Pearls of Wisdom from Mr. Johan Burger, Chief Executive Officer FirstRand
Strand: Development and Sustainability
- What does your role entail in FirstRand?
It’s often said that the best leaders assemble a great team around them and then spend their time making sure that this team has the tools and resources to do its job effectively. This approach is particularly pertinent to leadership roles at FirstRand with its federated model and owner manager culture. It is also something that resonates with me personally as I have been very fortunate in my career to work for people who believed in empowering their employees, even allowing them to make mistakes as long as they were made in the pursuit of something that created sustainable value – in other words it came from a good intention. This empowerment definitely bought the best out in me and many other people who have been successful over the years at FirstRand. We don’t believe a CEO sits at the top issuing instructions – it’s just not possible for one person to have all the answers, we believe in the power of the collective.
- What role can Banks and Financial institutions play in the development of South Africa?
The fundamental role of financial institutions is to enable the efficient pooling and allocating of financial capital in an economy, which turn generates value for many stakeholders through the payment of dividends and interest, salaries and wages, procurement spending, taxes and corporate social investments. That is why large banks and other financial institutions are often seen to be systemic to the economy.
We believe the financial institutions of South Africa have a significant role to play is providing capital for inclusive economic development. For a start the sector’s Black economic Empowerment Transactions that have recently vested have delivered billions of Rands of value to the country, in addition the banks are putting their balance sheets to work for infrastructure projects in support of the NDP, investing in strategies to improve access to finance for our customers and funding and driving change through systemic corporate social investing particularly in the field of education.
- The South African banking sector has been ranked 3rd out of 148 countries in the 2013/14 World Economic Forum Global Competitiveness Survey, how does this uniquely position the country for further investment?
A sound and stable financial services sector is a huge asset to external investors because it provides comfort about the security, stability and reliability of the systems that they use when investing. It gives them comfort that their money is safe. A more competitive financial services sector overall then also helps improve returns and growth in an economy, which can indirectly benefit the return on investment.
- Why is it important for developing countries to collaborate?
Many developing countries are coming off of a low base in terms of economic cooperation when it comes to alignment of policy frameworks in-country and then enabling terms of trade across countries. Policy consistency enables more efficient trade and cross-country activity, which can lift competitiveness. Many developed markets have the benefit of hundreds of years of gradual policy alignment, so it is important for emerging markets to catch up and unlock efficiency gains in the process.
- How do we improve economic sustainability in South Africa’s growing economy?
There are many ‘levers’ for economic sustainability. Three big focus areas for us as a country at the moment are fiscal consolidation (balancing public spending with public revenues), socioeconomic stability and production-led GDP growth. There is no one public or private sector entity that can improve all of these, which is why it is important to work together within a common framework. The National Development Plan is the blue print for achieving this coordination.
- What would you say is the main economic development challenge of our time?
The main economic development challenge at the moment is achieving sustainable GDP growth. As Minister of Finance Pravin Gordhan says, GDP growth is the denominator for most of our progress metrics so an improvement in GDP has many important knock-on effects for us. South Africa has participated in a long run global cycle of consumption-led GDP growth. This was unsustainable and the economy has started to shift structurally towards production-led growth. This kind of change is often painful because it means redeploying capital and other resources, including human resources, into new sectors. At a macro level managing this shift towards production-led GDP growth is the main challenge of our time, but it is also a very healthy challenge.
- How did the 6.5% BEE share deal with Kagiso Trust, Miner workers Investment Company and Women’s Development Bank start? And why was this transaction unique?
FirstRand’s BEE transaction started in 2005 when the group, and the financial sector in general, began to formalize its transformative agenda. At the time the focus was mainly on building bridges between the first and second economy in South Africa so we wanted the transaction to create a broad-based of black FirstRand shareholders. One of the unique features of our BEE deal was that it included a broad-based component which accounted for more than 80% of the value created for the FirstRand Empowerment Trust when it matured in 2015. The transaction’s size and value add was also a unique feature as it created R23 billion for its participants.
- What role can the NGO sector (civil society) play in the development of South Africa and Africa?
There are many important roles for civil society in the development of South Africa and Africa. A vibrant civil society is often both a sign of, and protector of, strong democratic institutions and civil rights. However as the chief executive of a financial services group, for me a critical role that the NGO sector can play relates to providing funding to the parts of the economy that are often too profitable to qualify for government support but not profitable enough to qualify for finance on commercial terms. This economic layer accounts for a significant portion of economic activity and employment in the country and can contribute more to production-led GDP growth if innovative solutions are found for financing it.
- What is your message to Kagiso Trust as they celebrate their 30th anniversary?
Many wonderful stories have emerged from FirstRand’s BEE partners about how their organisations started with just a few thousand rand and now have multi-billion rand balance sheets. These stories are testament to the entrepreneurial talents of our partners and also really resonate with us because our own group was famously started with only R10 000.
My message is firstly to congratulate Kagiso Trust on applying its talents to a truly broad base of beneficiaries, and secondly to challenge it to think bigger about the possibilities for its multi-billion rand balance sheet another 30 years from now.