Three men turned R10,000 into South Africa’s most valuable bank 

Rand Consolidated Investments (RCI) began in 1977 with R10,000 in capital and the energies of Laurie Dippenaar, GT Ferreira and Pat Goss.

Just over two decades later, and with Goss replaced by Paul Harris, RCI had created FirstRand and listed it on the JSE. 

The banking group has had several stints as the most valuable financial institution in South Africa, with its market capitalisation hovering around R500 billion on the JSE. 

FirstRand is best known for its ownership of FNB, RMB, and WesBank, which effectively cover retail banking, corporate and investment banking, and vehicle and asset finance. 

Now a behemoth, it is forgotten that the bank was created by the work of three individuals who began with only R10,000 of initial capital. 

Heavily influenced and inspired by Dr Anton Rupert, Dippenaar is seen as the driving force behind the formation of RCI in 1977. 

After attending various lectures from Rupert at the University of Pretoria, Dippenaar took a job as an investigating accountant at the Industrial Development Corporation (IDC). 

This proved to be fertile ground for Dippenaar in finding business partners, with Goss introducing him to Ferreira while working at the IDC. 

None of the three thought that they would revolutionise banking in South Africa and provide early capital to some of the country’s most successful entrepreneurs. 

While Dippenaar was the driving force, Ferreira was the idea-man. Despite being attracted to the marketing business, Ferreira found himself working at the small Bank of Johannesburg doing structured finance transactions. 

Ferreira had realised that to do the types of deals he was doing, you did not need a bank. One could access capital from insurers and asset managers to structure deals. 

After pitching the idea to Goss, Ferreira and Dippenaar were introduced to each other, and the three began laying the foundations of RCI. 

The business was launched in 1977 with a focus on structured financing and leveraged leasing. Despite this focus, the company was started with only R10,000 in pocket money from the founders. 

Goss would resign three months after the founding due to the passing of his father. He would, however, be a director of FirstRand and remain friends with Dippenaar and Ferreira. 

This brought Harris into the fold. He had met Ferreira when studying at Stellenbosch University and had bumped into Dippenaar when working at the IDC. 

Harris was also well-versed in structured financing, and the three would go on to become some of the most successful entrepreneurs in South African history. 

RCI and the Ruperts

At the same time as RCI was finding its feet, Johann Rupert returned to South Africa and founded Rand Merchant Bank (RMB) at the age of 29. 

He was not part of the family business, Rembrandt, as yet. Committed to not working for his father, a young Johann had gone to New York to work at Chase Manhattan and Lazard Frères. 

Things began changing in the 1980s when anti-South African sentiment overseas, particularly in Europe, ratcheted up as a result of the Apartheid regime’s repressive policies. 

Rembrandt had consolidated its overseas tobacco interests into Rothmans International to separate its businesses into more manageable units. 

However, the anti-South African sentiment saw Rupert’s father ousted from his management role at Rothmans. This sharpened his focus, and the young Johann committed to joining the family’s business to help his father. 

All the while, Rupert had become increasingly interested in what Dippenaar, Ferreira, and Harris were doing with RCI. He also realised he could not take RMB with him into the Rembrandt stable. 

Rupert thus proposed a merger between RCI and RMB, which would give Dippenaar, Ferreira, and Harris access to a banking licence. 

Even then, the three entrepreneurs did not know this would become the foundation of South Africa’s most valuable bank over the next 30 years. 

While Rupert had proposed the merger, the three entrepreneurs transformed RMB into the modern-day FirstRand. 

Ferreira and Harris had the banking knowledge, but Ebbe Dommisse in Fortunes said it was Dippenaar who oversaw the finances and was the “custodian of values” that made RMB and then FirstRand so unique. 

Dippenaar also had the foresight to know that RMB needed scale, and needed it quickly, with foreign banks likely to flood into the South African market after 1994. 

RMB moved onto the front foot and was out looking for acquisitions. What it really wanted was a retail banking arm that would give it scale and diversify its earnings. 

Through the RCI-RMB merger, the company had also picked up Anglo American’s financial services businesses.

The Ruperts would once again come knocking with an opportunity, with the family looking to dispose of Momentum Insurance, which it partly owned with Volkskas. 

RMB was initially appointed to facilitate the transaction, but decided instead to act as the insurer and incorporate it into its business. 

Momentum provided RMB with diversification and a large pool of capital. As valuable as the deal was financially, its major benefit would come in the form of how long it took to structure the deal that would make FirstRand. 

Making FirstRand

Dippenaar, Ferreira, and Harris first began by overhauling Momentum’s hierarchical structure to make it more innovative and competitive. 

While the focus was on improving Momentum’s operations, the three entrepreneurs kept their eyes open for the chance to buy a retail bank. 

A chance came in 1998 when Southern Life began experiencing financial difficulties. This would be the perfect acquisition to scale Momentum at the drop of a hat. 

However, the real key to the deal was not Southern Life’s insurance business, but the fact that it opened up the chance for RMB to buy First National Bank (FNB) at the same time. 

Southern Life was owned by Anglo American, which had, post-1994, decided to refocus on mining once it was no longer subject to draconian Apartheid-era foreign investment controls. 

Anglo was prepared to sell Southern Life, but only on the condition that Momentum bought FNB at the same time. 

“What frightened us about the deal was the size, the relative size. We were around 4,000 people. The bank alone comprised 25,000 people,” Dippenaar recalled to Dommisse. 

“These were two big companies that we had to take over simultaneously. But we knew that, strategically, it was a wonderful opportunity. We wouldn’t get another chance like that. So, we just closed our eyes and decided to go for it.”

At this point, RMB had so much backing and trust from the established financial sector that it raised R5 billion in a single day to fund its takeover of Southern Life in 1998.

Ferreira described the deal as the sardine swallowing the whale. Momentum changed its name to FirstRand Limited and was listed on the JSE on 25 May 1998. 

Post-merger events saw Rand Merchant Bank and FNB combine to form FirstRand Bank Limited, with the two units remaining to trade as its divisions.

It would take a significant amount of hard work to turn the amalgamation of companies into the most valuable banking group in Africa. 

FNB, at the time, was not considered one of the Big Four banks and was considered stale, slow-moving, and unfriendly to clients. 

Harris took the lead role in shaking up FNB’s culture, declaring to the bank’s executives that the culture of simply checking into work to collect a wage was not going to fly anymore. 

“Turning FNB around required a metamorphosis – they had to get bankers to think like businesspeople,” Dommisse explained. 

“This approach created a culture in which a team had to develop a strategy, was given resources to implement it, and was then dispatched to execute it.” 

The approach made FNB synonymous with innovation in the banking space, with it being the first bank to launch banking on a mobile phone through USSD codes and a banking app. 

Ultimately, the focus on innovation and making people directly responsible for business outcomes worked, with FNB and FirstRand more broadly becoming immensely successful. 

FirstRand now vies with Standard Bank and Capitec for the title of South Africa’s most valuable bank and operates primarily through FNB, RMB, and WesBank. 

This was far from RCI’s only success story, with it also playing an instrumental role in financing the launch of Discovery and OUTsurance, among others.