- Capitec has seen its customer numbers swell exponentially to at least 16 million customers currently
- Capitec’s customers are approximately the same size as the population of Zimbabwe
- Capitec’s success is attributable largely to the leadership of one man Stassen and the support of his team
Whenever people examine the origins of Capitec Bank, most people tend to celebrate Michiel Le Roux.
That is a fact.
Capitec would be unknown if it were not for the participation of this titan of the banking industry. However, there is another founder whose name tends to be missed when it comes to the celebration of the success of this banking franchise. That name is Riaan Stassen. He is one of the founders and was the bank’s chief executive and retired in 2019.
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Capitec is a very successful bank. It has the financial exploits to prove it. The bank has consistently grown its profits despite a slowing economy and a global recession back in 2008 and most recently when the Covid pandemic struck. The bank owes its success to its mass-market approach to the fortune at the bottom of the pyramid and the entrepreneurial drive of this little-known banking supremo Stassen.
This man is not your typical buttoned-up and tongue in cheek banker.
For starters, Stassen loves the thrill of racing. He has been on holiday to Sao Paulo to attend the Brazilian Formula One Grand Prix. He has been to Shanghai China to watch his favourite team, Ferrari. His love for Formula One racing betrays a trait that is common in most if not all entrepreneurs, he is competitive and has a strong desire to achieve.
He has managed to successfully translate these traits into the company during his tenure at the helm turning it into a runaway success in the process. Capitec has a culture of being competitive, the ability to achieve results through operational excellence and teamwork.
In November 2009, a respected South African business weekly called the Financial Mail carried the story of Capitec on the cover of its issues titled, “Banking’s Unknown Revolutionary, In the Fast Lane,”.At that time the journal described Capitec as a “minnow” or “a small or insignificant person or organization” compared to the then big four banks, Standard Bank, ABSA, Nedbank, and First Rand. Times have changed since then. Capitec has seen its customer numbers swell exponentially, at last count the bank had at least 16 million customers. To put that in perspective, this number of customers is approximately the same size as the population of the country of Zimbabwe.
At last count of the heavyweights of the banking sector, the Standard Bank Group has 10 million customers on its books significantly less than the 21-year-old banking sector newbie.
Capitec was founded in March 2021 and listed on the JSE in February of the following year. The company has weathered crisis after crisis all the while producing consistently strong results. The company listed at a price of 120 cents per share and now trades at ZAR 2,131.00 as of January 17, 2022.
To give that kind of share price performance some perspective on needs to consider what an investment of ZAR 10,000.00 during its IPO and held during that time to date would have made an investor fabulously wealthy.
Capitec at its inception started by acquiring a microlender from the PSG Group which gave it a platform to expand itself rapidly. It has now become a general retail bank and with the acquisition of Mercantile Bank, Capitec has officially entered the business lending segment.
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A lot has been written about Capitec and how it achieved the spectacular success that it has. Two reasons explain the success of Capitec, firstly, its founders understood the needs of its customers particularly those in the mass-market low-income segment.
Secondly, the founders developed an innovative strategy and business model that aimed at addressing those needs better than established players.
Stassen and the team have executed that strategy very well.
They recognized that although South Africa has a highly sophisticated and integrated banking sector, much of the population has no access to or they have limited access to banking facilities. The market that Capitec has cornered consists of people who find banks and banking products difficult to understand, expensive, cannot access the credit they need, distrust banks, spend cash to settle their transactions and spend a lot of time in queues to draw cash to settle their transactions.
These prospective customer circumstances have provided the proverbial “ace” which Capitec has played very successfully during its 21 years of existence.
Capitec’s success is attributable largely to the leadership of one man Stassen and the support of his team. Stassen for his part is not a traditional banker, he was during his time at the helm of the bank an even more unconventional CEO.
