It’s a familiar scene on a hot day in Accra, the capital of Ghana. The alleys are packed with women, carrying children on their backs, selling vegetables and fake Louis Vuitton bags while men sell anything they can get their hands on. Here, you could be sold a drug that could kill you.
The danger is counterfeit drugs that masquerade as healers but threaten to do the opposite.
Victoria Amponsah claims fake drugs almost robbed her of her unborn child like a thief in the night. The day she was diagnosed with malaria she also learned she was two months pregnant. She went to the nearest pharmacy, in Accra, and bought prescribed anti-malarial drugs she thought would save her and her child.
“That evening, I took the medicine. After about two to three hours, I started shaking and vomiting. I felt weak. I called a cotenant and showed her the drug and she said ‘I know this drug, its ok’. But when she [took out the pills from the box] she said ‘this is not the drug that is supposed to be in this box,’” Amponsah told the NGO, United States Pharmacopeia (USP).
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<div id="attachment_5209" style="width: 310px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-5209" class="size-medium wp-image-5209" src="/wp-content/uploads/2017/05/Bright_Pharmacy_Lonart_Phone_2015_hi-res-300x200.jpg" alt="" width="300" height="200" />Bright B. Simons is the brain behind mPedigree, a technology that&#8217;s used to counter counterfeiting of pharmaceutical products, wax prints and other products that are prone to piracy. Accra, Ghana.</div>
She was rushed to the hospital where a doctor confirmed the drug she took was fake. She managed to complete her pregnancy, but this was not the end of her struggle.
Near the end of her pregnancy, she almost died from a fake version of oxytocin, disguised in convincing packaging. Within 30 minutes of administration, Amponsah was sweating, shaking, vomiting and bleeding.
“I was bleeding so bad. [The doctors] were scared and didn’t want me to move,” she says.
She nearly lost her baby and was hospitalized for two days. For months later, she had to return to the hospital often, for checks.
“Sometimes I hear stories of a person who was fine, gave birth and the next minute the person has died and you find that they gave the person an injection and they died from it. I didn’t know it was that bad,” says Amponsah.
It is the poor, like Amponsah, that suffer. According to the Dutch Malaria Foundation, malaria is responsible for the death of one child dies every 45 seconds, but a third of malaria drugs sold in Africa are fake.
“My son was my biggest present; the center of my life. He is all I have… I am hoping that globally people understand that our lives are more important than the little money they will make out of bringing a fake drug out. [I hope] people will understand that it’s not all about money. It’s about life… the smallest thing, like just a tiny drug which is bad can cause so much damage in one’s life,” she says.
Amponsah and her son Denzel are among the few lucky ones. Over 30% of antimalarials in Africa contribute to nearly 450,000 preventable deaths each year, according to a report in the medical journal The Lancet. Fake tuberculosis and malaria drugs kill an estimated 700,000 people a year, according to the International Policy Network.
The manufacturers of this fake medicine make it look like the real thing. Mario Ottiglio, the Director of Public Affairs, Communications and Global Health Policy of the International Federation of Pharmaceutical Manufacturers and Associations (IFPMA), says fake medicine thrives in countries with weak regulation.
“In areas of infectious disease, like malaria and tuberculosis, fake products with incorrect dosage of ingredients can result in antimicrobial resistance to genuine treatments. At a global level, analysis of reports over a five-year period, from 2005 to 2010, indicates that incidents of fake medicine increased by 122 percent, while diversion and theft increased by 66 percent,” says Ottiglio.
In 2009, 84 Nigerian children were killed by toxic chemicals that were laced with teething medications for babies. In 2012, Angolan custom agents busted counterfeiters importing what turned out to be one of the largest fake medicine imports in history, when containers shipped from China to Luanda, the capital of Angola, were filled with over 1.4 million packets of a fake version of the antimalarial drug, Coartem.
“In 2013, the World Health Organization (WHO) launched a global surveillance and monitoring system… Thus far, 48 percent of cases reported [to the system] have been in the African Region,” says Ottiglio.
A study published in the International Journal of Tuberculosis and Lung Disease found one in every six pills in Africa to be fake. Furthermore, a survey conducted by the National Institute of Health, which examined over 2,600 malaria drug samples across 21 sub-Saharan African countries, found 20% of these drugs were fake and a third were of poor quality.
