Business in Africa has never been rougher, drop your guard for a second and chances are the new kid on the block will poleaxe you with a right hook. Just ask entrepreneur Adrian Gore, the founder of the $6.5-billion Discovery Limited, who built his empire by turning the health insurance industry on its head.
Now Gore has set his right hook on the banking industry with the launch of a $105-million bank. Just another day in the life of a man who takes a look at a market to see how he can disrupt it.
“It’s been a remarkable 25 years. It doesn’t feel like it. If you build a business and find the organization ages better than you do, then Discovery feels brand new… We are always immersed. No one is sitting here in the boardroom drinking cognac thinking about the past. We are humble because we are building, it’s like day one here,” says Gore.
Gore is seen as an innovator in Africa with plenty to say. This vision has seen the self-taught entrepreneur, and actuary by profession, work his way to a $522 million fortune. It’s a far cry from 1992 when Gore was the hungry new kid on the block tying on his gloves in the far corner.
“It started out as this anecdotally opportunistic idea, and as soon as we did it we knew, s*** this is big. This has got great potential.”
The key to Gore’s success was the idea to reward people for looking after their bodies.
“Health and life insurance are typically grudge purchases. Our fundamental success in this market has been making health insurance sexy, cool, accessible and different,” says Gore.
These days, one in every three South Africans put their money down in the hope of reward. It’s made Discovery the largest supplier of medical aid in the country.
This is just the beginning of a global network that has expanded into 16 countries, including the United Kingdom, United States, Singapore and Australia. Ultimately it leads to one thing: making 10 million people healthier by 2018.
“I believe that it is often during moments of difficulty that the best ideas emerge. Times of crisis can often lead to progress, and hard economic times can be a catalyst for positive change. When we started Discovery in 1992, the country was in a state of political turmoil. We saw an opportunity to create a business that could positively impact the healthcare system and we found a way to move forward.”
BANKING ON DISRUPTION
If you want to bank on something, it should be on Discovery disrupting business. Now Gore believes he can do the same in banking.
“We don’t disrupt for the sake of it. We don’t sit and think ‘how do you disrupt?’ Most markets are not based on behavioral issues. They are not based on the model we’ve developed, so when we come in and we do it right it, by nature, is disruptive,” says Gore.
In 25 years, Discovery’s share price on the largest bourse in Africa, the Johannesburg Stock Exchange, has gone from R10 ($0.70) to almost R150 ($10.40) – an inflow of shareholders’ money that is helping Discovery Bank Limited take advantage of its new banking license. It could be open as early next year pending the Competition Commission’s approval.
“We’ve never made an acquisition here, everything here has been organic. We’ll probably invest, in total, by the launch, R1.5 billion ($105 million). It’s a considerable build,” says Gore.
In Africa’s economically challenging times, everyone is looking for better ways to save their hard-earned bucks.
“We’ve been working on it for two years now, with a good team and very strong people… it’s not an easy thing to do. I’m not sure there is an excellent time to do it. I think it will take a decade long to develop something that has materiality in that space… We came to the conclusion, given our technology and being given the ability to start our own legacy, we said let’s start it slower and proper.”
Gore is playing his cards close to his chest. He has said little about how he intends to integrate banking with his other businesses. What we do know is that he will set his sights on the rising middle class.
At the center of it all is his team of Apple-watch-wielding actuaries, who will also need to come up with something so that the business can stand out in the crowd. It’s a tough crowd too. The territory is already held by heavyweight banks who’ve been there for generations, like Standard Bank, Absa, FNB, Nedbank, and Investec. They also want to modernize and make use of big data.
“We’re not going into a weak market where the banks are useless, that they need to be shaken up. I don’t believe that at all. My sense, anecdotally, I think they are worried. I think they think we will be disruptive. I think they have a healthy respect for us. But there is no panic here. No hubris here,” says Gore.
“We’re going to target the mass affluent. We’re going where our customers are. So it’s pretty broad. It goes from a fairly low LSM to a high one. Our approach is not to focus on [the banks]. We need to focus on our customers.”
