The $200-Million Pioneer Who Changed The Way Africans Bank

Published 9 years ago
The $200-Million Pioneer Who Changed The Way Africans Bank

He’s slowing down now, but with Paul Harris you can tell; time is money. He doesn’t look much like a multimillionaire, but on this Thursday morning the banker, with piercing blue eyes and a hint of power behind a firm handshake, is one of the brains of Africa, who wears his eminence and his fortune of around $200 million lightly.

“I suppose I stumbled into it. I went to Stellenbosch University and my interest was in sport. I had a sports bursary for cricket and rugby. I ended up becoming intrigued in studying and ended up coming out with a Master’s degree in Commerce.”

These were the first steps, in the right place at the right time, for Paul Harris, the unassuming man who built fortune on banking and bright ideas. He, along with two other millionaires, his university friend GT Ferreira and colleague Laurie Dippenaar, took $10,000 and forged the $2.1 billion FirstRand empire, the largest bank in South Africa, by market value, according to Reuters.


You could say Harris is: the father of FirstRand; the grandfather of Rand Merchant Bank Holdings (RMBH); and the great grandfather of First National Bank (FNB), OUTsurance and Discovery Health –all pillars of South African business.

“A lot of tech in Africa has been quite far behind the developing world. But the new wave of the world, the internet and mobile, has enabled Africa to leapfrog. The opportunities lie in using technology in creating different business models. The African can go into industries that have been doing something from the 1980s and in one shot update them into [the 21st century],” says Harris.

Harris has grown a thick skin in 37 years of business; he had to. He battled through the 2008 financial crisis, cricket scandals – which really hurt – and a public spat with an Australian pen pal named Jeff. On this bright bustling spring morning, amid the affluent sparkling skyscrapers of Sandton, he held forth with a masterclass for young entrepreneurs.


“Young people should know something about everything and everything about something. You must find areas you are obsessed about and must become the world expert in that particular field,” he says.

Harris takes his cellphone in his left hand.

“This thing put the man on the moon. There is so much space for African entrepreneurs to re-engineer business.”

It’s hard to believe that this man, in a plain blue collared shirt and black pants, who calls himself an unemployed former investment banker, is a multimillionaire and one of the most influential minds in Africa.


It’s a journey that began way back in 1977. It was a time when people went to discos to listen to Rod Stewart’s Tonight’s The Night; Star Wars was in the cinemas and the force was with the rand, which was worth a dollar. In this year: Dippenaar, Ferreira and Pat Goss left their safe banking jobs to set up Rand Consolidated Investments (RCI), with $10,000 and a secretary.

Eight months later, Harris, who worked with Dippenaar at the Industrial Development Corporation (IDC), a South African government institution that bankrolls industrialization, was a last minute substitution; called on when Goss left the company.

“When you start as a new business the thing you need to do is get the next deal done, you have to pay your bills, you have to work really hard at surviving; exploiting the opportunities that come your way,” he says.

Opportunity knocked after four hard years in the trenches. RCI grew from $10,000 capital to profit, after tax, of $48,000 (R657,000).


“Everything we really did was start-up, and then we acquired some companies. It was always a new way of doing things. It was always a new approach. We grew from being a very small group of guys to become huge.”

In 1983, six years into the business, billionaire Johann Rupert, the fourth richest man in Africa, whose family is worth $6.3 billion according to FORBES, approached the group of guys to sell his bank, Rand Merchant Bank (RMB). Rupert was going back to the family business, Rembrandt Group, that sold everything from luxury watches to cigars; he needed to offload.

The opportunity was too good to miss. RCI sold into RMB and got a controlling stake of the company, which they named RMBH; RMB remained a subsidiary. The deal gave Harris and the guys a banking license. By 1988, RMBH was making profits of $964,000 (R13.5 million) a year.

Harris set off for Sydney to set up another subsidiary, Australian Gilt Securities, now RMB Australia. By the time he returned to African shores, in 1991, he had a burning desire to implement lessons learned abroad.


In 1992, the company bought Momentum Life, a life insurance company that formed Discovery Health, now the largest private healthcare company in South Africa. In 1998, it added Southern Life and First National Bank (FNB), bought from Anglo American.

RMBH needed to raise $370 million (R5 billion) in new capital in order to seal the Southern Life deal. Harris and his crew did it in two days.

“Funnily enough I don’t think about that too often. It was quite a compelling proposition and it made a lot of sense. I don’t remember that as being hugely stressful,” says Harris.

Stress or not, FirstRand was born.


“It’s only after you have got some more stability that you start looking at bigger things. Once we got into that mode, we started to get people around us as partners. The opportunities were painted on a bigger canvas,” says Harris.

The 1998 merger with FNB promised greater things. Harris didn’t just want to own banks, he also wanted to change the way people used them. Along came the means, the internet.

