Capitec Bank Holdings Limited (CPI) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Second Virtual Annual General Meeting of Shareholders of Capitec Bank Holdings Limited. My name is Santie Botha, and I Chair the Board of Capitec. With the COVID-19 pandemic still in force, we decided that in the interest of everybody's well-being and safety, to again convene a virtual meeting for this year. As a quorum of members is present, we have at least 3 shareholders present and at least 25% of votes have been submitted on proxy and notice of this meeting has been given in an appropriate manner, I declare this meeting properly constituted. The notice convening this meeting was distributed on 28th April 2021, allowing sufficient time for members to peruse the contents thereof. I propose, therefore, that the notice be taken as read. This being a virtual meeting, we need to vote on a poll on all the resolutions proposed in the notice. We will open the voting on all the resolutions now to enable you to vote at your leisure whilst I read through the resolutions. Select for if you agree, select against if you do not agree or select abstain if you do not wish to vote on a resolution. You will still be able to send messages and view the webcast whilst the poll is still open. I will allow for questions on all the resolutions till all the resolutions have been read. Once all your questions have been dealt with, we will ask you to finalize your votes, close the poll, and we will then display the results of all the resolutions on the screen. [Operator Instructions] Gerrie Fourie, the Group CEO of Capitec, will present an overview of Capitec's performance at the end of this AGM. The company's act requires a member of the Social and Ethics Committee to report on the affairs of this committee. This report is included in the integrated annual report. Emma Mashilwane, Chairman of this committee, can address any questions that you may have at the end of this meeting. We will offer a further opportunity for general questions after Gerrie's presentation at the end of the meeting. Ordinary resolutions. So we will now move to the business of the day. So ordinary resolution number one, the reelection of Danie Meintjes as an Independent Non-Exec Director of the company. Danie was the CEO of the Mediclinic group until his retirement in 2018 and currently serves on the Board of Mediclinic International. He joined the Board of Capitec in 2018 and is a valued member of the Board. Danie is present. So Danie, please show yourself on screen.

Okay. Good afternoon, everybody. My name is Danie Meintjes, and I'm available for reelection to serve on the Capitec Board. So thank you. Thanks, Chair.

Thank you, Danie. So please vote now if you have no questions regarding this resolution. [Voting]

Ordinary resolution number two, the reelection of Piet Mouton as a Non-Executive Director of the company. Piet is the CEO of PSG Group and serves on the Boards of a number of companies. Piet joined the Board of Capitec in 2007 and is an experienced and valued member of our Board. Piet is present. Piet, please show yourself on screen.

Good afternoon, ladies and gentlemen, and shareholders. I hereby put myself up for reelection. Thank you very much.

Thank you, Piet. So please vote now if you have no questions regarding this resolution. [Voting]

Ordinary resolution number three, the reelection of Jean Pierre Verster as an Independent Non-Exec Director of the company. Jean Pierre is a chartered accountant and the Chairman of our Audit Committee. He is well positioned to serve the business with his analyst and audit experience. Jean Pierre joined the Capitec Board in 2015 and is a valued member of the Board. We are on ordinary resolution number three, Jean Pierre Verster. So Jean Pierre is present. So Jean Pierre, please present yourself on screen.

Thanks, Santie. Good afternoon, everyone. My name is Jean Pierre, and I'm available to serve on the Capitec Board.

Thank you, Jean Pierre. So please vote now if you have no questions on this resolution. [Voting]

Ordinary resolution number four, the confirmation of the appointment of Cora Fernandez as an Independent Non-Exec Director. Cora is a chartered accountant and has extensive experience in investment management and private equity. Cora joined the Capitec Board on the 25th of September 2020. Cora is present. So Cora, please show yourself on screen.

Good afternoon, ladies and gentlemen. My name is Cora Fernandez, and I'm available to sit on the Capitec Board. Thank you, Chair.