Ottiglio says the first line of defence is to always buy medicine from licensed and certified sellers. People can check the packaging of the product for spelling mistakes or grammatical errors. Check for expiry dates and that the details on the outer package match up with the inner packaging. Those who are familiar with the medicine can check that the pill looks correct, is not discolored, degraded or doesn’t have an unusual smell.
Even with checks, there is still a problem. Some fake products are almost visually identical to the genuine ones. Often it’s difficult to tell the fake from the real thing.
Patrick Lukulay, Vice President of Global Health Impact Programs at United States Pharmacopeia, says during the outbreak of Ebola in Liberia, there were fake drugs on the market purporting to cure Ebola and people were attracted to them.
“The drugs most counterfeited though are lifestyle drugs such as Viagra and Cialis&#8230; Antibiotics and antimalarials are heavily counterfeited also because of demand for these drugs and the tendency for people to self-medicate. ARVs (antiretrovirals) are also counterfeited because of demand and the fact that people might seek to buy them in private settings for confidentiality purposes instead of getting them free from public facilities,” says Lukulay.
These drugs, according to Lukulay, are made in countries that have developed capacity for pharmaceutical manufacturing and packaging, such as India, China, Vietnam and Malaysia.
He says the ingredients used for fake drugs are usually cheaper versions of legitimate ingredients. An example is diethylene glycol, which is toxic but 10 times cheaper than the legitimate pharmaceutical grade ingredient, glycerine.
“They may also include impure cheap raw materials, such as over-sulphated chondroitin sulphate, the one found in blood thinner, heparin, a few years ago that killed people in the US,” says Lukulay.
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Unfortunately, the problem grows at an alarming rate. Lukulay estimates the counterfeit drug market is worth over $75 billion per year.
Like many problems in Africa, it is seen as an opportunity by private money.
In Ghana, entrepreneur, Bright Simons, says he has developed a program that is helping to curb the counterfeit drugs.
In 2007, he launched mPedigree, a company that has created software manufacturers can use to label their product packaging with a random code hidden beneath a scratch-off covering. If a consumer wants to know if their product is fake or not, they can just scratch off the covering and SMS the code to a toll-free number. They will then be notified whether the product is authentic.
Simons claims his services are used by around 100 million people per year in 12 countries, from India to Uganda.
“Our biggest frontier now is predictive analytics, in particular the use of our EarlySensor technology to predict hotspots and flashpoints of emerging counterfeit activity by looking at large data sets across time and space. If we can predict retail points that are likely to be targeted by counterfeiters by disrupting upstream distribution networks, we can actually stop counterfeiting from even getting to the level of the consumer,” he says.
This will help prevent the suffering that Amponsah experienced. She at least lived to tell her story; many more were not so lucky.

A Deadly $75-Billion Business

In 1966, if you drove through Gaborone and blinked you would have missed it. It was little more than a barren railway stop, in the middle of nowhere, on the way from Cape Town to Cairo. Those living here would have said there was nothing more to it than termite mounds and elephants.
At the time, this land-locked country was considered to be the poorest in Africa, with a per capita of $70. It had nine secondary schools, 50 university graduates, a railway line built by Cecil John Rhodes, and five kilometers of tarred road that stretched between Lobatse Station and the High Court.
From this backwater beginning Botswana has emerged as one of the fastest growing economies in the world and moved into the ranks of upper-middle income countries. Real GDP shows an average growth of 5% per annum over the past decade, at a time when the most advanced economies have been falling apart. In 2015, GDP stood at $14.39 billion. This remarkable growth, according to the World Bank, is because of diamonds hidden deep in Orapa, 521 kilometers north of Gaborone. The discovery was made in 1967, months after Botswana’s independence was declared on September 30, 1966, and the proceeds went to the state rather than colonial coffers.
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But, if you look closely at the white walls and fresh cement of Gaborone, cracks appear. In the week FORBES AFRICA arrived in Gaborone, unemployed youth clashed with police outside Parliament; four of them spent the night in jail.
It is called #UnemploymentMovement and uses social media to fuel support, much like South Africa’s #FeesMustFall student protests a year ago. It comes at a time when citizens question the government’s P100 million ($9.76 million) budget for its golden jubilee.
It is a big problem. One third of Botswana’s two million people are youth. The World Bank says poverty in Botswana is 17.8%, among youth aged between 15 and 24 its 34.10%. This is despite government spending 9% of its $14.39 billion GDP on free education.
