Capitec’s big dream

Capitec, which grew rapidly by focusing on South Africa’s low-income retail clients overlooked by rivals, now wants to expand into the business sector.

The Stellenbosch lender, which built the country’s biggest bank by customer numbers by focusing on low-income depositors and unsecured lending, is targeting small and medium-sized businesses and building an insurance business for its next growth spurt. 

“We believe there are massive opportunities in South Africa,” CEO Gerrie Fourie said in a Bloomberg interview. “If we can get our government of unity to operate fully and we get the full buy-in of the private sector, we’ve got massive potential in South Africa.”

Business sentiment has improved after the African National Congress formed an alliance with smaller rivals, including the centrist Democratic Alliance, following May 29 elections in which the ANC lost its national majority for the first time since 1994.

The lender also wants to boost its share of services that have helped it capture 32% of South Africa’s prepaid cell phone airtime market and 27% of all prepaid electricity vouchers, he said.

That business generated profits of R3 billion by February 2024 from zero in 2022. 

In the longer term, the bank will use its March acquisition of fintech group Avafin Holding Ltd. to drive an international expansion. Avafin operates in Poland, the Czech Republic, Latvia, Spain and Mexico and Fourie plans to transform it into a fully-fledged bank.

‘Big dream’

“We will slowly build Avafin out, and then over time, the big dream is how you take Capitec international and how you use the building block of Avafin, and you bring that all together,” he said.

That will generate growth for the bank that already ranks as South Africa’s most valuable.

“People have been saying we are overvalued for the last 20 years, and we’ve proven that we are not overvalued,” Fourie said. “It’s the challenge we’ve got, but if I look at the opportunities, I’ll say to you, I believe we can deliver.”

It’s asset base of R208 billion rank it as the smallest of the country’s major lenders. Standard Bank, the biggest bank by that metric, has R3.1 trillion of assets. 

But Capitec’s performance has been rewarded by the stock market, lifted its price valuation to 6.19 times its book value, higher than South African peers like FirstRand at 2.37 times.