The bank has got a lot of people talking. As South Africa grapples with its rocky economy, that faces possible ratings downgrades which could send stock prices tumbling, the markets are looking for something to shake things up, says Michael Treherne, a portfolio manager at Vestact.
“The banking sector is ready for disruption. Capitec has done this for the lower LSM customer base and Discovery will be looking to use their huge database on behavior traits to disrupt the top-end LSM. As the saying goes though, the proof is in the pudding,” says Treherne.
“They offer a product that is unique globally. Their massive database is the moat between them and competitors. Also, their white-labelling strategy of selling their intellectual property and not needing to put in capital upfront means they can grow very quickly.”
Over the long term, Treherne believes Discovery will be able to weather the storm.
Another market commentator, Chantal Marx, Head of Research at FNB Securities, also backs the company.
“[Gore] is the ideal guy to be at the front of the businesses challenging the status quo and changing the face of insurance…They have revolutionized the way companies see their clients. I think they will compete with banks like Investec and the private banking offerings by the big four. If they can get people to be sticky and put their entire financial portfolio together, it’s where Discovery will make their money.”
The only problem, Marx says, is Discovery is seen as pricey.
“The expectation of growth relative to someone like Sanlam doesn’t justify the premium. But I think investors are willing to pay a little bit more for their innovation slant.”
Meanwhile, Gore backs himself by having no investments other than his shares in Discovery.
From a young age, Gore learned business by doing.
“Ironically [my father] was a tobacconist wholesaler. He would sell cigarettes and candies between wholesalers and stores. I remember as a kid having to pack cigarettes, I remember all the brands, Lexington and Rothmans, and having to take them out to the café owners. It was actually an interesting business because as time went on the margins got squeezed and wholesalers started supplying to businesses directly.”
“[My father] is essentially an academic at heart. He hated business. When he retired he went and did a bunch of degrees. He never stopped learning, so I grew up with a belief that knowledge and learning is more important than anything.”
From his mother, Gore learned to push himself towards the intellectual forefront. He grew up in a household where discussions around the dinner table involved questioning the ‘way things are’.
“You never kind of accepted that that was how it is and that’s the way it’s expected to be. In my own journey, my own career, it’s been one of my biggest assets; don’t take things at face value. I just don’t.”
“My parents are not essentially commercial people. They are not excited by scale or profit. They are excited by values and doing good,” says Gore.
BUILDING ON BEHAVIOUR CHANGE
Building healthy lifestyles has been the key to Discovery’s success. Under Vitality’s Shared-Value Insurance model, Discovery rewards clients that regularly go to the gym, eat their vegetables and do their medical checkups. Clients are then given free smoothies and discounts on healthy food, cheap flights, and Apple watches.
The model was born in 1992, when the Health and Racquet Group, who later became Virgin Active, approached Gore to see if they could cross-sell into their base. Gore and his team came back and said why don’t we give people health miles and reward them for living healthier lifestyles with discounted memberships.
“Discovery’s entire investment case is premised on that one brilliant original idea which is Vitality. If you look at Vitality, what it basically did was revolutionize the way insurers look at their clients and the way they made risk on their book… What Vitality did is essentially place the risk management outside of the company and what the actuaries do and put it in the hands of the insurers they are insuring,” says Marx.
“Suddenly they have a better persistence; people aren’t lapsing their policies or moving around. They’ve got sticky clientele who are living longer, happier lives. So, the amount of claims they have to pay out are less on the medical health side and on the life insurance side the longer someone stays alive the better it is for the company, because they can continue to invest and build on their investments.”
Two aspects enabled the success of the model, says Gore. The first is technology, the second is understanding risk is behavioral.
What Vitality has become is unexpected. Gore says it is now the world’s largest scientific, incentive-based wellness solution – this is all thanks to terabytes of data its users send every time they update their apps.
Vitality Active Rewards has found that those that use the app increase their exercise levels on average by 24%, and those using Apple Watch increase their activity sustainably by an average of 81%.