One of those that spent the night in jail is Jones Banda, a committee leader behind #UnemploymentMovement. Speaking to FORBES AFRICA while on a march on August 13, he says the movement started with just one student, Tlamelo Tsurupe, standing outside Parliament with a poster. Within a week dozens more, including Banda, joined him.
“The youth of Botswana have realized our government can no longer place jobs for the youth&#8230; Most of our emphasis now is on the graduates. Why? Because it is [graduates] that are very frustrated. They have been educated by the government to take control of the economy and now the government is not absorbing them. Mind you, the students have loans to pay,” says Banda.
At the time of going to print, the BDP had not released an official statement concerning police assault at the protest on August 8. A permit was granted for the march held on August 13.
Banda believes unemployed youth make up more than 17.8%. This is because unemployed graduates have to register with the government, meaning that thousands of other students who are not graduates are not considered.
Banda’s stint behind bars hardened his resolve.
“Being in jail is almost as if I was home, not that I have ever been in jail. But for the movement it was a good thing. We felt the brunt of system and so we know now who is on our side. It was what we expected,” says Banda.
While students called for better employment, there are others who have managed to eke out a living.
A 32-year-old electrical engineering graduate, Kagiso Monkgatusi, makes his living from flying a P45,000 ($4,400) drone, one of the few owned and licensed in the country.
Monkgatusi, a photographer by trade, got the idea for his business after seeing footage on the internet. It led to him starting his small business, Africa Killer Bee Media, named because of the sound the drone makes in flight. The drone was given to him as a grant by the government-run Local Enterprise Authority. Monkgatusi’s success is an indication of Botswana’s potential.
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In Gaborone, there are small signs of burgeoning wealth; tarred roads glisten, as bright as the country’s diamonds, next to dusty sidewalks; malls, polished and pristine, are packed to the rafters with food, shoes and cell phone stores. The city center is a hive of activity as scaffolding rises on the skyline.
Botswana’s success is largely due to a stable government with strong fiscal management, reports the World Bank. President Ian Khama, whose photo hangs on the wall of every store you visit, has held office since 2008. He is the head of the Botswana Democratic Party (BDP) that has been in power since the first elections in 1965. Every president has been democratically elected and all stood down after their two-term limit.
At the very least, Botswana is trying hard to improve investment and growth in their small economy.
For the hungry investor, Special Economic Zones (SEZ) have been built in Lobatse, Gaborone, Palapye, Selibe Phikwe, Tuli Block, Francistown and Pandamatenga.
“In April, P1.6 billion, of P3.5 billion over three years, in tenders have been awarded and the focus is mainly on the construction of roads, health and education facilities. Other sectors that have been allocated package proceeds are manufacturing, tourism and agriculture,” says Moatlhodi Sebabole, Research Manager at First National Bank Botswana.
Sebabole says Botswana also has a five-year national development plan (NDP) which will focus on coal mining, base metals and diamonds. However, according to Sebabole, investors need to keep a careful eye on low agriculture and food security, stability of water and electricity, and low investment growth.
“The production side of the economy still remains under turbulence with the closure of some abattoirs as well as base metal mines like African Copper,” says Sebabole.
Regardless, Sebabole believes Botswana’s outlook over the next 10 years is promising. Focus will remain on infrastructure projects in water, rail and electricity, which will need financing of P100 billion (around $10 billion) by 2019.
Botswana is a far cry from the country that started with $70 per person a year and five kilometers of tarred road. Fifty years on, it faces new challenges that show how far the country has come – some might even go as far as calling it first world problems, including an educated and militant youth.

Young,  Jobless And ANGRY

During the week, if you drive around what was once Zimbabwe’s industrial hub, Bulawayo, the factories are dead; on Sundays, they come alive with the sounds of worship.
According to reports, in the last 10 years, around 100 factories have shut their doors and laid off staff. They are being rented by churches as it appears religion is the only boom in town.
“Most of the factories here don’t operate anymore. You will find that the only thing the company has left here is the building itself and they need to make a bit of money. Our factory, for example, was vacant for a very long time. It only made sense to rent it out to someone who needed it and there is nothing we can do about it until the industries can be revived,” says the former buildings manager who asked not to be named.
The list is long.
The charismatic prophet Emmanuel Makandiwa’s United Family International (UFI) Ministries rents the city’s biggest textile factory, Textile Mills, along Josiah Chinamano Road in Belmont. Not too far away, Revelation Church of God rents a large warehouse in Kelvin, formerly the home of wholesaler Goveya Enterprises; Higher Grace International Ministries occupies a dilapidated building which used to be a motor repair shop. In the same building is one of the few survivors, a small-scale detergents manufacturer who displays his products on a slab outside and Universal Church of the Kingdom of God (UCKG) rents a building which was once an exhaust repair shop in the heart of Bulawayo.