“There was no doubt that we were pioneers… It was the early 1980s when I first heard about [the internet] from a chap we did business with in Chicago. One of the guys that was very involved in our option trading. I didn’t understand it for about five years. He used to talk about these network computers that you can access. I didn’t get it at all.”

“In the nineties, you would go to a board meeting; people would say ‘what’s the internet?’. I then went and registered this proposal called Cyberbank. We put together a small team. They used the internet in the business under the name Origin. It eventually became RMB Private Bank. Right from that stage we were into the internet.”

“I still don’t fully understand [the internet]. It really helped that I hooked up early on with Michael Jordaan. I mean he was my PA. He is an incredibly sharp guy. We liked this concept of using the internet, using mobile phones.”

Jordaan is a success in his own right. A venture capitalist and wine enthusiast who started his life as an officer in the South African navy, went on to build Montegray Capital. He also was the Chairman of social media platform Mxit; the CEO of FNB; and is an Executive Committee Member of FirstRand.

“[Harris is] always the lateral thinker who comes up with a range of new and unconventional ideas. At first this could be very frustrating if you interpret them as instructions; as would be the case in an autocratic environment. Over time you learn that his ideas as not orders but the start of a rigorous debate about what is possible and practical. If you engage properly the outcome was inevitably better than the conventional resolution. But it took guts to debate with Paul,” says Jordaan.

Jordaan first crossed paths with Harris in an interview for the self-starter workshop Class Of spearheaded by Harris in the 1990s.

“I had researched the bank so well that I could even quote Paul in some of the questions that were asked. Nevertheless I felt completely unprepared. RMB had an open bar on Fridays after work. Paul would work the crowd and I was mildly terrified of whatever questions he would ask of me. So I had a strategy of always having some questions prepared for him should he join our group,” says Jordaan.

“One day in a passage, in the old RMB building, he asked if I would become his Executive Assistant. I was bowled over and could not say no. It ended up as a hugely valuable part of my career, learning how a bank was run by being in close contact with one of the founders,” says Jordaan.

Harris’ vast office in Sandton speaks of the man. His desk is surrounded by paintings and sculptures from African artists, his bookcase lined with cricket books and photographs of him shaking hands with the strong and powerful. It is a world away from the simple farm home in Greytown, in the KwaZulu-Natal province, where he grew up on peanut butter and bread. He left home at the age of eight to go to Maritzburg College, 77 kilometers away in Pietermaritzburg, coming home at weekends.

“We grew up fairly modestly. I think the first time I was ever on a train was when I was chosen to play for Natal in rugby as a school boy. It was the first time I was ever out of Natal,” he says

“I went to Stellenbosch speaking only English and came out speaking Afrikaans fully.”

It led to a life of gadgets, golf and art, a far cry from peanut butter.

The ideas that changed African banking came in offices like this. It took eight years to convince hundreds of millions of Africans to use their phones rather than a bank teller.

“We said we needed to have a land grab… Very early on we saw [banking] was going to go mobile. We always said banking was going to be electronic and on the internet. People don’t realize this but when was the first iPad sold? In 2010. The iPad is only five years old. It’s a phenomenal story. We always said internet banking was going to be a big thing. That’s why we had Cyberbank and made a big push for it. Mobility only came in in the last five or six years,” he says.

The crowning glory was eBucks – the loyalty reward system that gives discounts and money to customers every time they swipe.

In the life of an African entrepreneur it’s amazing how often ideas that make millions start at odd times in strange places. In Harris’s case, eBucks hit like a bolt from the blue to the crash of waves in Plettenburg Bay, on South Africa’s east coast, on his Christmas holiday. He was supposed to be resting at the time.

“I clicked. I sat down and then I wrote a strategic document on how this thing could work. I still have the document. And we pretty much still follow it. A team of thinkers built the product and the rest is history.”

“If you are in the business of ideas, you have to accept that to get a good idea you have to have a lot of bad ideas. People have to understand that’s what you are. You aren’t the oracle of all wisdom. But you have to create the idea, but you also have to evolve the idea and take it to the next level.”

In 37 years at the helm, Harris has learned to run with the great and the good taking a few kicks along the way. His hardest kick was the 2008 financial crisis. It hit FirstRand like a hammer destroying R1.4 billion (around $100 million) in overseas earnings.

“If you were to take a plot of any financial index; it was almost impossible to conceive that the drop could be so dramatic. Equity markets went from a factor of a hundred to a factor of ten. Banks that were capitalized at hundreds of billions of dollars were suddenly worth nothing.”

“I woke up and on one specific day and FirstRand had a bigger market cap than Citigroup bank. That was the most terrifying day of my life when I just realized this huge bank had just now become smaller than us. All I could think of was this is going to happen to us. We didn’t have the infrastructure like theirs.”

