At the start of 2018, Capitec Bank and its CEO Gerrie Fourie were riding high on a wave of success. In 17 years of existence, the South African bank had racked up a trove of accolades, being named the best bank in the world by international banking advisory group Lafferty two years in a row and placed in the top 100 companies in the world by The Sunday Times. Capitec’s outspoken commitment to customer satisfaction and its simplification of clients’ banking experience appeared to place the bank in an unshakable position. But then, without warning, the company was thrust to the brink of disaster. That January, the bank came under a vicious attack by a shadowy short-selling firm known as Viceroy, which released a report accusing Capitec of “reckless lending” in an apparent attempt to turn a profit on its own sales of Capitec shares. Capitec’s share value plummeted by 25% – a savage blow to a company that had so carefully cultivated the public’s trust. Fortunately, it was that trust that shielded Capitec from the assault when a corps of credible allies rallied to the bank’s defense. The South African Reserve Bank denounced Viceroy’s report as “reckless” and “not acting in the public interest nor in the interest of financial stability in South Africa”.

“I think it was a significant achievement for us to go through an attack by a short-seller and then to make certain that the confidence from clients, media, analysts and investors was still there, and to be supported by the Reserve Bank and the Treasury,” says Gerrie, who describes this experience as one of the “most trying” during his tenure at Capitec’s helm. Capitec’s nimble escape from the jaws of a malicious predator has made the company stronger, launching a period of growth, expansion and innovation that has carried the company to new heights.

“We’ve really taken off in the last couple of months,” Gerrie says. “We acquired more than a million clients, so I think that is a big tribute to the brand and the client service that we offer.”

In the year up to February 2019, Capitec boasted a client base growth of 15%, up to a total of 11.4 million clients, with 127,000 newcomers per month, plus 19% growth in earnings per share. “If you look at South Africa, where the economy is really under pressure, I think to be able to grow at 19% is an incredible achievement,” Gerrie says. Today, Capitec faces more predictable challenges, such as competition from upstart entrants into the banking market, particularly those with a focus on digital banking. To stay ahead of the pack, the company has deployed a strategy that combines the bank’s longstanding values with modern insights. “With new entrants coming into the market, we need a combination of a very strong digital component – a digital banking platform where you can work with the client – as well as a very strong branch infrastructure and the ability to communicate with our clients to help them bank better,” Gerrie explains. “We’re still opening branches while in South Africa, in general, they’re closing.” Every decision that goes into the design of Capitec’s branches, many of which serve remote, rural communities, is guided by the bank’s slogan: ‘Simplicity is the ultimate sophistication’. Banking with Capitec is further simplified by the fact that the bank offers only a single personal banking product to all its customers, regardless of their income – the Global One account – which includes a flat and affordable fee structure for a variety of transactions. “A great focus for us has been removing the friction from the client’s life. We are constantly on the lookout for areas of friction, so we can make it easier and more affordable for them,” Gerrie says.

Ensuring that a staff of 14,000 people are all committed to eliminating friction and serving the needs of each particular client has been no small feat, but Gerrie says Capitec’s success in this department has been facilitated by his recent decision to formally define the company’s culture. “We operated for 18 years before we actually defined our culture, but when we started reflecting on it, we realised that it’s not about results such as driving the share price. Instead, it’s all about delivering on the client’s needs,” he says. Gerrie cultivates this culture through a leadership philosophy he calls “understanding the why”. “Most theories about leadership are needlessly complicated. Ultimately, to keep people inspired, all you have to do is make sure they understand the reason behind what they’re doing. The moment a team member understands why – what is expected of them when it must be done, and how it fits into the functioning of a large organisation – they will do it with passion,” Gerrie says. “Passion comes from the understanding that you’re really making a difference.” For Gerrie, fine-tuning systems and improving people’s experiences is a never-ending project.

As often as he can, he steps out of his office in a Western Cape science park and visits Capitec’s far- flung branches “to understand what’s really happening on the floor”. Over the course of several days, he and other executives spend quality time with clients, consultants and branch managers, and take notes on what they need and how their lives could be improved. “When we come back, we’re so inspired by what our people have done and by how much more we can do,” Gerrie says. “It’s nice to be in an office, and we think we know what’s happening, but the real thing is to be out there and connect with your clients and your staff. Then we can come back and say: ‘What can we do better?’”

Q.1.1

Discuss charismatic leadership and whether you believe Gerrie Fourie can be described as a charismatic leader. Reference to the case study must be made as well as additional research on charismatic leadership, Capitec and Gerrie Fourie are required.

Q.1.2

Using the information in the case study as well as by conducting additional research, analyse the remote/macro environment of Capitec.

How the following liabilities are to be shown on the liability side of the balance sheet in the order of permanence? 1. Current liabilities and provisions 2. Secured loans 3. Share capital 4. Unsecured loans 5. Reserves and surplus