Thank you, Cora. So please vote now if you have no questions on this resolution. [Voting]

Ordinary resolution number five, the confirmation of the appointment of Stan Du Plessis as an Independent Non-Executive Director. Stan is Chief Operating Officer and Professor of Economics at Stellenbosch University. He's a specialist in macroeconomics and monitory policy and has been an adviser to the South African Reserve Bank and National Treasury on macroeconomic policy. Stan joined the Capitec Board on the 25th of September 2020. Stan is present. So Stan, please show yourself on screen.

Good afternoon, Chair, ladies and gentlemen. My name is Stan Du Plessis, and I'm available to serve on the Capitec Board.

Thank you, Stan. So please vote now if you have no questions on this resolution. [Voting]

Ordinary resolution number six, the confirmation of the appointment of Vusi Mahlangu as an Independent Non-Executive Director. Vusi is the Co-Founder and Director of Tamela, an investment and corporate finance business. He has extensive experience in finance and investment banking. Vusi joined the Capitec Board on the 25th of September 2020. Vusi is present...

Good afternoon, ladies and gentlemen. My name is Vusi Mahlangu, and I'm available to serve on the Board of Capitec.

Thank you, Vusi. So please vote now if you have no questions regarding this resolution. [Voting]

Ordinary resolution number seven, the reappointment of PwC as auditors of the company up to the next AGM in 2022. Please vote now if you have no questions regarding this resolution. [Voting]

Ordinary resolution number eight, the reappointment of Deloitte & Touche as joint auditor until the next AGM in 2022. Please vote now if you have no questions regarding this resolution. [Voting]

Ordinary resolution number nine, the authority to, one, issue loss absorbent capital securities; and two, ordinary shares upon the occurrence of a trigger event in respect of the loss absorbent capital securities. So please vote now if you have no further questions on this resolution. [Voting]

Ordinary resolution number 10, the general authority to issue ordinary shares for cash. Please vote now if you have no questions. [Voting]

Ordinary resolutions 11 and 12. This is the nonbinding endorsement of the remuneration policy and its implementation. The purpose of ordinary resolutions 11 and 12 is to test the view of shareholders of our remuneration policy and our implementation of the policy. So just as a brief recap, in March 2020, South Africa went into one of the hardest lockdowns outside of Southeast Asia. As the lockdown was extended, financial hardship to a large portion of our client base and huge internal operational challenges became a reality. Our leadership team and all employees worked tirelessly to safeguard and balance shareholder interest with the health and well-being of our clients and of our staff. While the group financial performance was negatively impacted in the first half of the year, strong and decisive leadership and innovative and agile delivery from all our staff ensured that we exceeded market expectations in the second half financial performance. The REMCO, within its mandate, had to apply their minds to ensure that pay was aligned to performance and that staff remained motivated. As such, the REMCO aligned both short-term and long-term incentive to reward all staff in the group. The overall remuneration philosophy of Capitec remains unchanged and fit-for-purpose for the achievement of long-term strategic targets. So we'll now move to ordinary resolution number 11, which is the nonbinding endorsement of the remuneration policy. So please vote now if you have no questions pertaining to this resolution. [Voting]

Ordinary resolution number 12 is the nonbinding endorsement of the implementation report of our remuneration policy. So once again, please vote if you have no further questions on this resolution. [Voting]

Ordinary resolution number 13, authority to amend the definition of employee in the Capitec Bank Holdings Share Trust Deed. The purpose of the amendment is to be able to use the share incentive scheme governed under the trust as a tool to recruit senior managers to key roles in the group. So please vote now if you have no further questions on this resolution. [Voting]

So that concludes the ordinary resolutions of the day. We now move to special resolutions. So special resolution number one is the approval of the non-executive directors' fees for the financial year that ends on 28 February 2022. So please vote now if you have no questions on this special resolution. [Voting]

Special resolution two, the general authority to the company and any of its subsidiaries to repurchase up to 5% of the ordinary shares issued by the company. So please vote now if you have no further questions. [Voting]

Special resolution number three, the authority to the Board to authorize the company to provide any financial assistance to any related or inter-related company. So please vote now if you have no questions pertaining to this particular resolution. [Voting]

And then special resolution number four, the authority to the Board to authorize the company to provide financial assistance for the acquisition of ordinary shares in respect of a restricted share plan for senior managers. So once again, please vote if you have no questions pertaining to special resolution number four. [Voting]

So we've now concluded on all the resolutions for this particular AGM. If you have any specific questions on any of the resolutions, you can ask them now.