“When I started out, companies had mission statements like ‘we endeavor to make shareholders rich’. Our idea was of making people healthier. We were seen as being mad. But today we see now, since 2008, a sense of purpose is what appeals to people,” says Gore.
“In our case, there is a massive spend on technology. A lot of it is on enterprise stuff, the core. In the case of Vitality we have invested hugely in technology to be able to globalize it.”
Utilizing innovative technology has become the forte of the Discovery team. Underpinning this is using big data, which Gore admits to being skeptical about.
“I don’t think data in and of itself is this nirvana. I mean using A.I. and machine learning, it’s powerful stuff, but it’s the application. The shared-value model, I think, is where we are powerful. I think it’s the DNA and it understanding it through the data, and sharing how people respond is a very powerful thing,” says Gore.
“A.I., without romanticizing it too much, has given us the ability to crunch the data, without upsetting the hypothesis. Overseas we are learning more and more how to use it. In the UK we are using it to help with our pricing,” says Gore.
In a world where Africa is China’s happy hunting investment ground, Gore is heading the hunt in the opposite direction. With 3.7 million customers in China, Discovery has a 25% stake in Ping An Health Insurance, the country’s largest private health insurer; 2016 saw membership grow by 428%.
“The growth is staggering. It’s something we’ve never seen before. I still think it’s early. These things take seven to 10 years. It takes time. Ping An’s relationship is seven years long, and it’s beginning to expand rapidly. Literally the last years, after we figured out the distribution channels, it’s been hugely successful,” says Gore.
“This is a massive industry in China. Ping An itself is the gold standard in China. Today it’s the most powerful and biggest insurer in the world.”
Gore’s confidence stems from the Chinese government’s plan to introduce privatized health reforms.
“We’ve typically gone into developed markets that have been commoditized and disrupted them; it’s our natural target. It’s slower going, it takes time. Ping An is more pioneering, it’s a market that’s growing, the middle class is emerging. Healthcare is becoming a bigger and bigger issue. So I hope we can continue that trend.”
In just 12 months Vitality Active Rewards, with Ping An Life, has reached 2.4 million members. To give a sense of scale, Discovery now has more people signed up in China than in South Africa.
“China remains a huge growth market, with the estimated total healthcare spend expected to rise by over 90% by 2020. Private healthcare spend is expected to grow even stronger over this period,” says Gore.
Discovery has found it difficult to take on the rest of Africa. This is mainly due to the lack of infrastructure and established private healthcare.
“The insurance space in Africa is very underdeveloped and your insurable population is small relative to the population at whole. You need to be careful about which markets you are entering in. For Discovery, it makes much more sense to invest in developed markets where you have broadband capability and most people have a smart device so that you can afford a wearable,” says Marx.
E-HEALTH LEAPFROG AND ITS CROAK
eHealth, could be the massive opportunity where private infrastructure can help solve Africa’s shortage of doctors. Africa, Gore believes, can short-circuit the shortage of doctors and expensive technology by supplementing them with eHealth developers working on apps to treat patients.
“I think we are sitting on the cusp of eHealth starting to do stuff. Through the smartwatch being able to track things more accurately, there is a whole world of stuff that’s happening,” says Gore.
Disruption has the ability to leapfrog older technologies; especially when it comes to cellphone reach in Africa. Those with keen eyes of innovation can spot ideas and gaps in the market, and create unique solutions to Africa’s needs, while at the same time being exportable.
“The interesting thing in healthcare is we haven’t seen technology bring prices down, in fact we’ve seen prices go up. A new biological drug is discovered and the prices go up… Everyone is carrying smartphones around. The ability to give care out on this basic level is an amazing opportunity,” says Gore.
Of course the health industry in his own country faces its unique challenges. The private healthcare industry is anxious to resolve the uncertainty of the South African government’s National Health Insurance (NHI) and its impact on the private sector.
The government claims 80% of South Africa’s population, that’s 40 million people, can’t afford medical aid. Their reality is waiting in massive queues from sunrise to sunset in the hope of seeing a doctor. All this while the other 20% of the people, who can afford medical aid, are treated by 70% of the country’s doctors.
