Cape Town – Capitec CEO Gerrie Fourie opened up over a variety of issues last week, including the impact the old African Bank had on Capitec, as well as why he believes the bank was wrong not to challenge the only court loss the bank has had.
Fourie, speaking outside Cape Town after the bank's annual general meeting, also spoke about Capitec's strong stance on why it had closed over 2 000 MMM bank accounts.
Lost court case
Regarding a court case Capitec [JSE:CPI] lost in 2013 over reckless lending, Fourie said the bank was probably wrong not to appeal the ruling, especially as the media is now “sensationalising the issue”.
He said that out of 47 cases, Capitec has lost one. “On that particular case (where an Ulundi branch employee allegedly did not conduct an adequate credit assessment), we had to make a call: do we appeal it, because we believe we did it right?
“We decided the legal costs (were) going to be much more than just writing off the loan. That’s the decision we made then, and it was probably the wrong one if you look at the media sensation.”
Fourie said Capitec employs 11 000 people and “someone, somewhere is going to make a mistake”.
“Our approach if something like that happens is take it on the chin, write it off and carry on.”
WATCH: Fourie speaks about the lost court case and financial literacy
Not here for a quick buck
The heat is back on Capitec after consumer watchdog Summit Financial Partners launched a court case in Stellenbosch over the same issue in May.
Fourie told Bloomberg: “We’re not payday lenders”, adding that he was “confident we can win against Summit, but we’re worried about reputational damage”.
Summit filed papers in Cape Town’s High Court and the Magistrates Court in Stellenbosch, saying Capitec breached the National Credit Act.
It focused on the bank’s multi loans and its alleged refusal to supply paperwork when requested to do so by clients.
Fourie told Fin24 that Capitec was not in the banking industry to make a quick buck and will aim to prove that in court.
“Hopefully, we will show our client base that we are doing the right thing,” he said. “That emphasis on building a long-term company (is important). We are not here for a short-term, quick buck, type of attitude. For us, we need to comply.”
He said there are a lot of facts being reported regarding the case that are not correct, “but that will come out in the court case”.
WATCH: Compliance division has 40 employees, says Fourie
Life after demise of African Bank
Fourie said the collapse of African Bank in 2014 forced Capitec to explain how it was different to the failed bank.
“Before the demise of African Bank, we always struggled to explain the differences between ourselves and African Bank,” he said. “I think the one good thing is people now understand the differences.
“When I saw asset managers before African Bank, I would spend 50 min on African Bank and 10 min on our bank. Now I am spending 50 min on Capitec and 10 min on African Bank. It’s positive, because we believe we must spend our energy building our own bank and where we want to go.”
WATCH: Capitec CEO’s view on Big 5 banks
Too much focus outside SA, says Fourie
Regarding the political uncertainty facing South Africa’s economy, Fourie said he was concerned that business leaders were taking their eyes off the local market.
“The economy is troublesome, because you would prefer to have people focusing on South Africa,” he said.
He said 10 years ago, CEOs spent 90% of the focus on South Africa and now they are “spending 70% of their focus outside South Africa and 30% on South Africa”.
“We need to create that environment that our business people actually spend the majority of their energy in South Africa and build up this beautiful country,” he said.
The rise of Capitec
Capitec was recently crowned the best bank in the world by international banking advisory group Lafferty in its inaugural 2016 Bank Quality Rankings. Locally, the bank was ranked SA’s best bank for the fourth year running by the SA Customer Satisfaction Index (SACsi) - both in terms of how consumers experience its quality of service and value for money offered.
Financial Mail reported in May that “those investors who had the foresight to stick R10 000 into Capitec shares when it listed in 2002 (at R1.80/share) would now have more than R4.7m (dividends included) — a dizzying 46,900% return.”
Asked why that is, Fourie said “we believe it’s not one thing, we believe it’s a combination of a couple of things”.
“It the positioning of our brand, it’s our accessibility of our branches, … it’s our pricing of our products.. it’s our simplicity of our product… and the fact that we do side-by-side consulting.”
WATCH: Why Capitec is doing so well