Okay. So there's a question from [ Andrew Budway ]. "I note the reports concerning COVID and the impact of the pandemic on clients. I would appreciate a comment on how the impact on employees has actually played out and how Capitec employment policies and procedures have been and will continue to be changed." So [ Dr. Budway ] -- Danie, can I ask you, Danie Meintjes, who's Chair of the REMCO, to take this question?

Thanks, Chair. I will start, and I think then Gerrie can add to it. From a remuneration point of view, I think as you summarized, Chair, we had to reevaluate during the year because the pandemic really caused havoc. There was uncertainty. We stopped all short-term bonuses, the calculations of that. We stopped increases. And as you've noted in the rem report, we didn't give increases this year for the senior execs. But as the year panned out and as we did a new budget that we approved at a Board level, we've set new targets. And I'm pleased to say that a normal increase was given to all staff. It varied. At the lower end of the spectrum, it was a higher increase. In the higher end of the employee group, it was lower, plus/minus inflation related. And I'm very proud and very pleased to report that none of the employees was terminated. There were no layoffs, no salary freezes. The bank managed to maintain the business and look after the staff and the clients. I think that is a short summary. I don't know whether Gerrie would like to add anything.

Thank you, Danie. Gerrie, anything you wish to add?

No. I think the only thing to add is the fact that we had to adapt very quickly to work from home. And as the year progressed, we started to move people back. And I think the biggest challenge now is to get that balance right between work from home and work from office. So I think that's a big opportunity. And then the other big thing is we've driven very hardly multi-skilling and people -- using people in different jobs because this has given us a lot of opportunities in that regard.

Thank you. Any more questions? No further questions?

Okay. So if there are no further questions, we will close the poll and display the results of the votes on the screen. Are we ready for the results to be displayed on the screen?

Results will come up shortly, Chair.

Thank you. So just a minute or so. There you are. So I'm just reviewing all the results. So in terms of ordinary resolution number one, for, 96.31%, passed; ordinary resolution number two, 93.35%, passed; ordinary resolution number three, 98.35%, which is passed; ordinary resolution four, 99.46%, passed; five, 99.28%, passed; six, 99.26%, passed; seven, 79.82%, which is passed; eight, 98.39%, passed; nine, 97.93%, which is passed; 10, 97.12%, which is passed; 11, 79.16%, which is passed; 12, 48.75%, which is not passed; 13, which is 99.44%, passed. And then special resolution one, 99.41%, passed; two, 99.26%, passed; three, 99.56%, passed; and four, 99.43%, which is passed. So thank you very much. So all the resolutions have been passed with the requisite majority vote, except for ordinary resolution number 12, which is the nonbinding endorsement of the implementation of the remuneration policy. As we have not received the requisite 75% on the nonbinding endorsement of the implementation of the remuneration policy, we will further engage with interested shareholders. We have already engaged with some shareholders prior to this AGM. We will communicate a proposed date for such engagements on SENS this coming Monday as part of the AGM results announcement. So ladies and gentlemen, as all the agenda items have now been dealt with, I would like to take this opportunity to thank you for attending this AGM today and also for your interest in Capitec. I now declare the AGM closed. Should you have any questions regarding the affairs of the Social and Ethics Committee, Emma Mashilwane is present to answer those. And if there's no questions to Emma, then I'm going to hand over to Gerrie Fourie, our CEO, who will present an overview of Capitec. So Gerrie, over to you. Thank you.