“From our perspective, getting an NHI that bridges the gap and does everything that it needs is crucial. We’ve been involved where we can. I am hoping we can overcome the chasms that are between public and private healthcare.”
Many fear the NHI could be the tipping point for the country’s health system, forcing doctors to emigrate.
“It’s in a complex place at the moment, while the policy details are set and we are going along a process that is right. The details are not clear. I think funding issues are going to be critical. We don’t have the money to fund the kind of services that we need,” says Gore.
Something that could even disrupt the disruptor.
‘You Could Immediately See This Guy Was Different’
In 1992, Adrian Gore raised seed funding from Laurie Dippenaar, the cofounder of FirstRand, and founded the South African medical insurer after years of working with Liberty Life. Dippenaar, who is on the FORBES list of the 40 Richest Africans, was the man who gave Gore his shot.
“You could immediately see this guy was different. He was not the typical chartered accountant nerdy smart. You could see he had intelligence but he also had business sense, all the qualities that make you a success. I think he is actually one of the smartest businesspeople I have ever met,” says Dippenaar.
According to Dippenaar, Gore’s first pitch didn’t go well. His life insurance scheme sounded too much like all the others.
“To this day he says I got it wrong. A year later he comes up and says he’s got something completely different. From life insurance he had gone to a health insurance. He started to describe what he had in mind and I could immediately see he was onto something.”
This something was Discovery.
“When he described that medical savings account, it was a pioneer move in South Africa. I remembered when I was a bachelor and paying all these premiums for health insurance. You are young and healthy you don’t need to claim. All you do is pay premiums. Here was a product where you could carry forward some of the premiums if you were not claiming. In theory you could get into a situation where you didn’t have any premiums to pay,” says Dippenaar.
Gore left his job and Dippenaar gave him three months to draw up a business plan, in Dippenaar’s own offices.
“He never had any hesitation. He came up with the numbers. We liked it. So we backed him,” he says.
The rest is history.
Forbes Africa | 8 Years And Growing
As FORBES AFRICA celebrates eight years of showcasing African entrepreneurship, we look back on our stellar collection of cover stars, ranging from billionaires to space explorers to industrialists, self-made multi-millionaire businessmen and social entrepreneurs working for Africa. They tell us what they are doing now, how their businesses have grown, and where the continent is headed.
Since its inception in 2011, and despite the changing trends in the publishing industry, FORBES AFRICA has managed to stay relevant, insightful and sought-after, unpacking compelling stories of innovation and entrepreneurship on the youngest continent, in which 60% of the population is aged under 25 years.
Many of those innovations have been solutions-driven as young entrepreneurs across the continent seek to answer questions that have burdened their communities.
Always on the pulse, FORBES AFRICA has chronicled and celebrated those innovations – prompting the rest of the globe to pay attention and be fully engaged.
A prime example of this is the annual 30 Under 30 list, which showcases entrepreneurs and trailblazers under the age of 30 from business, technology, creatives and sports. In 2019, we had 120 entrepreneurs on the list, finalized after a rigorous vetting and due diligence process to well laid down criteria.
We have always maintained the highest standards of integrity in all our reporting.
As we transition into the next milestone, FORBES AFRICA reflects on the words of civil rights activist Benjamin Elijah Mays, who once said: “The tragedy of life is not found in failure but complacency. Not in you doing too much, but doing too little. Not in you living above your means, but below your capacity. It’s not failure but aiming too low, that is life’s greatest tragedy.”
With the transformation in the media landscape, the recent awards given to the magazine for the work done by a hard-working, determined and youthful team, serve as a reminder that we are doing something right.
Early this year, FORBES AFRICA journalist Karen Mwendera received a Sanlam award for financial journalism as the first runner-up in the ‘African Growth Story’ category. In January, FORBES AFRICA’s Managing Editor, Renuka Methil, received the ‘World Woman Super Achiever Award’ from the Global HRD Congress.
In reflecting on the last eight years, this edition revisits a few of the strong, resilient men and women who have graced our covers.