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There are plenty of other places that have closed – Rusglen Fashions, True Value, Belmor Fashions, Lancaster, Harren Manufacturing, Cinderella, and Label Fashion.
Amid economic carnage is a company trying to pull itself up by its bootstraps. The company must be one of the few in Zimbabwe that has never retrenched people. It employs 15 people, making handmade boots for export between $299 and $999.
“We need a minimum of nine working days to make a pair of boots so each day the 30 pairs being cut are not the same 30 pairs being boxed,” says Courteney Boot Company co-founder Gale Rice.
When Rice helped form the company in 1989, selling in Zimbabwe was easy. Half their production was sold locally.
“We had a strong commercial farming sector which hosted a strong hunting community, a vibrant tourist industry and a varied local economy. Every single town had at least one stockist, whether it was the farming co-op, seed company, hardware shop or even the gardening center. Courteney was available throughout the country. Nowadays 99 percent of our production leaves the country,” says Rice.
Making boots by hand is a slow, painstaking but worthy process that makes them last longer.
“Our customers send their boots back to us from all over the world for repairs, re-soling, full refurbish. Mailing can be expensive but we pride ourselves on returning a pair of boots that look as good as new and will last for many more years. We’re old fashioned and happy to be so,” she says.
What’s the secret to keeping this small company alive when so many others are dying?
“I don’t know,” she laughs. “We’re a team that believes that no individual or enterprise escapes the bad stuff. Nobody gets off scot-free – we all have to deal with death, tragedy, business or financial reversals and so on during our journey on earth. Just crack on,” she says.
It’s not easy, but there is a reason she hangs on – family.
Her late husband, John Rice, won a worldwide design competition, at the age of 17, with his favorite design for a stitch-down shoe. Shortly after they met, in 1989, John had a dream, Gale was sold on the idea and they built a company before they were even married.
“It was a terrific adventure. Everything from buying the machinery to developing the marketing was exciting and terrifying. John once pulled out all our Christmas cards to each other and was going through them. He said to me, ‘Do you know that in every single card you’ve described the past year as difficult?’” recalls Gale.
By that time, John had already been in the footwear industry for 37 years as a designer and manufacturer. The business, in the early days, relied on the hunting and safari industries.
“John always said that men admire what other men have, whether it’s a knife or a watch or a pair of boots,” says Gale.
They slowly established a strong American following; then after a few years, they got a strong British link. Westley Richards, a 204-year-old leading gun and rifle manufacturer based in Birmingham, England, asked if they could stock and distribute for Courteney.
John and Gale were delighted.
“Courteney was the biggest part of our marriage and working together was deeply fulfilling. We never, ever ran out of conversation – we’d sit in the bath nattering away and we’d have sore throats after a long journey in the car. I look back now and see even more clearly how incredibly lucky I was to have such an adventurous husband, and how fortunate I am now to have my life still filled with Courteney and all its joys and challenges.”
Despite the success, it was difficult to keep the doors open as Zimbabwe’s economy struggled. It was difficult to export from Zimbabwe.
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“[Goods] were backed up at Harare airport waiting for a plane, but almost no carriers were flying in at that time. John and I went to South Africa to the shoemaking industry centered in Durban and Pinetown and visited several stitch-down manufacturers to find a temporary home for our production.”
When things settled a bit, they came back to Bulawayo. Also known as the City of Kings, it is no longer fit for kings.
“The profit margins have gone down significantly because of the high costs of production – electricity, labor, raws – and just the business of doing business in Zimbabwe. There is little consistency in pricing in the country at present,” she says.
Rice says because they manufacture only in legally obtained game-skin leathers, Courteney may be directly affected if Zimbabwe loses its hunting industry. They are also in danger of losing the company altogether under the intense scrutiny of foreign countries, spurred on by the anti-hunting organizations.
“The Zimbabwe Parks and Wildlife Authority needs to be squeaky clean and in full control of our wildlife and hunting quotas. It’s worth noting that it’s the hunting industry that funds anti-poaching operations in our conservancies. About a decade ago, the Authority had its budget rescinded leaving them to source their own income. One tiny result of this is that parks demand two percent of the value of every invoice to provide a CITES permit for every export. It’s an unnecessary duty to impose on our customers, and very annoying,” she says.
