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A Plucky David Banking On Beating Goliaths

From David and Goliath to the giant in Jack and the beanstalk; who doesn’t like the age-old story about the little guy taking on the big guy and winning? This is the story of African banking wizard, Riaan Stassen.

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On March 1, 2001, a small bank opened in South Africa with the aim of providing easy and affordable banking services to its customers. Attracted by this alluring promise, in no time people were queuing up to open a Capitec account. Today, the bank has more than four million customers; clearly CEO Riaan Stassen’s move from the liquor industry to banking has been a fortuitous one.

Born in Cape Town, Stassen earned a Bachelor in Commerce Honors degree from the University of Stellenbosch. He then did his articles and CA qualification at PricewaterhouseCoopers (PwC) before spending 14 years in the liquor industry.

The course of his career changed in 1995, when Stassen was asked to reengineer Boland Bank, a conservative regional bank established in 1900. After South African retail billionaire Christo Wiese bought Boland, it merged with Natal Building Society (NBS) and Board of Executors (BoE).

Stassen spent five years at BoE Bank, during which time he came up with a different banking concept: a retail bank for mid-to-lower income people. According to Stassen, the incumbent banks were failing in four areas: accessibility, affordability, simplicity and personal service. He left BoE with his management team and a goal to succeed where others had failed.

Stassen says that South Africa’s existing banks had never transformed to align with the cultural diversity of the country.

“So we saw that as quite a key opportunity for us to create that cement with our customer base,” he says.

Stassen and his team were approached by PSG Holdings, a company owned by South African millionaire investor Jannie Mouton, to manage PSG Specialized Lending, its micro-lending company focused on low-income customers. The name was changed to Capitec and the bank listed on the Johannesburg Stock Exchange in 2002.

It was no easy road for Capitec. The start-up capital was R250 million ($28 million), it listed with net assets of just under R400 million ($45 million), at R2 (around 2 US cents) a share. Within three months its market capitalization dropped to just under R50 million ($5.6 million).

The first few years of Capitec’s life were dedicated to developing an application platform that could handle high-volume, low-value transactions, efficiently and at a lower cost.

The system is run from Bellville—a small town just outside of Cape Town. From there the bank runs the administration that usually takes place at branch level, shifting the branch focus to its customers. The last fundamental of the technology component is the ability to conduct all processes in real time.

The bank uses fingerprint biometrics to counter fraud and is currently testing new ATMs fitted with the system. Capitec is also the first bank in South Africa to allow coin deposits at ATMs, further evidence of its focus on low-income customers.

Stassen says other South African banks are rife with high costs, lack of transparency and confusing jargon.

“We believe what a person needs from a bank is to move money, to park money and to get money,” he says.

Capitec’s solution to this is its Global One account—a single account that can be used for transactions, including online purchases, as a savings vehicle and as a way to apply for credit. Customers can get up to R230,000 ($25,700) in cash within minutes of applying for a loan. This amount is determined by an affordability assessment based on their monthly cash flow and is repayable over one to 84 months, also based on personal ability. The interest paid, 17% to 28%, also depends on the individual’s credit profile.

A big bone of contention in South Africa has been unsecured lending. In the past, borrowers were required to secure a loan with collateral. With unsecured lending, clients do not need this security, “In South Africa nowadays unsecured lending has become a swearword, and that’s absolute nonsense,” says Stassen.

He points out that as far as Capitec is concerned, it’s not about the assets a person has, but their cash flow.

“There are 20 million active credit clients in South Africa. There are 1.8 million credit clients who have any form of home finance, a mortgage grant. Only 1.8 [million]. So what are the other 18 million people doing to improve their standard of living?” asks Charl Nel, the head of strategic communications at Capitec.

Few deny the fact that South Africa, like most of the world, is a consumption-driven society as opposed to a saving one, or that defaults are part of the territory, but as it currently stands, over 95% of Capitec’s book is current. Despite citizens’ household debt often being greater than disposable income, according to Capitec’s interim results from September, its number of arrears had decreased to 4.4%.

“The profile of our credit client is definitely changing as we are seeing new credit clients with higher income levels attracted to our offer,” the interim report says.

According to a report by South Africa’s National Credit Regulator, unsecured credit in the first quarter of 2012 grew by 49.4% year-on-year. This is a rate far higher than any of the other types of credit.

