Sizwe Nxasana is South Africa's best-paid bank CEO!
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.
However, 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. 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 ZAR500 billion (USD65 billion, EUR46 billion, GBP40 billion) 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”. 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 privatization.
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. However, 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 (CCB), 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% 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%. 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 center. “It is a much tighter definition and a lot more coordinated 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 programs 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.
Interview with FirstRand Bank First Back CEO Sizwe Nxasana
Sizwe Nxasana, chief executive of FirstRand Bank and a leading business personality, speaks about his approach to leadership and some of the challenges he has overcome on his way to the top
Describing himself as an introvert, Sizwe Nxasana says the ability to remain quiet and listen has enabled him to empower those around him. Nxasana became a chartered accountant (CA) by accident. When he registered at the University of Fort Hare in 1976, his intention was to complete a marketing degree. But Professor Wiseman Nkuhlu, the first black person to qualify as a chartered accountant in South Africa, had coincidentally started lecturing at Fort Hare that year.“I was inspired by this man who had grown up in a village in the Transkei, and had survived the rural schooling system, even though I didn’t know much about what a chartered accountant actually does,” says Nxasana. “I believed that if he could do it there was no reason I couldn’t.”
Fort Hare did not offer the subjects required for the CA qualification at that time, so Nxasana completed a general BCom. He started his career at Unilever and Price Waterhouse and in 1989 established Sizwe & Co, the first black-owned audit practice. In 1996 he became the founding partner of Nkonki Sizwe Ntsaluba, the first black-owned national firm of accountants, and was national managing partner until 1998 when he joined Telkom as chief executive officer. His experience in the financial services industry includes non-executive directorships, since 2003, of FirstRand Bank and Rand Merchant Bank, of NBS Boland Bank (1995 to 1998), of the Development Bank of South Africa (1995 to 1998) and Chairperson of Msele-Hoskens Insurance Group (1994 to 1996).
Entrepreneur: Your tenure at Telkom was successful from both a financial and operational point of view. What were the key reasons for this success?
SN: The Telecommunications Act of 1996 completely overhauled the legislative and regulatory framework of the telecoms industry in South Africa, setting certain key objectives for Telkom in the process. These included the mass rollout of telephone lines, appropriate training of employees, preparing the organisation for its listing on the stock exchange, and gearing it up to face competition. Our entire focus was on meeting these objectives within a five-year plan. To be honest, because we were operating in a regulated environment it was quite easy to achieve some of them. The mandate was clear.
E: What were some of your goals?
SN: One of the major goals was to make the company more efficient, which required negotiation with the unions and employees. That was the first step in setting the stage for Telkom’s transformation. We then created a set of values within the organisation, and ensured that everyone in the company contributed to them. E: How did you involve Telkom’s people in the transformation?
SN: The people issue was really central to everything at the time. The values subscribed to included selection of the right people. We developed systems and processes to map the skills in the organisation and the ones we would need going forward. But execution is always challenging. A huge effort was made to rally all stakeholders around the key objectives. We had to build a team of people who would make things happen, which meant changing the culture of the organisation. Telkom had gone from being a government department to becoming a fully owned parastatal. Success depended on moving the company out of its monolithic mindset into a space where it could operate as a commercial entity.There were hardly any sales or marketing teams in place, so the concept of customer service had to be introduced from scratch. We ran ongoing campaigns, discussions and road shows about culture.
E: How did you convince Telkom’s people that you were moving the organisation in the right direction?
SN: We introduced performance management, incentivising people to carry out their duties. Because the organisation went from rewarding loyalty to rewarding performance, initially there was some resistance from the unions and people who thought we were trying to weed them out. A fundamental shift was required. Consider that previously employees would start working for Telkom straight after school or university and stay there until they retired, often to be succeeded by their sons.
E: How did you move the company from a job-for-life to a performance-based mindset?
SN: First, the roles of human resources and HR development were defined. We then identified a number of key objectives and cascaded these into various service organisations within Telkom, such as sales, marketing, customer service, and finance. These units had to develop objectives which informed the company’s overall business plan, and were then turned into measurable targets. To support the performance based philosophy, we also introduced development plans for all staff.
