SA’s exponentially expanding Capitec Bank today released audited results and the annual report just six weeks after its February year end. This is a discipline CEO Gerrie Fourie says helps his team get the investor-related compliance done early into the new financial year; allowing them to get back to what they love … actually running the business. In this podcast, Fourie shares the back story to Capitec’s continued growth, highlighted by a 16% bottom line improvement since before Covid-19, a rare achievement for a major SA company. Among the surprises is a new notes-swapping engagement on customer-centricity with global icon Amazon.com. Although they’re supposedly in different sectors, Fourie reckons these two businesses have much in common: a joint obsession for putting customers at the centre of their worlds; the use of Big Data; and the way both apply AI and machine learning. He says Capitec has learnt a lot from Amazon, and vice versa. There is plenty more in Fourie’s fascinating discourse with BizNews editor Alec Hogg. Plus, a future outlook that is sure to satisfy its delighted shareholders who have enjoyed an almost 3x price surge in the share price, from 2020’s R850 a share to the current R2,300.
On Capitec’s continued growth
It is an interesting thing. We hardly ever discuss the share price. In my 21, 22 years on exco, I can probably count on one hand the times we’ve discussed the share price. For us, it’s all about discussing the client, the strategies, making certain people understand the why. It’s that whole thing about not focusing on now, but focusing on the input because the input creates the output. That is just a philosophy and a DNA that we’ve got. We were quite pleased with the very strong results, given Covid-19. If you look at a 16% growth over a two-year period, I don’t think many companies went through Covid-19 and the KwaZulu-Natal unrest and still grew at 16%. So, we are happy with it.
On the total debt coverage ratio provision before and after the pandemic
Before Covid-19, our total provisions were 20%, we are now 23%. So, we are still covering 23% of allowances going out. There is still uncertainty in our client base that we need to manage. What is important is if you look at our results, last year we had R3.2bn for our economic forward-looking scenarios and still kept R3bn back because of the uncertainty of inflation, oil prices and the China situation. We must not underestimate the China situation given the supply chain reaction it could have because they are locking people down quite severely. It’s going to be interesting. I think the next two, three to four years are going to be interesting to manage. But that’s what we’ve done well; being agile, flexible and quick with the right products and we’ll continue doing that.
On how international events affect Capitec
If you look at what is happening internationally and that old saying: if America sneezes, we get a cold, we need to understand what is happening internationally. A big portion of our commodities is exported. We have very high prices. The mining industry is doing well at this time. If you are importing but your supply chain has been affected, even though you’ve got a better rand dollar, prices will go up because of supply problems. We always start with the international market, understanding what impact it will have on South Africa. Then we go into the South African market and start looking at industries. From industries, we go into the different sectors and provinces. The easiest for me to explain is farming in the Western Cape. It is completely different to farming in the north of South Africa. You need to understand what is happening. Those are the things we take into consideration when we look at our credit policies on appetite. Covid-19 and the economy have helped us because I believe we give exceptional value to our clients. Prices on our fees reduced over a four-year period and we have added quite a lot of products to great value to the clients. It’s that value that you give to the clients that they see in Capitec. And that is where the strong growth is coming through. We grew to 4.6 million clients over the last two years. Our digital client base is now at 10 million, which is unbelievable. In 2010, we didn’t understand what an app was and now everything is on the app. So, that flexibility and agility have helped us quite a lot.
On Capitec’s customer-centric approach
We have spent quite a lot of time with Amazon in the last six to nine months, sharing ideas and how to get what done. We definitely learn from [each other]. We are using some of their principles of how they develop products. We have just implemented their so-called ‘six-pager’ in the bank. It’s a formal process where you start with the client and ask the right questions. But it’s part of our DNA you know. Culture is an amazing thing. It eats up strategy for breakfast. You need to have it embedded in your DNA. In every meeting when we look at a new product, we start with that question to the client. Last week, I came back from a trip to KwaZulu-Natal where I spent time with clients and with consultants to understand the market better. So, it is everything you do and you need to take it down to the lowest level because it’s about strategy. You can easily talk about strategy but how do you make certain everyone in the bank understands the strategy? We have spent a tremendous amount of time in the February, March and April period where the majority of our people go through conferences to really [discuss] what we want to achieve this year: what is expected from us, what is the leadership we understand. That continual talking and making certain everyone understands the client is part of our DNA.
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