Capitec has millions of customers, and Stassen attributes the bank’s success to widespread discontent with the big four banks among their customer base, as well as its strong proposition to customers. His is the first bank in South Africa to be open on Sundays, a move that persuaded one of its large competitors, Nedbank, to follow suit.

“We had to think a lot on our feet. We change things a lot. What we thought was going to work had to be changed slightly. And often in a very old, stale, established organization you get resistance and that’s dangerous because people kind of trip up the process,” says Nel.

How does the bank manage to make money and a success out of low-cost banking, especially when they have kept their prices unchanged for the past three years? As most business minds know, you can only undercut your competitors for so long before it becomes costly. Stassen says Capitec could only be priced significantly lower than their opponents if they took smaller margins or lowered their cost structure. Their solution appears to be running the bank like a production line.

“Stassen is an exceptional CEO. One of the best that I’ve come across because since he joined Capitec we’re really focused. They developed a great computer system and it’s a great success,” says Mouton.

Stassen admits that they were initially ignored by the bigger banks because they started off as a micro lending organization. When they began to look beyond this; their competitors believed their primary focus would be on the unbanked and the lower income market. Then around two years ago the more established banks started to take notice.

Capitec now has around 9% of South Africa’s banking market share and their most important objective is to attract primary banking accounts, those into which salaries are directly deposited. The bank also plans to launch a credit card at the end of this year.

The interim results stated that Capitec’s transaction fee income for the first six months of the financial year grew by 61% to R583 million ($65 million) year-on-year. Headline earnings per share grew by 35% to R7.02 ($0.80). Income from credit was R3.6 million ($403,000), which the bank says is due to growth in the unsecured credit market.

The management team at Capitec had been part of a share incentive scheme, allowing them to buy into the company. Last year, there were numerous reports and speculation as to Capitec’s health and suggestions that its captain, Stassen, was abandoning ship, and that other executives were offloading their shares too. When asked about it Stassen says: “It was very bad reporting”.

The truth of the matter is that Stassen sold most of the shares in his own name but that 95% of his investment in the bank is held by a company in his family trust. The private investment company owns more than R400 million ($44.8 million) worth of shares.

“I believe it’s extremely dangerous for executives to be over-extended to the company they run,” says Stassen.

He says this is because, when executives become over-exposed, they start making short-term decisions and manipulate numbers to protect the share price.

Last year, Capitec sought to raise funds through a rights issue, which increased the bank’s capital base by R2.25 billion ($252 million). The funds were for the extension of the branch network, with 55 to 75 new branches proposed for this year, and to increase lending.

Earlier this year PSG sold off some off its stake in Capitec to repay debt incurred in the purchasing of approximately R724 million ($81 million) from the rights issue last year. PSG’s stake in Capitec has dropped from 32.2% to 28.5%, and the company says it will not be selling off any more of its shares.

Then in February, the South African Public Prosecutor confirmed that it will launch a formal investigation into a black economic empowerment deal, from 2011, resulting in a consortium with ties to the country’s ruling party acquiring nearly R1 billion ($122 million) worth of Capitec shares. Nel says they will cooperate fully with the investigation.

Capitec is currently focusing on South Africa but will start identifying opportunities in other countries on the continent. Its long-term goal has always been to internationalize its banking model. Infrastructure is however a concern as the bank is highly reliant on technology. As the fastest growing retail bank in South Africa for individuals, winner of Africa’s Top 100 JSE Companies for the second time, forging into an under-tapped market and making the big dogs follow suit, could mean Capitec will lose its underdog title.

Goliath may not be down and out yet, but he is certainly taking notes on David.

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The Maverick In Tech

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The founder of some of Nigeria’s best-known startups on the mistakes and the millions that made him click in the technology business.


Sometimes, the simplest business ideas can come from strange places, or even strangers.

In his first year studying law at Waterloo University in Canada, Iyinoluwa Aboyeji was approached by a stranger who asked to stay in his house.

 “I was like ‘I don’t know you, you have long hair and you are white; I don’t know about this’, but I said, ‘ok cool’, and he stayed over and we became good friends.”

About a year later, Pierre, the friend, decided to head to Silicon Valley for his cooperative education term.

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“He told me about this amazing world of Silicon Valley, tech and investments, and I was sold. A few months later, we decided to start our own tech company called bookneto.com,” says Aboyeji.

