T.J. Strydom, Capitec: Stalking Giants (Cape Town: Tafelberg, 2024)
THE LIBERATION of the majority of South Africans after 1990 has all too often been seen in terms of the vote. This was always going to have its limitations. And, indeed, some improvements in people’s lives have more to do with economic forces. One was microlending.
Both during and after apartheid, the retail banking sector was dominated by major institutions that regarded most of the population (a staggering 87%) as unbankable. But in December 1992 the government deregulated loans of less than R6 000 and effectively licensed usury. Microlenders, often whites with a modicum of capital, satisfied an appetite for thirty-day loans at extortionate monthly rates of interest of up to 30%. This was a revolving door of loan sharking in which debtors surrendered cards and PINs.
Minister of Finance Trevor Manuel ended the usury exemption, but the need for microloans persisted. While South Africa was seen as one of its most fertile fields, institutions in other countries such as Grameen in Bangladesh, paved the way and various significant business figures such as Christo Wiese nibbled at the margins of this phenomenon. Meanwhile, payroll lending based on the government employee system, Persal, flourished. At one stage emolument attachment applied to one-fifth of all public servants; and it is also believed to have played a part in the Marikana miners’ strike of 2013.
Microloans were short term, cut and dried; payroll lending multiplied and was often used to pay off existing loans that created disastrous debt traps. From the turn of the century (its first branch was opened in Bellville in 2001) Capitec aimed to automate microlending with economical banking services targeted at black commuters. The key concepts were accessible, affordable, simple and personal; which translated into the idea of walk in, walk out having completed one’s business. This was the antithesis of old-style banking epitomised by the architecture of money palaces.
Only in 2003 did Capitec start taking deposits – just savings accounts at first. Today these deposits are worth R300 billion and there are 20 million active clients, truly banking for the masses. T.J. Strydom describes the historical process as banking guerrilla warfare, the minor player nipping at the heels of the big companies. Capitec concentrated on transport nodes in platteland towns behaving more like a retailer than a traditional bank; subsequently moving into urban areas. Branches open on Sundays, supermarket tills operating as ATMs and clients viewing tellers’ screens were among the innovations; together with a final count of 860 branches. Its first million clients were attracted without a single advert. The mantra was ‘simplicity is the ultimate sophistication’.
Emerging from Stellenbosch, Capitec bore the stamp of Anton Rupert in many ways. It took a decade to outgrow the loan shark image and take on the role of serious bank challenger. A masterstroke was getting written into the television soap opera Generations, making it a household name. Capitec’s is a real-time operation with instant information available on the finest of detail. It also calculated its costs precisely: a branch, for instance, operating at R10 a minute.
Capitec is a remarkable success story that has made a notable contribution to the building of the post-apartheid nation. But on top of hard work and good judgement, it required a modicum of luck. Standard Bank could have swallowed it in 2005; and Absa might have done the same had it not been compelled to follow an agenda set by Barclays. And the world of finance and banking is highly vulnerable to perception: credit cards are after all an upmarket form of the unsecured credit that attracted such an adverse press.
A close rival, African Bank dispensing credit at the notorious furniture store Ellerines, 70% of whose business was on tick (from 2008, the year of the global financial crisis) dug itself into a hole that ended up with curatorship in 2014. Capitec put its success in a comparable market of unsecured loans down to the straightforwardness of its product and the efficiency of its operation, especially calculation of creditworthiness. But it was nevertheless tainted by association. Then there was the Viceroy episode that seems to have been an attempt to undermine Capitec under the guise of financial research. Iraj Abedian called Viceroy ‘unknown sangomas’ while Reserve Bank governor Lesetja Kganyago named it a ‘hit squad’.
The bank is now one of the giants of the South African financial sector and Strydom makes free use of the Jack and the Beanstalk analogy. It has 15 000 staff and a headquarters in Stellenbosch, which have diminished its operational agility. New challengers such as Patrice Motsepe’s Tyme, whose clients clog the tills at Pick ‘n Pay to the frustration of food shoppers, are now banking for the masses. And the Stellenbosch connection has provoked noisy leaders of the ANC Youth League to call for a boycott.
There seems a surprisingly strong niche for books about South African business. They sometimes lack historical accuracy: this one, for instance, suggests that the transition to democracy was peaceful (p. 30). And there is a danger of personal and corporate hagiography, although the writer deftly avoids that in this offering.