A conversation with Bob Tucker – Former CEO, The Banking Council
LM: Bob, Thank you so much for sharing some of your thoughts and life experiences with young leaders across Africa
BT: That’s my privilege Lincoln I am glad to participate if it is going to help young people.
LM: I can’t see you retired, I’m sure you are busy as usual, what are you currently working on, what are you busy with?
BT: I am chairman of the Nikela Trust, which is raising money through the rounding process at the tills of the retailers and by voluntary giving in most restaurants and franchises, and using that money at the grassroots level to eradicate poverty and rebuild the social fabric of our society. I am also devoting energy to loving Jill and our three sons and their families better. Jill and I are in our fiftieth year of marriage. I am also spending significant time in understanding God and my relationship to Him and to my fellow man. You might be interested in the speech I delivered at the launch of Nikela Trust (which is attached).
LM: Where did it all begin for you, how were your early years, what were your fondest memories?
BT: I was one of 5 children of incredibly loving parents. You could arrive at our home at any time of the day and my mother would find something for you to eat and make you welcome, and I can’t remember many occasions in my childhood that we did not have at least one young person staying with us. My father was an attorney and devoted his entire working life to assisting people (particularly first time home owners) to acquire their own homes
LM: Who had the biggest influence on you as a young person, and who were your early heroes?
BT: My parents and a few of my teachers, who taught me to love the subject they were teaching me.
LM: What do you remember most about your university experiences?
BT: During my B.Com, I did a lot of rowing, including an international tour to the UK and Germany, and I had never seen so many beautiful girls. But, as at school, I remember well a few professors who taught me more than all else to love the subject they were teaching me. I still frequently think of them and what they taught me. I was a much more serious Ll.B student, which I did part-time while serving articles at Edward Nathan and Friedland, who were also quite demanding.
LM: You studied law, how did you end up in banking?
BT: I was very fortunate to be appointed as legal adviser to the Perm Building Society, and in that capacity appointed a director of the Perm at the age of 30. As legal adviser to the Urban Foundation I was also very involved in arguing for the repeal of Apartheid legislation, including the laws which prohibited land ownership by blacks in 1979. In that year blacks were entitled to acquire 99 year leasehold title but by 1983 the Perm had not granted a single bond to a black person. I went to one of the key members of the board and said that in all conscience I could not remain a director under those circumstances and insisted that the Board look at replacing the joint managing directors. He replied by suggesting that I accept the position of Managing Director (at the age of 36). I had never managed anything up to that date and I asked when. The reply was in 3 weeks’ time. I accepted, but the consequence was that I was never really a banker.
LM: How did you meet Jill, your soulmate, and the love of your life? Tell us a bit about your children and grandchildren.
BT: I met Jill at Wits. She was also studying B.Com. and I fell passionately in love with her. We wasted many hours in the back of the lecture hall and in the canteen, and in pretending to study for exams in the library. We have three sons –
Robert who is married to an American, Brooke, who teaches at the American International School. They have three lovely and very well qualified children who are also at the school. Robert has his own HR Consulting business and is passionate about helping people to achieve their full potential.
Nicholas who is married to an Australian, also Brooke, and also has three lovely and very competent children. I will also send you the citation of an award just given to the eldest, Cara, which epitomises what I would like our grandchildren to be. Nick is a Project Manager working for Chevron in Kazakhstan, and he works 28 days on and then returns to Perth for 28 days off. That is what a great many young people are doing today, and it is tough on him and the family.
John who is an Electrical engineer and works for ELB, the listed engineering company. He has two very young children and they live right next door to us, so we have two grandchildren who come through the gate frequently and make our day for us. John works on many exciting projects, including large scale energy replacement projects. He conceptualized the Ngodwana biomass generating plant which will supply enough electricity for the Ngodwana paper mill and the whole of Mbombela, and is now busy on the construction. John’s wife, Andrea, was a graduate at Standard Bank (you might remember her as Andrea Carr) and she now works for E 4 which has digitized your new bank credit sign-up process for credit cards.
We dearly love all our daughters in law, and they are as special to us as our sons. The way they have brought up their children is much different from the way we brought up ours. My role was much more one of role model than hands-on parent. That was left to Jill. Our sons are almost as hands on as our daughters-in-law. I think the way they are doing it is much superior to the way we did, and I am very proud of what they are doing, and of the product which is our grand-children.
LM: You were the MD of the Perm, the largest building society then in South Africa, why were building societies important, what role did they play in society?