It was a platform that enabled students to download past examination questions and work with a team of people at the school to help answer them.   

The company did decently for three years until it got sued by the university, but at least that marked a turning point in Aboyeji’s entrepreneurial life.

It turned out that the intellectual property for past examination questions belonged to the professors at Waterloo University, a fact that was “unknown” to the pair of entrepreneurs and they were found “guilty of piracy”. The venture was eventually sold to a professor who wanted to teach students not enrolled on campus, for a small fee.

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“We had it for three years, and by this time, I had graduated and looking for a new adventure and I was pretty sure I did not want to run another business in Canada, so I had started looking at other markets and Africa was a big one for me, Nigeria in particular,” says Aboyeji.

After graduating, he returned to Nigeria in 2013.

His proclivity for identifying opportunities inducted him into the world of massive open online courses (MOOCs). The dominant players at the time were Coursera and Udacity.

According to a report by Component, globally, the MOOCs market is estimated to hit $20.8 billion by 2023. Aboyeji wanted in. He set up a company in Abuja called Fora.com focused on incorporating MOOCs into the university environment especially for courses that were relevant but not provided by Nigerian universities due to a lack of quality resources.

“I was very naïve. I imagined that it would be a breeze to build that business and learned the hard way that anything regulated doesn’t operate rationally. So, the regulators didn’t give me any approvals and universities were skeptical and didn’t want to be laid off so it didn’t work out. We ended up pivoting that business and ended up selling online MBAs instead. Our typical clients were young bank managers who wanted to get an MBA or advanced degree courses to improve their chances of being promoted,” says Aboyeji.

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The firm began to gain some traction. People were paying for the application courses and Aboyeji decided to pilot a loan program where financial institutions would offer loans to students.

“So, we were making money but it wasn’t popping off. I went to New York with the team because we had just gotten some new funding and we had to meet the new investors. I had met a guy named Jeremy Johnson when he was in Nigeria earlier so I pinged him and told him what we wanted to do. I wanted to learn from his experiences. He agreed to meet for coffee in New York.”

During their meeting, Johnson expressed his idea about a new form of education geared towards skills rather than degrees. Aboyeji also talked about unemployment in Nigeria and how that represented a massive opportunity.

It was a match made in heaven.

“One of the things he told me was that he could not find a sales force engineer for $150,000 in New York. They just didn’t exist so I said, ‘man, I can train you sales force engineers’. And he said ‘if you decide you are going to pivot, what you are doing or adding to it… I would fund you and I will be chairman and we can do this together’. So, I said ‘someone is going to fund you to do a new business, why not’.”

Aboyeji had just stumbled on a new gold mine and Andela was born. He started with one person and began teaching him how to code. He repurposed the team from Fora into coding masters, bid masters and operational staff, and shifted the focus of Fora because they had the flexibility to do it.

“I don’t think at the time we had any idea how big what we were doing was. We did the first one, it was semi-successful, we trained the next four, which was really good. We put out a job description saying no experience required, we will pay you to learn how to program and we had over 700 applicants off Twitter and we knew we had something.”

They whittled down to about four or five people that completed that program. To find work for his new coders, Aboyeji used Upwork, the popular freelance jobsite, to bid for jobs.

“We didn’t know anybody, so we bid for jobs, executed it and before we knew it, we had about 150 people in the room. That was how the transition happened from Fora to Andela,” says Aboyeji.

The company has since gone on to raise $180 million in venture funding from the likes of Mark Zuckerberg and other notable investors from Silicon Valley. Aboyeji left the company after three years in search of his next adventure but is still a major shareholder in Andela.

That voyage led him to co-found Flutterwave, an integrated payments platform for Africans to make and accept any payment, anywhere from across Africa and around the world. Under his watch, the company processed 100 million transactions worth $2.5 billion.

Turning his eyes firmly on future opportunities has led Aboyeji to set up his own family office called Street Capital, with a focus on identifying passionate and experienced missionary entrepreneurs with the integrity and courage to flawlessly execute in Africa.

With a solid track-record of unearthing diamonds in the rough, Aboyeji hopes to empower the next generation of African entrepreneurs to achieve their fullest potential and help build some of Africa’s fastest-growing and most-impactful tech businesses.

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Entertainment

The Movie Buff With A Happy Ending In Business

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Kene Okwuosa continues to make profit selling the immersive cinema experience across movie halls in Nigeria.