Rice is in Bulawayo to stay and she is not about to turn the factory over to Sunday worship.

Boots And Praises

Don’t be fooled by his infectious smile, the sports car and designer clothes; behind it all is a sad story of depression.
On a windy winter’s afternoon, in Johannesburg, we arrive at the Serengeti Golf and Wildlife Estate, in Kempton Park – a place for the affluent. Five minutes later, a BMW sports car pulls up and a tall gentleman in a navy blue tailored suit steps out, his name – Chris Van Zyl. His game – building.
For one so young and seemingly successful it is a surprise when 30-year-old Van Zyl claims that failure is his best friend.
“I am so glad of the failures that happened to me. If I see failure, I say bring it on and it becomes part of my DNA,” says Van Zyl.
“Although I’m in the building industry, I’m not a builder, I’m a businessman.”
Van Zyl grew up in Sunward Park, in the east of Johannesburg, a middle-class suburb, where education is important; yet he doesn’t have a qualification beyond school.
“I never felt comfortable with the mind-set that to be successful you have to be educated.  If you’re not the smartest, surround yourself with people who are going to help you grow.”
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When Van Zyl matriculated, his father, a businessman in the transport industry, encouraged him to try his hand at golf. Here, he had to face his demons; frustration and confusion. Luckily, he found a niche in real estate.
Van Zyl then went to work at his brother-in-law’s auto-glass company. This gave him a taste for business.
“I didn’t like the job but I had to take anything that came my way and make the best of it… Talking to a stranger was unthinkable, so I was taken out of my comfort zone.”
“I would go an extra-mile for the customers, more like people pleasing. I would aid more for people but never felt I was succeeding,” he says.
From here, he volunteered as a driver at a construction building company to learn the trade.
“I love designing; it can be anything from fashion to cars and building. Because I wanted to learn about the building industry I asked my boss to just pay me for transport and airtime as long as I got to learn the ins and outs of the business,” he says.
In 2008, Van Zyl took a leap of faith, with a friend, and started the company Buildpro Construction and built 21 houses. In 2013, he bought out his partner.
It all seemed plain sailing; lurking around the corner was his worst day.
His business was thriving but his health was suffering; anxiety and depression were his lot.
“I was pumped as an entrepreneur because I was getting in a lot of business and everything looked up because if you have money in the bank all is fine, right?”
Deals piled up and the business grew. It meant long hours of work; three for sleep. The pressure was on and getting more intense.
“I was depressed, for weeks on end I could not sleep because of all the stressful situations I had to solve daily. I was in constant damage control and because I did not know how to delegate; nobody could lighten the load for me.”
“We had a last minute site meeting with one of my clients who said it was urgent to meet face to face; of course I knew something big was wrong. I remember driving past the site twice and not realizing I must pull over for the meeting.”
He eventually pulled over and found that his client was at the end of his tether. There had been too many failures, says Van Zyl.
“As we walked around the site he pointed out all the things that were incorrect and problems that I committed two weeks ago to fix but had not been touched.”
The client sued for damages.
During the meeting, Van Zyl says he could feel that something was wrong; his whole body became numb.
“I tried to tell my project manager next to me but was struggling to speak – he saw that something was wrong. I used all the power I had to apologize to the client to cut the meeting short and my project manager carried me to the car and took me to my house. I could not think clearly or breathe. It was time that my body told me that I can simply not carry on like this,” he says.
“I had to negotiate new time timelines, and deliverables and made sure that I stuck to them.”
It was going to get worse.
Van Zyl was overworked his brain started to shut down.
“When people spoke to me, most of the time I did not register what they were saying because I would think of all the overwhelming problems in my business I need to solve.”
Cash flow was also a problem.
“I remember it was early in the month and I did not even have enough money to pay my workers’ salaries. I was days late on salaries and thinking now that the client will sue me for damages.”
The thought of closing down his business made it worse.
“It was unthinkable for me because I had so many clients that entrusted me with their hard-earned money on the dream homes which I was supposed to finish for them. If I had to close, all of them would have suffered financially and emotionally and I could not allow that.”
The doctors advised him to take a break.
“They told me the usual things; that I was fatigued and experienced several panic attacks so I had to stay at home for about a month. I couldn’t leave my staff to run the business; the big problem was that none of them really knew what was expected from them, so they carried on with no goals, deadlines or correct budgets. Without me there was no company.”