For some, fortunes have literally changed, as witnessed in the fall of gargantuan African empires such as Steinhoff. Of course, there have been massive moments of triumph too, which have seen some new names feature on the annual African Billionaires List. There have also been moments of tragedy with former cover stars passing away.
Africa is ripe for the taking and is seen as the next economic frontier. The unique position the continent finds itself in will no doubt give FORBES AFRICA plenty to report on. Here’s to more deadlines and debates for the next eight years.
– Unathi Shologu
Mastercard: Diligent About Digital In Africa
Mastercard knows only too well that technology can drive inclusive financial growth with simpler and more efficient ways to do business and life. And Raghu Malhotra, the man spearheading this trajectory in Africa, is also focused on social progress.
In many ways, Raghu Malhotra is like the brand he works for, leaving his footprints in different parts of the world, and in some cases, the most unlikely corners.
On a scorching summer’s day in June 2016, Malhotra traveled 100km east of Jordan’s capital city Amman, to a camp with white tents named Azraq built for the refugees of the Syrian Civil War.
In the desert terrain and hot, windy conditions, people had to queue for hours on end for plates of food handed out of visiting trucks. But some of them, displaced and homeless overnight, expressed their gratitude to Malhotra, President for Mastercard in the Middle East and Africa (MEA).
Mastercard, a technology company that engages in the global payments industry, had distributed e-cards, as part of a global collaboration with the World Food Programme, to the refugees that they could now use to purchase food and other supplies from local shops.
“I spoke to the people myself and saw what their lives were… Even those who were doctors with their families and were displaced… They said to me ‘you have restored dignity to our lives; you have no idea how demeaning it is to queue up to be given food’… We actually digitized how that subsidy for food was given. Some of these things go beyond economics,” says Malhotra.
That very simply sums up Malhotra’s mandate for Africa as well.
The New York-headquartered Mastercard, ranked No. 43 on Forbes’ list of the World’s Most Valuable Brands, with a market cap of $247 billion, which connects consumers, financial institutions, merchants, governments and business, is fostering key partnerships across the African continent to help drive inclusive economic growth.
The idea, Malhotra says, “is to get our global skill-set to operate in its most efficient form in every local economy, at the same time, we must do good, and it must be sustainable.”
He calls Africa the next bastion of growth for various industries.
“As a company, we have stated we are going to get 500 million new consumers globally. And Africa plays a big part of that whole story… We want to be an integral part of various economies here,” says the man responsible for driving Mastercard’s global strategy across 69 markets.
“It probably took us over 20 years to get the first 50 million new consumers, in my part of the world, which is the Middle East and Africa (MEA). It took us probably five years to get the next 50 million, and last year alone, we put over 50 million consumers [in the formal economy] in MEA. That is part of our whole African story, so this is just not rhetoric; we are actually building our business on that basis.”
Home to four of the world’s top five fastest-growing economies, Africa has the fastest urbanization rate in the world, the youngest population, and a rapidly expanding middle class predicted to increase business and consumer spending.
It’s a continent of opportunity for global players like Mastercard with an eye on the potential of a booming consumer base and small and medium entrepreneurs, most of whom are still not a part of the formal economy. A large proportion of Africa is still unbanked. There is enough business opportunity in offering people digital tools so they can lead respectable financial lives.
But it is in knowing that financial inclusion is not just about technology, but more about solving bigger problems, as the World Bank says in its overview for Africa: “Achieving higher inclusive growth and reaping the benefits of a demographic dividend will require going beyond a business as usual approach to development for Africa. Going forward, it is imperative that the region undertakes the following four actions, concurrently: invest more and better in its people; leapfrog into the 21st century digital and high-tech economy; harness private finance and know-how to fill the infrastructure gap; and build resilience to fragility and conflict and climate change.”
And in order to enable financial access, Mastercard has a balanced strategy in place, with the right partnerships for inclusive growth on the continent, Malhotra tells FORBES AFRICA.