E: You made a vital contribution to bridging the gap between black and white staff members at Telkom. What advice do you have for entrepreneurs whose companies are going through some form of significant change?
SN: Make sure there is discussion and debate. Be an open and transparent leader. Tell people why the organisation needs to change. Encourage buy-in. Don’t force your views on people – rather allow them to contribute to what you have all agreed you need to achieve. Leaders tend to believe they must make decisions; in truth, they are there to facilitate decision-making.
E: What role did communication play in the evolution of Telkom?
SN: It is vitally important for leaders to communicate important information, be it good or bad. Leaving sensitive issues to your marketing or PR department is a no-no. One of the key things that happened at Telkom, for example, is that many businesses in the organisation were not core and had to be hived off. Also, the organisation invested heavily in new technology and had to retrench certain employees as a result. These are events that impact people’s lives significantly and must be communicated directly by the CEO. Leaders sometimes tend to shy away from these difficult tasks, but openness is the bedrock upon which success is built.
E: How did your relationship begin with Laurie Dippenaar?
SN: I served on the board of NBS Bank, in which RMB had a stake, with Paul Harris and GT Ferreira from 1995, and I was a non-executive director of FirstRand Bank from 2003, while I was still at Telkom. I came to understand the bank’s strategy and some of the issues the banking sector faces. My own philosophy is that it’s not good for a CEO to lead an organisation for more than ten years. It’s vital for a company to have access to new people and new ideas; otherwise, the whole organisation thinks just like you do. When my contract at Telkom came up for renewal, I made it clear that I was going to move on. Then Laurie decided to retire, so the timing was opportune.
E: Since joining FirstRand Bank in January 2006, what have been the biggest challenges you have had to face?
SN: The first few months in any organisation are about learning the business. I have immersed myself in the three key operating divisions I am responsible for, all of which are large businesses in their own right. I’m also looking at areas that FirstRand still needs to focus on to enable companies in the group to cross-sell and grow. Key objectives are attracting and retaining the right people, pursuing growth opportunities, improving efficiencies, dealing with transformation issues around employment equity, and meeting and exceeding the requirements of the financial services charter.
E: FirstRand Bank became known for the entrepreneurial culture that existed within its business units – First National Bank, Wesbank, and Rand Merchant Bank. Does that culture still survive?
SN: It does. One of the defining elements in the organisation is the owner-manager culture. My role at the centre is to be a catalyst, to help make things happen, to offer guidance that empowers people, and to pave the way for ongoing discussion and debate. I believe in letting people who run business units run them. RMB, for example, has a number of divisions that operate as discrete businesses, competing or collaborating as they see fit. The FirstRand Group has been broken into chunks of very nimble businesses that are able to execute quickly and efficiently. We have far less bureaucracy than our peer group. It’s important to promote an entrepreneurial culture because that is what makes us able to speedily launch new products and services in the marketplace. Centrally controlled organisations are simply not able to act as quickly.
E: You have demonstrated great concern for customer care. How do you define it, and what are the most important components of good customer service?
SN: We have a twofold approach: customer service means understanding the needs of your customers, but it also means anticipating future needs. There is one defining question: will the customer recommend First National Bank, Rand Merchant Bank or Wesbank to another person? Referral is the best indicator of customer satisfaction. You only reach that point if your customer is comfortable interacting with you and confident about the service you provide. Short queues and phone calls answered in two seconds are all very well in the short term, but long-term customer retention derives from an emotional attachment to your brand. People must be able to relate to your culture, value system and products beyond their immediate needs. Service providers must also remember that there is always room for improvement. We live in a state of constant change; to flourish, you have to be able to reinvent yourself.
E: Against a backdrop of commoditised financial services, how does FirstRand retain constant innovation?