He had a choice to make, either fight for his health or be an entrepreneur.
Van Zyl chose health and less work. It meant he had to cancel two deals worth R18 million ($1.26 million).
“We were about to sign deals but I couldn’t take them on and [the clients] were angry with me. I had no choice but to cancel, my capacity couldn’t handle it,” he says.
It was touch and go.
“I was not sure my business would make it at all,” he says.
It did. But tough times were not over for Van Zyl.
“I remember, we were building a suite and had to cement on top. We booked eight loads of trucks with concrete.”
“I paid for the loads and it was in the morning, I was exhausted and decided to take a nap. I couldn’t hear my phone ring, I was totally burned out and when the workers needed two more loads to complete the job, they were unable to get hold of me,” he says.
It almost cost him another deal. Years later, he has vowed to never give in to the pain.
He claims that his company is worth R24 million ($1.68 million). By the end of 2016, he plans to make R38 million ($2.66 million).
“I do not compare myself to anybody. I’m a learner and strive to be the best I can be.”
His lesson?
“Learn to say no. Do not over commit. If you say you gonna do something, make sure you are fully equipped.”
Three years after his worst day, Van Zyl is thriving and plans to start a private funding firm and luxury brands. Not even depression could keep him down. He is also about to get married. What else does he need?

‘I Was Not Sure My Business Would Make It’

On this Thursday afternoon, in Stellenbosch, a small university town, east of Cape Town, the sky is blue and the air crisp. In the gentle light, dressed in khaki pants and a checkered blue shirt, he doesn’t look much like a multimillionaire but Michiel le Roux has done for banking what Bill Gates did for software and Muhammad Ali for boxing. He has created a bank that in 15 years has forced its way into the top five in South Africa. He wears his $530-million net worth lightly, but behind the smile and humility, is a hint of power with a firm handshake that means business.
“We said let’s build a bank and we were not going to experiment on a small scale, we always stayed very close to our clients and we knew what we wanted to bring to the industry,” says Le Roux.
About a decade ago, few deposited their salaries into Capitec, most had never heard of it. Today, Capitec has over 7.3 million active clients, 720 branches, 11,440 employees and holds R13.7 billion ($1 billion) in shareholders’ funds. For Capitec, simplicity is everything.
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“When I was young, everyone was a Sir in the corporate industry and I hated it. There is a woman here who used to serve tea when we started and she couldn’t get herself to call me Michiel so she called me Mr Michiel,” he laughs.
“Here, there is no distinction between people. Nobody flies business class. How you fly, where you stay, the rental car you drive is the same whether you are the CEO or the junior in the company. Everyone gets the same treatment.”
There is a business reason for this.
“After the army, I worked at a company I thought was a very smart company but there was too much hierarchy. I found it very awkward and terrible. [Imagine] you have meetings out of town and you wait for your flight with your colleagues and you chat while you wait; then in the plane you sit in front and they all pass you to go sit at the back. I find it very stupid. The natural thing is to continue talking,” he says.
At Capitec, they take simple seriously. No suits, the CEO’s office is the same size as everyone else’s, the CEO shares a personal assistant, no personalized parking spots, even the guard at the gate calls him Michiel, while the receptionist jokes freely about his sense of style — or lack thereof.
This simplicity and business acumen has made Le Roux a rich man; the 38th richest in Africa to be exact, according to FORBES. In just 15 years, this fortune has grown rapidly. It has nearly doubled from around $290 million in 2011.
Capitec had big friends early on, on the other side of Stellenbosch. One of the earliest and biggest was PSG Group, an investment holding company, owned by former FORBES AFRICA cover, Jannie Mouton, who is worth $970 million. One day PSG called Le Roux to listen to what they had to say; he believes this was an attempt to lure him into its micro-lending business.
“I said I am not interested, this is not the type of business I want to be involved in because it’s a terrible business; they charge exorbitant interest rates. Those were the old pin and card days. When you wanted a cash loan, they would take your card and your pin number and they would withdraw whatever you owed and then give the card back to you. It sounded, and still sounds, terrible,” says Le Roux.
PSG convinced him to visit their branches and he was fascinated by how the micro-lending company treated its clients. According to Le Roux, in banking, the lower income consumers in South Africa were poorly treated, but not by PSG.
“A bank always determines the value of the client based on their net worth which to this stage in my mind doesn’t make sense because a guy with high net worth might be very frugal with the use of his credit card whereas a guy with a much lower net worth might be exorbitant with his credit card use. The guy that is exorbitant should be much higher in the rankings but banks don’t look at it that way.”
