Riaan Stassen: Capitec built from scratch, and now what?
He launched unarguably the most innovative financial model in SA, and leaves with some trenchant thoughts
There aren't many ten-baggers on the SA stock market but Capitec is one of those feisty little bets that paid off, big-time. We caught up with chairperson Riaan Stassen ahead of his last week at the bank he helped create.
What were Capitec’s founding principles, and have they changed?
What we’re doing today is exactly in line with the model that we developed 20 years back. We said the market wanted simplified, low-cost banking products delivered on a face-to-face basis. We said: here’s a big opportunity, bank costs are high, not transparent, banking is complex ...
At that stage I think I was an accountant’s nightmare because I said to [CFO] Andre du Plessis: whatever the other banks charge, we must deliver at half that price, and that’s how we set our pricing initially.
Was it as simple as that – whatever the other guys charge, we’ll charge half?
We learned some lessons in the microlending space and we’d done some volatility tests and so forth. What we found is: if you don’t make a significant difference in pricing, you’re not going to change behaviour. You’re not going to get someone to come from Absa to Capitec if your pricing is 95% of theirs. If you’re 40% lower, then they look seriously at what you offer.
Analyst Anthony Clark said on your retirement that, often, companies tend not to have the same level of dynamism under a corporate culture as under an entrepreneur founder, when they leave. Do you agree?
Innovation and creativity is a culture that you instil in your organisation. So we built the bank on the basis of a team, and not a person. I’m quite confident to know that culture exists and will exist going forward because it’s part of our DNA. That lowers the risk significantly for the bank. The second part is a bit more of a frustrating one: as you grow bigger it takes longer to get things done. That becomes quite frustrating.
Were you frustrated?
Er, yes. And that is one of the reasons I retired as CEO. I believe I’m quite a creative person but I’m not patient. So if I think of a new concept I want it implemented tomorrow and in banking that’s very difficult, very challenging.
How does Capitec not become a lumbering, middle-aged entity?
It’s a mindset. I always dreamed about building a big company with a small company feel and I think we’ve achieved that. Probably the most important is for senior management to be in touch with the market. Go out, get in the car, visit your branches. We’ve got a fairly informal culture in the organisation: I could walk into a branch today and the consultant will say: “Morning Riaan, how are you?” And that fights against this corporate culture of big organisations.
Did you do surprise undercover-CEO type visits?
That’s not possible because we train all our staff centrally, and every second Thursday we have a graduation ceremony where the CEO gives a speech and then mixes with the new recruits. If there’s a relaxed atmosphere where your staff don’t fear management – I would want them to see that I have a different responsibility, but I’m not at a different level – then it’s easy for me to communicate with my staff.
We’ve had a big advantage over the established players in that the management team designed the core of the bank model and basically all our systems. So you’ve got a good idea of the detail of what our consultants deal with. If they’ve got a question and I can’t deal with it, it’ll take one telephone call to one other person and I will solve the problem.
Are you worried about the new contenders?
I’m not worried, I’m not concerned, but I’m not relaxed at all. The biggest mistake one can make is to underestimate new entrants. But banking is a lot more complicated than it looks from the outside.
What are some of those complications?
If you make a mistake it’s all for your account. If you duplicate your salary run, the money’s gone. Your business is 24/7 open-heart surgery: you can never close business for one hour and say I want to make changes to my system or I’ve got a problem. It is a very high risk industry with a very high level of expectation.
Will you keep your shareholding in Capitec?
Yes. I’ve got a lot of confidence in the business model and the potential of the bank.
I’ve spent a few years developing this place [Hidden Valley] into a world-class wine farm but I won’t say it’s a passion of mine. I like what I did but my next focus is a new business we started three years back that manufactures and installs kitchens. Architecture and interiors have always been a sort of a passion so we built a factory and equipped it – mainly aimed at the limited-space market. I’ve got no hobbies, I don’t read, so I need to work (laughs).