Driving social change for profit in South Africa
By Richard Lapper
Published: September 6 2009 18:47 | Last updated: September 6 2009 18:47
There is a Rolls-Royce, a Maserati, an Aston Martin and a couple of Porsches, but it is the Bugatti Veyron that occupies pride of place in the collection of fast cars owned by Sizwe Nxasana, the chief executive of FirstRand, the South African financial services group.
But the vehicles are models that line a shelf in the Johannesburg office of the first black South African to head one of the country’s big four commercial banking groups. And the 52-year-old Mr Nxasana is a very different kind of businessman to the politically well-connected black entrepreneurs well known for their lifestyles and powerful motors.
While state-sponsored black empowerment and asset transfer policies have created an elite of “black tycoons”, Mr Nxasana came through the apartheid system as one of the country’s first black chartered accountants and has prospered in the largely white corporate world. His management record – at Telkom, the partly state-owned telecommunications concern, and since 2006, as head of FirstRand’s banking business – has won him plaudits.
Although his ascent owes little to affirmative action, he is a firm believer in black empowerment policies – under which some R500bn ($65bn, €46bn, £40bn) of corporate assets have been transferred to black owners since 1994. He believes the real significance of his appointment is “a demonstration that the country is making progress in the area of transformation. [It is important] that my appointment acts as a catalyst for other corporates to do the same or even for other black people to have confidence in themselves that it is possible you can be appointed to a position like this”.
Leader with ambitious vision and an impressive record
Mr Nxasana’s vision might seem ambitious but he can point to an impressive record at Telkom, the state-controlled telecoms company, where he worked hard to make the operation more efficient as it adjusted to the realities of part privatisation.
The restructuring was “conflictive ... [but] to be honest we just had a few strikes and demonstrations. We negotiated redundancies – it was all approached in a very humane fashion,” he says. “We outsourced a lot of functions and protected people in their jobs.”
But Mr Nxasana also believes that the shake-up was necessary to empower new black managers in a company that was mostly dominated by whites when he took over.
Telkom, in fact, had 24 separate layers of management and no fewer than 63,000 staff when he was appointed. By the time he left, more than 33,000 workers had been laid off and 16 levels of administration removed.
“When you have so many layers it is so difficult to empower because you have to go through so many levels. It had major implications as to the way people saw their status,” he explains. “It slows down the process and creates frustrations.”
Telkom has stumbled into more difficult times recently, but few analysts lay the blame at Mr Nxasana’s door.
“He is in a league of his own,” says one observer who worked with him on the company’s stock market listing in 2003. “He is measured and not remotely arrogant.”
Speaking over a hastily assembled working lunch of grilled fish, fruit and cheese, Mr Nxasana is courteous and charming, as comfortable talking about his own humble background as he is about his plans for FirstRand.
His story might seem to exemplify the importance of individual drive and the possibility of social mobility. But this is not a perspective that Mr Nxasana shares. Indeed, his plans for FirstRand are influenced by a commitment to social change. Although improvement in operating performance and returns is a priority, it is one that sits alongside a belief in the necessity of black empowerment. For Mr Nxasana, the two objectives are intertwined. “The goal of transformation is complementary to the goal of growing the business,” he says.
All the more so in the light of a decision announced in June to refocus the bank’s activities on Africa and the region’s growing trade and investment links with India and China. The bank’s domestic commercial clients are increasingly attracted to these growth markets and Mr Nxasana believes there is also considerable potential to exploit Africa’s own emerging markets, either alone or alongside strategic partners such as the China Construction Bank Group, with whom an alliance was formed in July.
At home in South Africa there are emerging markets, too. Mr Nxasana sees the rise of a black middle class as crucial for the group’s prospects. “Just anecdotally, if you look at WesBank [an asset-based financing business] in the early 2000s, only about 5-8 per cent of new business came from the black population in terms of financing motor vehicles,” he says. “Today, that number is close to 40 or 45 per cent. Therefore, there’s been a significant growth over the last couple of years of the contribution that comes from the black population into the economy. And the same applies to home loans or other parts of our business.”
Moreover, Mr Nxasana intends to build on FirstRand’s reputation for providing finance for black empowerment deals. “It is important that black people get an opportunity to create wealth for themselves,” he says.
Although none of this is new, Mr Nxasana has already indicated that the focus will be pursued more single-mindedly. In the past, heads of the group’s subsidiaries enjoyed considerable leeway in deciding their priorities, a looseness that allowed the bank to make loss-making investments in areas such as Japanese and German property.
Mr Nxasana now says that strategic priorities will be determined at the centre. “It is a much tighter definition and a lot more co-ordinated across the business units,” he says.
Part of this strategy includes bringing in more black and Asian managers so that the group will better reflect and understand the markets in which it is operating. Although this will take time, Mr Nxasana says that efforts – such as the provision of grants to black students studying chartered accountancy and other financial disciplines – has picked up speed and been given more focus since his arrival. And despite dipping profits, the amounts contributed to social responsibility programmes have increased.
More generally, Mr Nxasana is insistent about the need to increase the skills and knowledge of black students, whose under-performance in areas such as maths and science is a source of acute concern to the government. And he believes that vernacular languages such as Xhosa and Zulu, which millions of South Africans speak at home, and poor teaching are a big part of the problem. “[These] languages are not that good at handling the abstract concepts of trigonometry or algebra,” says Mr Nxasana.
Few business leaders are in a better position to make that judgment. In the 1960s and 1970s, when he was growing up in KwaZulu-Natal, Mr Nxasana says he was able to surmount these obstacles because his father was a science teacher. The answer today though could lie in the development of more dual-language teaching materials, an option that a charity – which Mr Nxasana chairs – is exploring. “We really [need to] sort out the schooling system so that we can, as a country, produce a lot more skills in engineering, in accountancy, in marketing, and in medicine and so on,” he says. “Language is the biggest impediment by far.”
These changes will not happen overnight but Mr Nxasana’s experience has taught him the virtue of patience. His time at Fort Hare University coincided with an upsurge of violent protests among black youth, and teaching was frequently interrupted. “There were running battles with the police and tear gas everywhere,” he says. “At the end of the first year we ended up in prison.”
In spite of recent unrest, South Africa is today much more stable politically, a context that can help advance the kind of economic and social changes that have accompanied Mr Nxasana’s own ascent.
Copyright The Financial Times Limited 2009.
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