“If you are a factory worker and earn very little, they were not that interested in you and that to me was a failure on banks not accommodating the lower income people,” he says.
In this, Le Roux saw a gap. He was bored at work and he decided to build a bank that would right these wrongs. He joined forces with PSG Group.
Before the bank was called Capitec, it was called Daxacom.
“We had about three branches that we put up and put on the logos and when we looked at it, it didn’t work. We had many other names but I am ashamed to say them,” he chuckles.
Le Roux says it took a long time to find the right name because they didn’t want a name that reflected they specialized in servicing lower income groups.
“We didn’t want to call it people’s bank for example, if anything, we wanted something that sounds modern and as if it could have been an electronic bank only, although we are also a physical bank.”
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Capitec won. The next problems were timing, licensing and money.
According to Le Roux, there was a small banks crisis just before they opened. Timing was not of the essence.
“In the late 90s, South Africa granted a number of new banking licenses and as far as I know, that was the last time they granted new banking licences. Most of those banks folded quickly. A bank called The Business Bank, which was about three to four years old, folded and PSG took them over and we sort of bought the license through taking over a failed bank. If it wasn’t for that, I don’t know if we could ever have got a license,” he says.
As Capitec was about to launch, Saambou Bank, one of South Africa’s significant players in the industry, went bankrupt. It was a very public collapse that did the image of banking no good at all. Lines of people appeared on TV news desperate to get their money out.
“The Reserve Bank closed them on a Saturday to minimize the impact on the markets and we listed Capitec Bank Holdings Ltd on the Johannesburg Stock Exchange on Monday, 18 February, 2002, the week later. That was a terrible time to list a bank and it also meant it was a terrible time to get finance whatsoever. I know I sound like an old man saying you learn from your mistakes but it’s true. Starting a business in good times is always very dangerous because you will think business is easy when the wind is blowing from behind and the sailing is smooth. When you start with wind blowing from ahead, then you know business is tough and you grow,” says Le Roux.
To survive when others failed wasn’t easy.
“It’s a hard slog to create the infrastructure, to network, to decide what you want to do. We take pride in the fact that at that stage, when we were also starting, Old Mutual had a retail banking license and they wanted to start a retail bank. They were looking for systems when we were looking for systems and the rumour mill had that they paid out R800 million ($60 million) for their system and that was when the rand was about R4 to the dollar but they never opened that bank because they couldn’t make it work.”
Capitec kept it cheap and simple.
“Other banks use systems that are designed for them which means that they have to maintain that; when the coders that wrote that leave, you are left with a gap. We made right calls because we had a good management team and we had a good management team because we hired the right people when we started. We don’t spend where there is no need,” he says.
Persistence and good planning helped them survive.
“We have been creating new branches but we try to be creative in the way we do that, we don’t over invest in a branch, we don’t build a branch, we don’t have specialized buildings and we don’t own a single branch, we lease all of them so we have the ability to cut back in future if things change.”
Although they want everything to be digital, they want to keep branches open for their clients.
“Our clients like the one-on-one interaction. In January, 6.7 million people came into the branches. It means, on average, our clients visit a branch at least once a month. Most importantly everything should be done on mobile. We suspect that is the future of banking but we are not quite sure what it’s going to be,” says Le Roux.
While other banks turn a blind eye to South Africa’s “unbanked” or “unbankable”, Capitec has made these customers their market. Over time, Capitec slowly transformed its micro-lending clients, who mainly relied on it for loans, into transactional banking clients who deposit their salaries and manage their transactions through their Capitec accounts.
International banking advisory group Lafferty has ranked Capitec Bank as the best bank in the world in its inaugural 2016 Bank Quality Rankings. According to the report’s findings, Capitec came out on top, with the only five-star rating out of the 100 banking groups listed. In South Africa, Barclays comes second with four stars, while Nedbank, Standard Bank and First Rand have three stars. Lafferty uses a combination of financial and non-financial disclosures in the latest annual reports to determine the quality of the organizations and their respective business models.
“South Africa’s Capitec was the only bank to achieve five stars. The bank has a level of focus, geographically and strategically, which boosted its scores across all of the metrics in the ratings process,” says the report.