SN: Take a product that may appear to be commoditised and look at customer needs. The Million a Month account, for example, is a 32-day notice account that is unique because it introduces excitement for the customer who stands the change of winning a million rand every month. The One Account too fulfils all the functions of a cheque account, overdraft, personal loan and home loan. Differentiating your products with added features like these is what makes an impact on your customers. A company must think ahead and develop new products. That is where innovation comes in. I mention our Million a Month account, our partnership model with the motor industry at Wesbank and the range of investment banking products offered by RMB as instances of business innovation – these organisations have come up with new and exciting solutions to customer needs. Innovation is all about designing products and services that meet those needs well into the future.
E: What are the next big goals you have set for FirstRand Bank?
SN: Attracting and retaining the right people is an ongoing objective. I’m also focusing on greater collaboration and communication across our business units, so as to improve efficiencies and aid them in finding growth opportunities for the group as a whole. We are looking at growth opportunities within the country and outside our borders. This is not a new drive: RMB has been operating in Australia and the UK for a number of years already, and Wesbank is also represented in Australia. Our strategy is not to export FirstRand as a brand, but rather to grow our business through niche units that offer an exportable proposition.
E: How is a day in your life typically structured?
SN: I go to gym for an hour six days a week. Gym is my personal time; that’s where I plan the day ahead and think about the issues I have to face. I get to the office by 7.00am and use this quiet time to send e-mails, and to read and draft documents. By 8.30am everyone has arrived and the day revolves around meeting with people, talking about the business, and making decisions. When I’m not visiting our regions or travelling, I’m back home by 7.00pm and I start working again after dinner.
E: How do you develop your knowledge and skills?
SN: I read autobiographies, business magazines, and anything relevant to banking.
E: Is there anyone whom you look upon as an inspiration in your career?
SN: There is a wide range of people, locally and internationally, who do interesting things and have wonderful ideas.
E: What is your key advice to anyone seeking to start a business in this country?
SN: South Africa needs young, emerging entrepreneurs to start their own businesses. Black people in particular cannot grow the economy just by looking for opportunities to buy equity stakes. When you are in a corporate environment it is easy to slip into a comfort zone. Remember that you have nothing to lose by starting a business; it’s far better to take a chance than to spend the rest of your life regretting what you did not do.
Published September 2008
Chartered Accountant Sizwe Nxasana, was born in 1958 at Lamontville and matriculated at Mariannhill in 1976. He holds a Bachelor of Commerce (Fort Hare) and a Bachelor of Accounting Science (Honours) degree (UNISA) and was one of the first 10 African CA’s in South Africa.
In 1989 Nxasana established Sizwe&Co, the first black-owned audit practice in Kwazulu-Natal. In 1996 he became the founding partner of NkonkiSizweNtsaluba, the first black-owned national firm of accountants, where he remained until March 1998. The firm is now the fifth largest audit firm in South Africa. He left to to join Telkom SA as Chief Executive Officer in 1998.
During his seven years at Telkom, Nxasana oversaw the listing of Telkom on both the JSE and NY Stock Exchange, the only IPO of a state-owned company since the end of Apartheid.
His experience in the financial services industry includes non-executive directorships at FirstRand Bank and Rand Merchant Bank, NBS Boland Bank and the Development Bank of South Africa and as Chairman of Mesele-Hoskens Insurance Group.
Nxasana joined FirstRand Bank in 2006 and has held a number of key positions. In January 2010 he was appointed CEO of the FirstRand Group, in the process becoming the most senior black executive in the African banking industry. He is currently Executive Director at FirstRand Ltd.
Due to this position within his industry he also serves as Vice-Chairman of the South African Revenue Services Board and is a member of the Income Tax Special Court.
Nxasana served as a Non Executive Director of Vodacom Group Limited until September 9, 2005 and as a Director of Co-ordinated Network Investments (Proprietary) Limited and Telkom SA Ltd. from 1998 until 2005.
Nxasana serves on several social awareness boards and was awarded an honorary doctorate from his alma mater the University of Fort Hare in 2004.
He is married to Judy Dlamini. They have two children, Nandi and Sifiso Nkanyezi.