BT: The Perm was the second largest after UBS. The building societies were specifically equipped to provide housing finance. They were given special tax dispensation, so they were consistently able to undercut the banks. But the condition was that they were only permitted to invest in first mortgage bonds over houses and in Government stocks. All their skills were devoted to home lending and as an example they had very skilled building inspectors. You knew that if you had building society bond, the house was well-constructed and in good condition. They would, for example, even climb into the ceiling to check the geyser. Up till 1981 banks did not grant any home loans and the building societies catered for virtually all the major migrations in our country – the Afrikaners in the early twentieth century when they migrated in large numbers from the rural areas to the cities, the Jews both before and after the war, migrating from Europe, and the Indian and coloured communities when they migrated to the urban areas. In 1978 the de Kock Commission reported on the banking industry. There were a large number of different categories – Building Societies, General banks, Merchant Banks, Discount Houses and so on, all with their own governing legislation. The commission reported that this was resulting in the inefficient utilization of capital and recommended that all the different classes of institution be brought under the same banking legislation, and essentially be required to hold the same capital. The legislation was passed in the mid 1980’s and the consequence was that the building societies lost their tax privileges, and since they did not have equity shares, and relied on their reserves as their capital, they were all under-capitalised. They had no option but to convert to equity banks or merge with banks. UBS and Allied were incorporated into Amalgamated Banks of SA together with Volkskas (ABSA); NBS listed and later failed and most of the loan book was taken over by FNB, Saambou listed and failed, and the Perm was taken over by Nedcor. I was vigorously opposed to the legislation, because it meant that funding for loans to first-time home-owners would come from the same pool as was used to fund corporates and thus directly competing with the likes of Anglo-American. I was outspoken about the implications of it for black people, who for the first time were able to buy houses, and it seemed ironic in the extreme that the institutions on which all other communities had relied to finance their home ownership, were dismantled at the very time that they were needed by black people. It was a very lonely battle and I frequently found myself in meetings with the Minister of Finance and all the CEO’s of the other building societies on the one side of the table and by myself on the other. I think that with the benefit of hindsight, we have been proven totally correct in the position we adopted, and that black home-ownership would have been very different if the building societies had survived.
LM: You were always passionate about housing, what role did you and others at the Perm play in providing housing for Black people in the difficult 1980’s?
BT: At the time we were regarded as fairly radical. We certainly led the field by a long way in granting loans to black people, and supported developers of low-cost housing. We also did things like granting loans to black women who were in customary unions. We disregarded the law that as such they had no power over their own property. We were very fortunate to have a board of directors who supported us in all these policies, and what we were doing. The Perm story during this period is the subject of a Harvard Business School case study.
LM: What is demutualisation, why was it such an important debate at the time, and what did it mean for your career?
BT: I think I have answered it above. Essentially a mutual society (which is what the building societies were) has no equity capital and relies on the reserves it has built up as its capital. By the time the Perm was taken over by Nedcor, its reserves were about R400 m which had been built up over 100 years of trading with the public, but they have to be profitable or they would not be sustainable. The time period for measuring that profitability is much longer than in an equity-based bank, which is effectively quarterly. So, in my view, the planning process is much sounder, being over a longer time frame. Effectively the value of all the reserves of the building societies was captured by the people who happened to hold “shares” at the time of the takeover or conversion.
LM: On the eve of democracy, you and a couple of community activists worked on the concept of a Community Bank, tell us a bit about the concept and the process of setting it up. What lessons did you take from this experience?
BT: My leader in that initiative was Mama Ellen Khuzwayo and my partner was Cas Coovadia. If you read my speech at the launch of Nikela, the Community Bank was essentially a fore-runner of those ideas. Throughout the world, foundations for banking industries was bottom up, established in a community for the benefit of that community. In the speech I have given the example of Germany, where even today 85% of all retail credit is still provided by the Bauspaarkassen and savings banks. The same applies in the UK and even in the USA. Because of the way our economy evolved, our banking industry has always been very much top-down, and that totally undermined the natural development which would, almost certainly, have taken place. The Stokvels would have been the start of our community banks.
So the Community Bank was an attempt to do what should have taken place naturally. If you think about it there is virtually no circulation of cash within a low-income community today, and no development of managerial capabilities in, by and for that community. But the forces against us were too great. It was conceived as a national community bank. Community banks are not national, they are community based. It was still much too much “doing it for them” instead of “assisting them to do it for themselves”. It had no legislative protection or privileges and faced the full force of the major national banks, with their nation-wide networks and incredibly strong branding. Why would anyone want to bank with a community bank?
