargon, to explain concepts in a way that makes them accessible to the man in the street and that’s how I see my role going forward in corporate South Africa. It’s when things unfold such as Steinhoff and Resilient, which on the surface seems very complex to understand. Usually they’re not. There’s just a lot of jargon around them.
Well, not to someone like you. What did you study?
I studied actuarial science, but that’s only because they offered bursaries that paid for everything because I really couldn’t afford to study anything else. However, actuarial science, as much as it’s a really boring career, gives you a very analytical mind-set, so it teaches you to analyse complex problems and to find solutions to them. That’s really the training; it’s nothing else. It’s kind of a very risk averse mind-set in problem solving and analytical skills.
When you see people and I’m thinking particularly of women who see you standing up against well, overwhelming odds, we know the risks of what you did, what Bianca Goodson did, and many others. How do they react to you now? First of all the people in the business community, do they thank you, but members of the public, are they appreciative?
The business community has never particularly liked women to begin with, so I don’t expect a different attitude and with that approach of being a market destructor cutting fees, exposing hidden fees, I will never be a popular figure among the business community in South Africa, so that hasn’t changed. You know, I wasn’t popular before, I’m not popular now and you know this isn’t a popularity contest.
It comes with the territory, does it?
It comes with the territory, but certainly, you know, I have been very surprised by the kind of overwhelming public support and it’s little things like sitting in a restaurant and someone walks up to me and says, “Thank you”. That actually means a heck of a lot because it means that they actually recognise you and they appreciate what you’ve done and it often comes as soothing antidote to the huge amount of Gupta bots that were attacking me on Twitter, the state security that was following me around and the death threats I received, particularly last year. So those little acts of kindness where people come up and say, “Thank you” or, “We appreciate you” or, “We missed you on Twitter” actually means a heck of a lot and I’m very grateful for that.
Has it calmed now, the attack on your person for standing up and speaking out?
Yes, I mean I think the Gupta bots have run out of firepower. Look there are different forces and different elements at play, so we are very far from being out of the woods. The “bedside” if one can put it that way is fighting back. You know they’re not going away quietly. I think that there are many people that have been implicated in corruption, not necessarily because they’re supporters of Zuma, but they’ve participated in the looting and they’re scared of being exposed, so there’s a huge pushback against what Cyril is trying to achieve and others such as Pravin in cleaning out the system and Jabu at Eskom. They all are facing huge pushbacks.
I think they’re in much more precarious and dangerous positions than I am, but we need to continue the fight and I think it’s very important that the South African public doesn’t become complacent just because Cyril Ramaphosa is now in power and everyone rather goes back to their daily lives. You know, it’s essential that people remain involved and actively involved in this fight against corruption because that’s the only way that we can get over what has happened.
That was Magda Wierzycka, founder and Chief Executive of Sygnia.
And this has been The Rational Perspective, until the next time, cheerio.