Capitec is giving South Africa’s banking industry a run for its money. Michael Lafferty, Chairman at Lafferty Group, says it’s because its founders understand their customers’ needs and they developed an innovative strategy and business model aimed at addressing those needs better than the established players. He says the best quality banks in the world are found in South Africa.
“Capitec is doing well because of its focus on the consumer&#8230; We only found two or three banks in Europe that were near to the top quality rating we saw and only one in the United States. There is something remarkable about South African banks,” says Lafferty.
That focus on the consumer is also visible in Capitec’s decision to open on Sundays. In 2011, according to reports, Capitec’s marketing and corporate affairs executive, Carl Fischer, said the idea has always been to operate like a retailer as a lot of people went to malls over the weekends.
Many people sing the praises of Capitec. But, says Le Roux, you can ignore your competition in other industries, but not in banking.
“If you bank with Standard Bank and I convince your friend to open an account with Capitec and you want to pay money to your friend, your bank must be prepared to pay money to Capitec. If you use a Capitec card and you are in a restaurant and they have a Nedbank machine they must cooperate. We all have to be in agreement and work together.”
Banking is a tough industry. Capitec’s closest rival, African Bank, collapsed in August 2014 as bad debt soared and the lender failed to increase provisions.
“When African Bank went bankrupt, it was terrifying. We thought African Bank were over optimistic with their credit assessments but we thought they were a big strong company. When they closed their doors it practically felt like a funeral. If they can sink, anyone can sink,” says Le Roux.
Capitec however was much more conservative. They set aside cash to cover bad debts and stuck to strict budgets.
The globally-awarded retail bank increased its active client numbers by 1.03 million, to a total of 7.3 million for the year to 29 February, 2016. This bolstered headline earnings to R3.2 billion ($234 million) for the financial year ended February 2016, up 26% on the previous year. Net transaction fee income increased by 16% to R3 billion ($220 million), the value of credit advanced increased by 25% year on year to R24.2 billion ($1.7 billion) for the 2015/16 financial year.
Capitec Bank CEO, Gerrie Fourie, on its website, says the brand acceptance continues to grow substantially in the market and there has been a 26% growth in total retail deposits to R37.8 billion ($2.7 billion).
“We are excited about the continued growth in client numbers and in particular the higher income clients who are finding our offer the best value in the market, which is an important consideration for consumers in the current economic climate,” says Fourie.
As rivals hobbled through two banking crises, Capitec sailed through. The advantage, says Le Roux, is that they thought big from the beginning.
For Le Roux, confidence in yourself and the belief that you can achieve something is the starting point and not money. He says many young potential entrepreneurs see the lack of money as an excuse.
“Money is a valid problem but the bigger problem is management and getting the right people to do the job. We started, knowing it was going to be a difficult journey. At one stage during the founding phases, we reduced the rates we charged for loans by about 40 percent. That meant we had to do 40 percent more loans to break even. To do 40 percent more loans, you need 40 percent more capital and it took about four months before we came to that point where we had 40 percent. In the first month, we made a loss, and in the second, we ran out of money. We had to put our own cash into the company but we knew that if the boat doesn’t turn next month, we won’t have any more cash,” he says.
They also had Riaan Stassen; Capitec’s pioneering CEO from 2004 to 2013. Stassen has been friends with Le Roux for years and served as the Managing Director of Boland PKS from 1997 to 2000, a division of BoE Bank Limited.
“Riaan is a very smart guy. I believe he built Capitec Bank. If I may claim some role, I would claim that I had a dream of creating a bank and Riaan made that a reality. He actually made a different reality. My vision was that we should be a bank for low income people, for instance, to my shame, I must admit that at that stage I said we should have books. Riaan laughed and said ‘you are crazy; we are in the electronic age’. He said ‘we are going to build an electronic bank for the new age and not for low income people but for everyone’ and that’s what we have done.”
As a travel enthusiast, Le Roux wanted to take Capitec across Africa, but, he says the longer they are in business, the more the dream recedes. Emerging market countries such as Brazil, Chile, Turkey or Poland are preferred.
“We don’t think Africa is a natural habitat for Capitec Bank, we are based on a digital financial environment, our client base are more salaried people and if we go into [for example] Zambia only 10 percent of the population earn a decent salary  and most of the people are [in the informal sector]. Even Nigeria is a tough country, it’s not like they have a massive urban digital employed population. We could do business there but we will have to redesign our products,” says Le Roux.
As we leave, the fiery red ball is dipping towards the mountain. This sun may be setting but it seems Capitec is just rising.

Tag: September 2016

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