So we failed. Trevor Manuel recently made the comment that “I believe that South Africa is much the poorer for this failure, since victories for inclusive financial services so early in our democracy would have laid a much sounder foundation for broad-based economic liberation”.
LM: You then started the EBank at Standard Bank, aimed at the unbanked and underbanked in South Africa? What success did this achieve, and why was it important for South African banks later on?
BT: The idea was conceived by Standard Bank before I was recruited to implement it. It was conceived as E Bank, a self-standing bank with its own distribution network, products and technology. I put together a team, a number of whom came from the Perm, and we developed the idea on some fundamental principles. the most significant were that it would start with a low-cost savings account designed especially for the use of low-income people, and using the best that modern technology could offer at the time. Fica was no part of our lives back then and the rule was that we could open the account, and the customer could walk out of our office in less than 5 minutes with his card and having performed the first transaction by himself (which was a deposit of R30 at the ATM). The account had a savings and a transactions purse, and the customer had to come into one of our outlets to move funds from the savings purse to the transactions purse. You earned a higher rate of interest on funds in the savings purse than in the transactions purse and enjoyed free funeral cover dependent on the balance you had maintained in the savings purse. The customer would only be charged “for value received” so there was no monthly “Admin fee”. But the customer would have to pay the cost of the service that he did receive. At the time it was a real breakthrough and it was launched at the end of 1994. Within a year or so we were realizing that it really was impractical to have a separate distribution network – too costly for E Bank and depriving the Standard Bank branches of the cost spread that they enjoyed from the low-income customers using those branches. So instead of it being a bank, it was really a product designed for low-income people. It even ran on a totally different core banking system (the one originally taken over by Standard Bank from the Trust Building Society). Having done what I had, I had really made myself redundant, and the whole thing was being run by the branches.
Standard Bank was given a Smithsonian Institution award for the use of technology in the banking industry and The World Bank wrote it up as a case study. When I left we had 3.5 million E Plan customers. From my point of view most of that was wasted in the following years. The first thing that was done was that it was realised that if you charged a R15 / month admin fee, you could immediately generate over R50 m per month. And I left a plan to extend the offering by including consumer loans, but instead of doing that, the bank entered into an agreement with African bank to hand over all loan leads to African Bank in return for a commission.
LM: I first met you in 1995, you facilitated a executive management strategy and planning session of the National Department of education that brought together officials from different former apartheid era education departments together with newly appointed post apartheid officials. Why were these types of sessions important in building a new public sector in South Africa?
BT In the last two years of my time at Nedcor I led a team of people in developing scenarios for the successful transformation. They became known as the Old Mutual Nedcor Scenarios. Up till that time there was a rather naive assumption that all we needed was a democratically elected Government, that we had a very powerful and effective economy that would be the engine for growth in the whole of Africa, and that everything would be rosy and come right of its own accord. The scenarios revealed that that was not the case at all, and that we would need three miracles – a political one, an economic one and a social one if the transition were to be successful. Sadly, that has proved to be true and the scenarios are as accurate today as they were when they were first published in 1992. I presented those scenarios more than 200 times during the course of 1992/93 and they had a big impact on large numbers of people.
The implications for a whole range of Government departments and officials were serious and I was requested on numerous occasions to participate in planning sessions as new ministers and officials took over the management of those departments and agencies. So, for example, I was involved in sessions for Department of Water Affairs, SABC and Denel. I think they were useful in alerting the officials to the extent to which things were going to have to change if the transition was to be successful.
LM: You then became the Chief Executive of the then Banking Council ( later renamed Banking Association), how did that come about and what was the role of the Banking Council?
BT: As mentioned in my tale about E Bank, when the management was effectively handed over to the branches, I was redundant. Norman Axten of FNB was temporarily holding the position of CEO of The Banking Council. but Standard Bank was concerned about the ongoing leadership of the Council and I was encouraged to make myself available to take up that position. Richard Laubscher of Nedcor was chairman at the time and I had, of course worked with Richard while I was in Nedcor, so it was an easy discussion, and I took over the reins in 1997.
LM: The Banking Association achieved a lot under your stewardship, could you highlight 5 of the most significant achievements of that period?