If trailers of Simon Kinberg’s upcoming X-Men: Dark Phoenix have whetted your appetite for more action-packed cinema, you could take your pick from the likes of Hobbs & Shaw, John Wick 3: Parabellum or Avengers: End game. But as any film buff would tell you, watching these adrenaline rushes on DVD or TV is no match for a full-throttle cinema experience.

Kene Okwuosa is bullish about letting Nigeria’s 190 million population experience the thrilling excitement of the celluloid world. Using the theater to extract a sizeable profit from the Nigerian culture of socializing and communal engagement, his Filmhouse Cinemas has grown from just three screens to multiple locations across the country.

As part of the company’s strategic expansion plans, Okwuosa signed a pioneer deal to bring IMAX, the world’s most immersive cinematic experience, to West Africa in 2016. In doing so, Filmhouse has flipped a switch not just to beat competition from other local cinema chains, but also become one of the fastest-growing IMAX businesses in Europe, the Middle East and Africa.

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Quite a feat considering Okwuosa’s first stint at the cinema business did not have a happy ending.

The year was 2008 and Okwuosa and his partner at the time, also named Kene, were desperately looking for greener pastures beyond the borders of the United Kingdom (UK), where they were both employed as assistant general manager and general manager respectively at Odeon Cinemas.

“I had a conversation with Kene on the first of December 2008 and he was saying there is an opportunity with a friend of his who was an investor in Nigeria and we could go back, set up a company and create a great product in Nigeria. I resigned from my job on the second of December, I saw my family on the third of December and I caught a flight on the fourth of December after not being back in Nigeria for 11 years,” says Okwuosa.

And their voyage back home was favored by lady luck. A South African company at the time was exiting the Nigerian market and their assets were up for grabs. With the help of their investor, the pair bought up the assets and just like that, Genesis Deluxe Cinemas was born. It was a magical moment in the lives of the newly-minted entrepreneurs.

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With three chains of Genesis Cinemas under their belt, the pair were ready to reap the profits of their entrepreneurial pursuits until everything went belly up.

“A year later, that deal went so bad we had to exit. Myself and Kene exited the company to our dismay.  The private investor owned most of the business and there were issues between the investor and my partner relating to a slight misalignment of the company. We were torn between either staying in Lagos or going back to the UK. We decided to stay and tug it out,” says Okwuosa.

The pair had to downsize from the guest house they were staying in to a smaller flat and survived on noodles, while they hatched their next plan. They turned their living room into an office and went back to the drawing board.

Okwuosa believed there was still a market in the cinema theater business and he was not wrong. According to PricewaterhouseCoopers, the Nigerian film industry is globally recognized as the second-largest film producer in the world. Total cinema revenue is set to reach $22 million in 2021, rising at 8.6% CAGR over the forecast period.

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The cinema industry is one of the priority sectors identified in the economic recovery growth plan of the federal government of Nigeria with a planned $1 billion in export revenue by 2020. Furthermore, the National Film and Video Censors Board estimates the Nigerian movie industry needs at least 774 cinemas across the country for it to tackle the menace of piracy.

“So, for two years, I was literally waking up and going to every single office trying to pitch and raise money. We didn’t know anybody and we are not sons of rich men, we had already failed with Genesis, we had no assets or collateral. We were literally telling people we were going to modernize Nigeria’s entertainment scene and everybody was looking at us like we were crazy.”

In 2009, the Intervention Funds, created by then president Goodluck Jonathan to boost the Nigerian creative industry, would prove to be the lifeline Okwuosa and his partner so badly needed.

“I am proud to say we were the very first to access that fund in 2012, which was about N200 million at the time which, when you look back is not that much but considering the exchange rate, it was over $1 million. It was enough to help us kickstart Filmhouse. We had nothing, so that particular facility was largely uncollateralized,” says Okwuosa.

The fund took a bet on Okuwosa and his partner and it paid off. The loan was used to open their first three-screen cinema in Surulere, Lagos.

“It had a slow start but ultimately grew to be one of the biggest locations in the country and that organic growth led us to open two more cinemas prior to our second round of investors, which was private equity money from African Capital Alliance.”

The investment helped Okwuosa to scale to 10 operational locations across six states. The original vision when Okwuosa started Filmhouse was to be the biggest and best cinema and create an amazing space where people could escape into a different world.

Two years after, the company set up the production and distribution part of the business.