“Every emerging market has different segments of people and you need to get the right product for the right segment. What we do is a balanced growth strategy across the continent based on timing, opportunity etc… Of course, because the bottom of the pyramid is much bigger, I think what we need is to adapt things differently; that is where the inclusive growth story comes from. That is where the opportunity is, but there is a second part to it…” And that, he summarizes, is advancing sustainable growth, doing good and bringing more transparency and efficiency.
The new pragmatic dispensation of governments in Africa towards ideas, technology and innovation has surely helped open up the stage to newer segment-driven products, especially as Africa already has such global laurels as Safaricom’s mobile money transfer and micro-financing service M-Pesa that took financial access to a whole new level. Also, sub-Saharan Africa remains one of the fastest-growing mobile markets in the world.
Malhotra says he finds African governments consistent in how they are rolling out their digital vision, and in trying to collaborate towards creating better ecosystems for their economies, though each is unique with its own dossier of problems.
“When I speak to various governments around Africa, I see a commonality of what their needs are and I also see a commonality in how they are trying to respond. So I think a lot of them realize running cash economies is a very inefficient way of doing things… Also, the consumer base is much more open to new technology because there is no bedded infrastructure or legacy infrastructure. I think where governments need to start thinking a bit more is how much do they want to do completely on their own.”
Part of this transformation on the path to financial progress is alleviating the burden of cash. Cash still accounts for most consumer payments in Africa. Mastercard, which started out as synonymous with credit cards, continues its efforts to convert consumers from cash to electronic transactions, and move beyond plastic.
Pioneer For Women In Construction Thandi Ndlovu has died
The cover of the August (Women’s Month) edition of Forbes Africa beautifully captures the essence of the woman I interviewed only a few weeks ago. Gracious, soft-spoken, brimming with life and energy. Dr Thandi Ndlovu impressed the entire Forbes crew on that afternoon cover shoot with her broad smile, and open yet powerful demeanor.
It is with great sadness that Forbes Africa heard of the accident that took her life on Saturday the 24 August 2019.
READ MORE |COVER: Feisty And Fearless Pioneers Thandi Ndlovu & Nonkululeko Gobodo
She had given so much to South Africa and its people – through the apartheid years and during the 25 years of democracy, literally building a better future, first through her medical practice at Orange Farm and then through her company, Motheo Construction Group and the scholarships for tertiary education granted by her Motheo Children’s Foundation.
That sunny winter’s afternoon, I asked her if she, at the age of 65, was considering retirement, and she laughed. A lively, amiable laugh. She told me she was healthy and strong and easily worked 12 to 13 hour days.
She loved hiking, and has climbed Kilimanjaro twice, reached the base camps of Mount Everest and Annapurna in Nepal. At the time of the interview, she was training to climb Machu Picchu, the famed ruins in Peru’s mountains.
One of her biggest passions was to make a difference in people’s lives and to motivate people to achieve the best they could. The other was to redress the racial tensions that still remained in South Africa.
Dr Thandi Ndlovu, South Africa is poorer for your passing.
-Jill De Villiers
Subscribe to Forbes
These Are The Biggest Givers On The Forbes 400
The Rage And Tears That Tore A Nation
Forbes Africa | 8 Years And Growing
How Virtual Therapy Apps Are Trying To Disrupt The Mental Health Industry
Having A Ball With Data
Brand Voice3 weeks ago
FOCUS ON CAMEROON: The Heart Of Africa Unleashing Its Potential From Within
7 Questions With...3 weeks ago
‘The One Thing I Want To Do Before I Die’
Arts4 weeks ago
Can Diddy’s Ciroc Recipe Work On Alkaline Water?
Focus4 weeks ago
How LinkedIn Is Looking To Help Close The Ever-Growing Skills Gap
Technology2 weeks ago
AI 50 Founders Say This Is What People Get Wrong About Artificial Intelligence
Entrepreneurs2 weeks ago
Owning The African Narrative
Entrepreneurs1 week ago
Having A Ball With Data
Entrepreneurs2 weeks ago
The $100 Trillion Opportunity: The Race To Provide Banking To The World’s Poor