BT: I think the most important was the establishment of the Banking Council (now BASA) as the spokesperson for the banking industry and leader of all the industry interfaces and negotiations with Government. But then one of the first things that we did was establish the office of the Banking Ombudsman, established PASA, established SABRIC, and then of course, we led the industry in negotiating the Financial Sector Charter.
LM: You have always passionately argued that the banking industry has to balance between achieving and maintaining the international standards required of banking supervision and competition whilst being responsive to the socio economic needs of the country. Looking at the situation today, across the most important dimensions, is the South African banking industry maintaining that balance?
BT: No, I don’t think they are or can. They are very large top-down institutions, and they can and do serve the first world part of our economy very well. But that is not where the battle is going to be won or lost. They cannot, as presently constituted and run, perform the role of community based banks, facilitating the circulation of money within the community and as integral parts of the fabric of a low-income community. I think it is possible that they could if they were, over a period of time, to turn over specific branches to communities and were to help those communities establish effective and sound management of those community based institutions. But it would not be easy and in my view the community banks would have to be restricted to doing business in that community only, they would have to be protected from competition from the national banks, and they would have to be given legislative privileges that encouraged members of the community to use the community bank and to place their savings there.
LM: In 1997, you hired me to become GM: Public Policy and SME development from the public sector, you have been involved in recruiting and nurturing a lot of young leaders, mainly black. How did you have the presence of mind to do this long before it become mandatory?
BT: I grew up to love and respect everyone, regardless of colour, race, gender, religion or creed.
LM: One of the things you instilled in us was diligence and professionalism in anything we did, why is this still important for young leaders and entrepreneurs today?
BT: Come on Lincoln. Excellence, truth, and love are absolutes, despite modern protestations that they are relative values. It worries me that business management has achieved the lowest standard of scientific excellence of all the professions. If we were, for example, judged to the same standards as the doctors and engineers, we would be found to be seriously lacking.
LM: You have worked with some of the doyens of South African banking, Nalie Bosman ( ABSA) Jaco Maree (Standardbank) Richard Loubscher ( Nedcor) Viv Bartlett ( FNB) and Magiel le Roux ( Capitec), what are some of the most important leadership traits they exhibited and some of the most wonderful memories from their time on the Banking Council Board of Directors ?
BT: They were all absolutely dedicated to do the best for their respective banks, and in the Banking Council, for the industry. They were all of the highest integrity and they were all very genuine and lovely people. I loved working with them, and they made it feel like I was working with them and not for them.
LM: What are the key things facing banks in South Africa today, and how do you think they should handle these challenges?
BT: Effectively I stopped thinking about banks in 2011 and I think it would be highly presumptuous to think I could make any useful comment today. The managements of the banks are, I know, thinking very deeply about these things.
LM: You were instrumental in the setting up of the Payment Association of South Africa, ( PASA), how do you see the future of payments in South Africa?
BT: Today I don’t know enough about it to comment. Obviously, it is essential for any banking industry to have interoperability and PASA has done incredibly well in ensuring that in South Africa. But with numerous new players coming into the payments business with a vast range of new technologies, it is likely to become increasingly difficult to maintain that need for interoperability without putting the whole system at risk in some respects.
LM: what lessons can we learn from the demise of VBS, African bank, Saambou bank and Regal bank?
BT: Personally, I think there has been a failure in both the accounting profession and in banking supervision. Sadly, there are always going to the crooks in banks, and it is the role of those two agencies to identify the problem and do something effective about it before the public are at risk.
LM: Working with you and later being mentored by you, there was always a strong emphasis on ethics. Where did we go wrong to have a Steinhoff scandal?
BT: From the little I know about it, there was again a failure in the auditing of Steinhoff. The danger should have been identified and addressed much earlier.
LM: Looking back in your life, what are the things that you look back on with pride and joy,
BT More than all else, that I have been married to Jill for just on 50 years and love her more today than the day we were married; and for having three sons and their lovely families, who are leading really good and effective lives. After that, Jacko Maree made a comment about me that I really appreciate and hope I have truly lived out in the way that Jacko has indicated.
“(Bob) has always been passionate about the development of South Africa. His life has been as much about doing the right thing for the good of the country as it has been about building his career, and he has successfully balanced these often-competing imperatives”.
(I hope Jacko does not mind me quoting him.)
LM: What things do you look back on and wish you could have done differently?
BT: Far too many to mention, and some of them personal. I am ashamed of every occasion that I have hurt someone.
LM: Thank you Bob for sharing your wisdom, giving your perspectives and at a personal level, thank you for the huge role you have had in my own personal and professional growth.