HomeBusiness DigestThe Human Capital Telescope: Tapping the unbanked: Lessons from Capitec...

Can 2010 be Zim’s Year of Redemption, Salvation?

The bank has earned the distinction in the South African banking fraternity of posting an impressive set of financial results at the height of the global financial crisis in 2009, during a time South Africa’s big four banks turned out lacklustre results. In the six months to August 2009, at the peak of the global financial crisis, Capitec’s headline earnings per share rose by 48%. They even declared a dividend, girded by a healthy Return on Equity of 28%.

Capitec’s most recent performance dwarfs our own big four banks combined! In the six months to August 2011, Capitec earned an equivalent of US$325 million in lending and US$45 million in transaction fees (bank fees). In sharp contrast to Capitec, most banks in Zimbabwe in 2011 earned more from bank fees than from lending, with one banking outfit earning 7 times more from bank fees than from lending.  

Aspiring and incumbent entrepreneurs can benefit from studying some of the Capitec founders’ innovative thinking patterns and processes below.


Out-of-industry thinking

What could possibly be a common trait between Eugene Ferkauf, a US World War II veteran who pioneered the idea of discount stores in 1948, and Riaan Stassen, the founding CEO of Capitec? Both wriggled out of their industries’ thinking boxes.

Ferkauf, through his EJ Korvette discount stores, would offer consumers a vast assortment of merchandise under one roof at prices 10%-40% below retail norms. Ferkauf turned to consumer cooperatives for ideas, launching a massive programme to distribute membership cards to the public. Thus Ferkauf  succeeded in portraying his EJ Korvette stores as a ‘consumer cooperative’ that could legitimately offer discounted prices to its ‘members’, in the process circumventing the US’s Robinson-Patman Act that outlawed discounting practices, much to the chagrin of variety stores such as Macy, who filed, albeit unsuccessful lawsuits against EJ Korvette.

Like Ferkauf, Riaan Stassen and his fellow strategists at Capitec looked to the mass liquor industry for ideas to shape their innovative banking model. Many of the founders of Capitec had worked at Distell, the liquor entity that had thrived by targeting the black community during the apartheid era. More than half of Distell’s revenues were  generated in black townships, despite the strict liquor laws prevailing then.


Distell was thriving on a high volume low-pricing strategy to generate massive revenues. Stassen and company were convinced that they could introduce Distell’s high volume low-pricing strategy to banking. Using experience garnered from Distell’s mass-based business, Capitec gathered information to find out the complaints, both the unbanked and dissatisfied banking clients had about banks. First, people complained about what they felt were very huge transaction costs (bank fees), including hidden charges.


This sounds like our own Zimbabwean banking story, doesn’t it?  Second, people thought that the banking products were too complex to understand — the ordinary people did not understand the almost esoteric terms such as effective interest rates.  In simple terms, potential customers wanted straightforward and simple banking products supported by ‘reasonable’ bank fees.  

Thus Capitec knew the unique value proposition to customers would be simplicity and affordability. In fact, Capitec, as a matter of policy, do not define their customers according to income, but according to the fundamental need customers yearn for.

Chulu is a management consultant and business strategist. Let’s discuss at brettchulu@consultant.com

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