It was recently announced that one of our more impressive business leaders will soon be standing down. As CEO of WesBank, Brian Riley has played a key role in both the financial services industry and the automotive sector. While he may not have had the same high profile as his FirstRand Group counterpart, FNB’s Michael Jordaan, who has also stood down this year, Brian’s impressive track record at WesBank speaks for itself. ZA Confidential caught up with Brian to get his views on the industry, and to find out his plans for the future.
ZAC. It’s often said that buying a car is the second biggest purchase after your house. Is that still true?
BR: Yes, this is definitely still the case. However, looking at the most recent Consumer Credit Market report, Secured Lending (mainly vehicle finance), is currently exceeding Mortgage Finance. WesBank’s average transaction value for new cars has doubled from R120 000 to R240 000 from 2006 to the present; during this same period the average transaction value for used cars grew from R94 000 to R165 000, an increase of 75%.
ZAC: What big changes have you seen during your time at WesBank, in terms of the emergence of the black consumer, trends in bad debt, length of loans, move to more fuel-efficient cars and so on…….?
BR: Since 2006 we have seen a change in the demographic makeup of our new business production, as follow:
Indian 5.5% 5.0%
Coloured 5.4% 5.5%
African 24.1% 34.4%
White 51.9% 45.5%
Companies 13.1% 9.6%
This clearly shows a transformation of wealth, in particular to the African customer. There has been a plethora of governance and compliance related changes. From a regulatory perspective, the introduction of FICA, FAIS, CPA as well as the NCA have quite rightly afforded the customer more protection, fundamentally changing the way we do business. Risk Management has also taken a new form in the banking environment with the introduction of the Basel Accords. The cost of compliance has grown significantly but at the end of the day the sustainability of a strong banking environment is at the heart of any economy and the legislation should be welcomed. The NCA was the most significant introduction for us as it affected our credit assessment methodologies, resulting in improved assessment and risk management capabilities. The NCA has also provided the customer more flexibility in structuring their finance agreements such that, more recently, we have witnessed average contract periods extending from 54 months to 68. It has also afforded the client clear rights and more protection from unscrupulous lending practices. WesBank has invested considerably in technological innovations which include the electronic submission of applications directly from the dealer floor. WesBank pioneered the first web-based contracting process with the launch of iContract. In order to empower our customers and address the ever increasing need for instant service gratification, WesBank also recently launched the online self-help account management service. We have seen a direct correlation between self-help functionality and improved customer service. These improvements have been significant contributors to ensuring WesBank is a highly efficient, cost effective organization delivering excellent service to both dealers and clients.
ZAC: WesBank has been an impressive contributor to the fortunes of the FirstRand group, but has tended to fly under the radar. Was this deliberate?
BR: It was, and for two reasons. Firstly, WesBank isn’t a big public-facing brand. 95% of our business is written through the brands of other companies, in return for which we jointly share, to some degree, in the profits we make. There are very few companies around the world which successfully specialize in partnership business models. When you are leveraging the strength of your partner’s brand, it makes little sense in spending large sums of money building your own. The other reason is a matter of personal style. Getting the job done is far more important to me than being a public figure. It is impossible to avoid media and public attention but I limited my involvement to events and interviews which I felt added value to WesBank.
ZAC: Your departure from the group follows that of former FNB CEO Michael Jordaan, who has already announced new interests. What about you? Are you staying in ZA? Will you be taking on new roles? And why are you now leaving WesBank?
BR: I am certainly remaining in South Africa. I became a citizen quite some time ago which hopefully confirms my commitment and loyalty to the country. I have a 26 year old son in the UK and a 17 year old son schooling here in South Africa. My partner, Fiona, has two children being educated in the country and quite frankly South Africa is a wonderful place to live and whilst it is not perfect, it is full of promise and opportunity. I can’t imagine myself living anywhere else. I am also too young (56) and too energetic to finish working just yet. I have received a couple of offers but want to take a couple of months to wind down a little before deciding upon what I am going to do next. I have worked for 37 years in the instalment finance industry. I started working for a small personal loan company in the UK straight from school before working for Lloyds Bank and Barclays. My move to WesBank in 1990 occurred as a result of Barclays selling its instalment finance ‘arm’ to GEC. When I took over the reins in 2007 I made it public knowledge that I would stay for 7 years. It created certainty for those aspiring to run the business one day. It also meant that to achieve the success I envisioned, it required a significant bias for action within a limited time period. It’s time to do something else. I’m sure that what I will be doing will become clearer in the next couple of months – but it will not be in the instalment finance business.
ZAC: Looking at the auto industry, we have seen a lot of strike action, BMW SA recently announcing it is losing a new ZA investment, and surveys showing low business confidence. What is your view on the outlook for the automotive sector and the broader economy?
BR: The Automotive Industry contributes approximately 7% to SA’s GDP and is therefore a significant contributor to the broader economy. Without the APDP which heavily subsidises the Motor Manufacturing industry we would not be producing vehicles at all in South Africa. I must believe that disruptions to the production geared for export will raise questions in manufacturing boardrooms around the world. We are not ideally located for export, and CEOs of Original Equipment Manufacturers in Asia, Europe and the USA will ultimately make the right decisions for their shareholders, and at some stage that may exclude the production operations in South Africa. Workers have the right to fight for better working conditions and better wages, but the decision to remain in South Africa will ultimately come down to economics and quality. If vehicles can be produced at the right quality and at an appropriate return for shareholders, productions plants in SA have a future. If not, they will be closed. If we import all of our vehicles they will become more expensive, but South Africans love their cars and the retail market will continue to perform in sync with the GDP of the country.
ZAC: There is a growing likelihood that e-Tolls are coming. Do you feel sorry for the Gauteng motorist?
BR: The South African Government needs to invest in the maintenance and upgrade of infrastructure. However, the viability of e-Tolls as a preferred funding mechanism for this is debatable. With improved transparency and pro-active consultation with the public, the perceptions of e-Tolling may have been different. Either way, infrastructure investment has to be recovered through taxes one way or another, and for South Africa to thrive, far more development has to take place.
ZAC: Road safety is a big issue. Are there any measures you would favour to make ZA roads safer?
BR: WesBank acknowledges the importance of maintenance and the general roadworthiness of vehicles in order to improve the safety of road users. The major contributors to road accidents occur because of worn shock absorbers, brakes and tyres. The introduction of an annual test to ensure vehicles over 5 years old are roadworthy would be an initiative we would support. This has been discussed for quite some time and why it hasn’t been introduced yet, is beyond me. This would help improve the roadworthiness of vehicles. In addition the upkeep of roads along with strict adherence to the legislation, in particular drinking and driving and speeding, would benefit safety. The long awaited points system should also be introduced sooner rather than later.
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