In 2008, it was happening to anyone who had money. The United States (US), built on the shifting sands of sub-prime mortgage-backed securities on US property price estimates, sank. Banks like Citi, the largest bank in the world at the time, realized they had overextended credit and couldn’t pay the people back.

“The reason there was a crash was because there was a lot of things that slipped into the system that was ill discipline. People were buying things they should’ve been buying. From our perspective we survived it. At our worst, our return on capital was higher than our competitors. It was the worst year that we ever had,” says Harris.

“We were hit, but we weren’t dealt a mortal blow. We had a very good diversification. I’ll never forget the presentation we had to make to our board members. I had to make it. I still have the YouTube clip. And I said ‘big s*** is coming’, we had to take drastic measures.”

Harris took a bearish approach to the markets.

“From our perspective we survived [2008]. At our worst, our return on capital was higher than our competitors. It was the worst year that we ever had… We were seen as being extremely negative. I must say we didn’t get very good press about it. But hindsight says we recognized the problems and we immediately did something about it. That’s why we came out of it much quicker than the others. The others hung around for a while and hoped for the best,” says Harris.

It was a hard lesson to learn.

“It’s like a sportsman. You put on weight and you get a little unfit and one day you get found out. That’s what happened to the financial world.”

And speaking of sports: Harris had to make some more painful decisions for the sake of the game he loves.

He played an important role in exposing a R4.7-million ($671,428) bonus scandal involving Gerald Majola, the CEO of Cricket South Africa (CSA), in the wake of the 2009 Indian Premier League (IPL) in South Africa.

“I was involved in a public thing where effectively I was chairman of the remuneration committee. There were dodgy things going on with the IPL. I was the one that objected and set off this whole process which eventually ended with the CEO being fired,” he says.

Harris, an independent director on the board’s remuneration committee, objected to CSA handing out bonuses to 40 people. The president of CSA, Mtutuzeli Nyoka, ordered an audit of the bonuses but was dismissed by his board through a vote of no confidence. The board also pushed out Harris and Hentie van Wyk, the board’s treasurer.

Nyoka wrote a book on how he fought for three years to see justice. In 2012, after a series of investigations, Majola was suspended.

“It shook the foundations of my life. I was plagued by so many emotions and sentiments, anxieties and fears. It was a significant event in cricket, there was a deep resonance in the rest of society,” says Nyoka.

Battered and bruised, Harris has also locked horns with an Australian pen pal named Jeff. Jeff, who sent Harris a number of articles that put South Africa in a bad light, never expected the response he got; a letter from Harris promoting it.

It read: “I often get e-mails like this from “concerned friends” worried about us, which is sweet of you guys. Of course we are concerned. Some worrying things have happened but we have been through and survived much worse in much more volatile environments. Including the Boer War, two World Wars, apartheid, the financial crisis without a bank bailout, the rinderpest, Ge Korsten and Die Antwoord!”

“…My message is, please don’t stress about us in South Africa. We are fine. We are cool. We know we live in the most beautiful country in the world with warm and vibrant people. There are more people here with smiles on their faces than in any country I have ever been to…”

The letter went viral.

So did Jeff’s response:

“Kids don’t get text books, pregnant women sleep on the floors of ill equipped public hospitals, tenderpreneurs keep the luxury car market buoyant but fail to build the roads they were contracted to… it’s a farce mate. And I won’t even mention the succession of dodgy police chiefs you’ve suffered. So please Paul, take off those expensive rose tinted specs of yours, smell the raw sewage and stop pretending you have a functioning government…”

Harris backs what he said in his letter.

“What I wrote is what I feel. It’s all in there. I think South Africa has got a hell of a lot going for it and you mustn’t let that get on top of you,” he says.

The future? Harris has teamed up with his daughter and son to venture into property, asset management, solar technology and sponsoring education projects. You could say Harris has started again. He argues any entrepreneur, young or old, has a mountain to climb for success.

“We worked incredibly hard. Sometimes I look at young entrepreneurs and I think it’s not possible to be one and have a balanced life… forget having a nine to five. The sad thing is a large proportion is going to fail, we know that statistically. The ones that are going to make are the ones that have got resilience, that are prepared to overcome incredible obstacles. And obviously have a good idea and work ethic,” says Harris.

According to Harris, entrepreneurism is even riskier if you don’t understand the market.

“I always say young people should know something about everything and everything about something. You must find an area you are obsessed about and must become the world expert in that particular field. If you just know a little about something and then go into a market and compete, unless you know more about that niche than the next guy, forget about it.”

“Wherever we have gone it’s always been grassroots and a new approach to something. Innovation and change is what we are all about.”

So says the farm boy who grew up in the middle of nowhere, who got somewhere, survived the 2008 financial crisis, and changed the way Africans bank.