Filmhouse now represents about 50% of tickets sold in Nigerian cinemas, according to Okwuosa. With just a dream to conquer the Nigerian market, today, Filmhouse has a vision to become a media entertainment company.

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In addition to IMAX, the company represents other international brands like Warner Bros and Lionsgate. With the institutional investment, Okwuosa has strengthened his core team, which no longer includes his former partner, as well as providing the company the impetus to scale with the right mind and right trajectory.

With a GDP of $375 billion making the Nigerian economy the 30th largest economy in the world, Okwuosa believes there is still a big chunk of money to be made from the entertainment and media space.

“I think we haven’t even scratched the surface of this industry and we want to position ourselves at the forefront of Nigerian entertainment.”

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Advances In Nigeria’s ‘Burglar Watch’ Industry

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The escalating safety and security issues in Nigeria raised the alarm for this innovative entrepreneur.


Today, organizations not only face escalating risks but also the certitude that they will face a security breach at any time, if proper precautions are not taken. Such was the case for Paul Ajibulu when his office premises were ransacked by thugs in Adeola Odeku, Victoria Island, Lagos.

“We had just got our office fully furnished with MacBook computers and the whole works. When we came in the next day, we found the locks broken and all the office equipment had been looted. I lost about $20,000 in all that day and that set our business back for a couple of months,” says Ajibulu.

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To solve his problems, he reached out to Extreme Mutual Technique, an automated digital systems solution and renewable energy service provider.

The company says it boasts top-tier clients such as MTN, the Embassy of Sierra Leone, South African Breweries, and Africa Finance Corporation, amongst many others.

Akpobome Ojoboh, its founder and Managing Director, is adamant his systems are a must-have for every organization in Nigeria.

“We initially started the business called Extreme Surveillance Systems limited. Coming from my previous background, we decided to focus on CCTV and digital security. Considering the fact that Nigeria was being terrorized by security mishaps, we decided to [resolve] that,” says Ojoboh.

Safety and security have never been discussed in Nigeria as they are now. Threats are from everywhere, and at all places. Routine security checking at offices and shopping mall entrances has become the norm.

The idea of preventing crime is an appealing twist in today’s times and although it’s comforting for many to imagine a competent police officer monitoring every camera in Lagos, the question remains whether CCTV systems really do prevent crimes from happening or do they merely help in nabbing a criminal once a crime has occurred.

In a city like Lagos where you have constant disruptions to power, the long-term success of these systems presented significant hurdles for Ojoboh in the early days.

“There are so many limitations to digital security vis-à-vis the lack of a proper database that even when you have [identified] the culprits, you cannot find them. Furthermore, there were limitations to how people took ownership of their equipment because there was [often] no power. So, you put a system and people say ‘what if there is no power’?”

To combat these challenges, Ojoboh decided to provide another solution, by moving into the world of inverters.

“Then again, these inverters run down when there is no power to charge them so we went into renewable energy called solar to back up our inverters and digital solutions. That is when we changed the business to Extreme Mutual Technique Limited,” says Ojoboh.

Security is one of the largest businesses in the world, according to Ojoboh.

He has seen an increase in more families opting for peace of mind by having big brother watching over their loved ones whenever they cannot be with them.

“When I first became a mum, I would always worry incessantly about my daughter left alone at home with my nanny. Then, we started noticing strange marks on my daughter and I had heard about people mistreating children they cared for but I never thought it would happen to me. I reached out to a security company to install a camera in the house and lo and behold, I saw the nanny hitting my daughter. My whole world crumbled,” says Rebecca Gyan, a grocery store owner in Accra.

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“You have to be prepared because if you are not, then you almost cannot stop any security breach. It helps you to know some proactive measures to protect yourself. If you have a CCTV system and you notice there is a particular group of people visiting your building, you will be able to notice and react,” says Ojoboh.

As organizations become familiar with probable threats and vulnerabilities, they will be able to establish both preventive measures and responsive systems, to decrease the likelihood of intruders and attacks.

Since starting out in 2007, Ojoboh has grown the team to a 40-member business spread across Lagos and Abuja. The company has also moved into IT and engineering services in the areas of energy infrastructure, home automation, fire safety and digital security solutions.

With power still an issue in Nigeria, Ojoboh sees the future of his business in the area of renewable energy to power his systems to provide that all-important peace of mind to his clients. 

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