Interviews with Capitec CEO Gerrie Fourie are usually a treat – and this one is no exception. It kicks off with Fourie’s perspective on the stock’s R30bn market cap drop after a Trading Update three weeks ago and moves through to interim results released today which included details of the latest strategic initiatives. Leading these is a massively disruptive move into the mobile phone market, where Capitec this week launched a 50% cheaper alternative to over 8m clients who already buy data and airtime through the bank. Also in the spotlight is the impending relaunch of Mercantile Bank as Capitec Business Bank – spearheaded by a simplified, low cost offering for SMEs. Fourie spoke to Alec Hogg of BizNews.com.
CEO Gerrie Fourie on the progress being made at Capitec in the market share price
I think that you can speculate quite a lot. I’ve said it a couple of times. We don’t manage the share price. We manage the company and we manage the fundamentals. And we believe the fundamentals are strong and there’s plenty of opportunities. I think the market was probably open. We were bringing out a 21% or 22% growth and I think the big differences lie in our transactional income where the transaction income came in at about 8% growth, where we normally are 17, 18%. But there was the cost of living that came in around 100 million, which the market should know. And then there was the 250 million on the SMS fee that we drop and the in-app messaging in your app if you do a transaction, which is for free. So that might change if you bring those in, then it’s back to a 21% growth in our transactional income. But you know, it’s coming back to the Capitec philosophy. We believe we do what is right for our clients and I don’t think as many companies that over a six month period make decisions and basically give back to clients. If you add the two, basically 350, 400 million back to the clients. But, you know, that’s our philosophy. We believe in long term sustainability and we believe we’ve made the right decision for our clients.
On who are the major competitors in the business banking side
I think all the banks are playing in that area. I think FNB is particularly strong and Nedbank is now in certain areas, certain sectors, very strong. But again, it’s your affordability, it’s your transparency. It’s your simplicity. You know, if I look at retail banks, you know, we don’t differentiate between clients. All clients are paying exactly the same fees. All clients have got the Capitec card. All clients are treated the same. So it’s that simplicity, the core concept that’s coming through. So we don’t have a purple card, you’ve got a black card, you’ve got a silver card. And based on that, you’ve got certain products and complexity that you bring in. So it’s definitely going to be the simplicity component, which I think is strong because you want people to understand their financial well-being and the same with the SMEs.
On whether they are getting into competitive positions with cellphone providers
Well, I think two, two comments. The first is, if you look at our 10.8 million clients on digital, that’s a big number. And we’re really starting to convince people that you can do your banking anywhere, any time. And for us, that’s promising because we want to take cash away and we want people to do electronic transactions, pay with your card, pay with your phone, because then we’ve got data and we can understand what clients are all about and we can add value to them. And then we’ve launched Connect on Monday, Capitec Connect, and we’re quite excited about it. I set it this morning, we’ve got 8 million clients that buy airtime every month from us. That’s a 30% market share. And we believe we can offer them value. If you look at what we’ve come out with, 45 rand, the average price in the market is about 80/85 rand. But the big thing is no expiry. So a lot of people pay and then expire and you actually lose your value. We’ve got no expiry as long as you do a transaction within six months to the moment you do a transaction, you’ve got another six months. And that’s just regulations. Nothing we can do but no expiry and I think a very competitive price. So it’s just, again, bringing that value to our client base.
On the headline earnings up 17% and the five year earnings
Quite interesting because I looked at the interim result and it came out at 17% and then when I was preparing for the presentation we were looking about the last five years and COVID and the KwaZulu-Natal unrest and floods and everything. And then I asked the team, but what was our five year earning? Because I just wanted to shout to the market how resilient we are and fundamentally strong. And it came out to be the same number. So, you know, for us, we got a number that we are predicting ‘s more and I’m showing transactional income we’ve cut back or given back to the clients – over 400 million. If we believe it’s the right thing to do, we will do it. Chasing profit I think is very short-term oriented. You need to look at the long term and make certain you create value.
See also:
- After 3x share price jump in two years, Capitec needed to produce a stellar FY22. It delivered.
- SA’s ever-increasing social grants are one of the greatest risks to the country, says Capitec exec
- Explosive growth for Capitec, with more to come as it shakes up business banking – CEO Gerrie Fourie