In his own words, he is non-hierarchical, consultative, and often informal in his approach. By his own admission, he is not a natural reader but said that he learns a lot from observation… Typically the average chief executive is said to read at least 52 books a year… but then Stassen was not an average CEO.
He preferred to learn about the market through personal contact at Capitec branches and extraordinarily has visited every township in South Africa!
The then chairman and co-founder Michiel le Roux described Stassen this way: “Collaboration is a big part of Capitec’s success combined with Stassen’s market insights and operational efficiency”.
PSG an investment vehicle representing the interests of Jannie Mouton, a South African, Afrikaner business tycoon was an early backer of the bank and remains its largest shareholder with a stake of just over 35%. Capitec’s unique standing and success in the market owes itself to the unusual backgrounds of its founders.
Most if not all top bankers are individuals who have spent their careers in the banking industry. They would have moved up the ranks, trained internally and deeply steeped in the culture of traditional banking. Banks generally innovate slowly, and it is almost unheard of that someone with the background that Stassen has would have made it to the helm of a top tier bank let alone make a success of a banking venture.
Stassen prior to his retirement in 2019 had been in the banking industry for about 20 years however it was his second career. He is a chartered accountant by profession who cut his teeth in the auditing profession, rising to become audit manager at Coopers & Lybrand and from there went on to join Distellers which was part of the Rembrandt Group (now known as Remgro).It was here that Stassen was exposed to the culture that is closely attuned to marketing and what customers want.
Stassen’s journey from the liquor industry to the banking sector began when the co-founder of Capitec Michiel le Roux left a cushy job as head of Distellers to start a banking venture backed by another Afrikaner business titan Christoffel Wiese who at that time controlled Pep Stores and together they launched Pep Bank.
After some time in business Pep Bank merged with a bank Wiese had newly acquired called Boland Bank.
It was at this point le Roux brought on board Stassen and they sharpened the newly merged entity’s focus on the mass market which they understood well from their background in the liquor industry.
The founders’ experiences at Boland Bank influenced the birth of Capitec. During their tenure at Boland, the founders succeeded in building a ZAR 1 billion microlending book in the late 90s. Boland subsequently merged with Natal Building Society and Board of Executors (BOE) and the impressive microlending book that they built was then sold to African Bank Investments Limited which is a specialist in microlending.
It was after this experience that the two founders approached Jannie Mouton whose support was critical in getting the idea of Capitec off the ground. PSG backed the start-up by selling its microlending business to the company for a stake in Capitec.
PSG for its part has done well from its interest in Capitec. Its 35.4% stake as of January 18 is worth an estimated ZAR 87 billion or US$5.6 billion.
The unconventional background of the founders made them recognize insights about the banking industry which set Capitec apart from the rest of the major South African banks. For example, in the 80s when South Africa had strict liquor laws, Stassen and le Roux noticed that 80% of liquor sold domestically was consumed by people of colour in the mass market.
This shaped Capitec’s mass market-low-income philosophy.
Capitec for instance defines its customers by needs and not by income. The bank as a result is status neutral, they even go so far as to say this in their marketing campaigns.
Capitec’s business is built around 4 guiding principles:
- Affordability: the fees and interest rates on its products are significantly lower than at other banks.
- Accessibility: through a branch network which at last count stood at 800 in South Africa alone.
- Convenience: cash can be withdrawn, and purchases are made at retail partners like Shoprite, Pick n Pay or from its ATMs.
- Simplicity: transactions are quick and simple and require no paperwork.
Capitec’s formula is clearly a winning one. In the 21 years, it has been in existence, it has grown to be the biggest bank in South Africa and the second largest listed banking share on the JSE boasting a market value greater than that of Africa’s largest bank by assets the Standard Bank Group.
It has built this success on the back of a winning culture that has richly rewarded its customers, shareholders, and employees. So, if you run a bank and want to make a success of it the way Capitec has, do it the way Stassen and company have done it. Start by spending time in the alcohol industry and then emulate Capitec!
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