Thank you, Santie. Good afternoon, everyone. Yes, I think we -- normally, during my presentations, we make a video of either the future or the year that's passed. But we thought it's better that given that Capitec is 20 years old, that we actually reflect on the 20 years and what's been achieved in the 20 years. It's interesting we normally get that question. When we started off the bank, did we think we're going to be this big? I always said no, answer lives, and we've always picked up on [ the mentals ] and focused on the implementation of our strategies, and that's still what we're doing today. What was also for me very encouraging and quite an experience is when we had our celebrations here in March. There were still 49 people that actually joined me and André, who was with the bank for 20 years. So I would like to share that video with yourself. [Presentation]

Okay. Okay. As I think of the year that's gone past, I think these 2 words sum it up. It's a year that we had to be agile, and it's a year that we focused tremendously on digital. I just want to remind everyone that there's my presentation that I did about 1.5 months ago for our year-end results, and that's got much more detail about the financials. I'm just going to cover certain aspects of the financial that I'm going to focus on. If I look at the year that's gone, it basically consists of 2 halves. I think we all knew that March was when COVID started, and then we had to quickly look at how do we make certain that our staff are safe, our clients are safe, how do we start working from home. And then I think the biggest challenge was to understand the full potential of COVID on the business, on our credit, on our provisioning. We also spent that key first 4, 5 months to rebudget and basically stop all new positions, stop salary increases. Danie referred to it. And then second half was actually really started to focus on growth. And I think what we've done, I think, is a very good achievement. We've launched 6 new products in that period. And I think what is important is right through COVID and for the full year, we've maintained our service delivery right through. If I look at our financial results, I think what is important is that you can see the impact of the first half and then the positive results in the second half. I think what is important is, I remember when I said to our team here in August, September, if we actually can achieve the same figures as what we've got in 2020, then we will have a very good year. And that was ZAR 3.2 billion. And as you all know, we've actually increased that with 18%. And then also with an ROE of 30%. So I think overall, we had a tremendous -- a very good year. We recovered well, and I will unpack that a little bit further. If I look at our key drivers, we've always said that we want to cover our operating expenses with our transactional income. That was our objective we set to ourselves about 10 years ago. And I think what is quite nice is you can see in August and in February, we've actually achieved that. We're 101% and 102%. And even if you bring Mercantile in, you can see we're basically close to that. And then on the second slide, you can see the combination between our credit income and our transactional income. We were as high in the first 6 months of 87%, 86% and then dropped to 61%. Our aim was actually to get to 50% -- to plus/minus 50%. So 50% of our income coming from credit and 50% of our income coming from transactional income. So I think what it shows is how well diversified we are. We could go through a crisis and that we're not that dependent on the credit side. I think the challenge is, given the economy and given COVID, how do we open up on the credit side and how do we manage the credit side. So I think that's a challenge for this year. Cost to income, I think we're quite happy with plus/minus 40%. And then capital adequacy, I think what helped us quite a lot in this period is we've always been very conservative. We've always said we need to make certain that we can go through experiences like COVID. I think we've shown that. And you can see how the capital adequacy has improved to about 36%. And the impact of buying Mercantile, you can see that impact coming through during 2019 and 2020. If I look at our retail credit sales, I think what is quite important is our sales dropped in the second half due to COVID. We've pulled back. And in the second half, we actually opened up. If you compare ourselves, it was ZAR 29 million versus ZAR 39 million in the previous year. But if I look at the year ahead, I think we're on track to take it back to about ZAR 39 million sales. It all depends on what wave 3 is going to do and what happens with the vaccines. But we're quite positive about our credit sales in the sense of what we've achieved. I think the access facility has been exceptionally well. About 50% of our sales is now coming through from either credit card or from the access facility. What is interesting is on the access facility, about 50% of our sales in the access facility are sold to people that has previously got credit from us. And another 50% is to clients that never took credit with ourselves and now for the first time is taking up credit as well as new clients. So we're very happy with this product. If I look at the impact of COVID, I'm just going to try and move the screen because it's -- if I look at the impact of COVID, you can clearly see what it has done to our provisions. I think to look at it is if you look at the year 2019, we had an ZAR 4.4 million (sic) [ ZAR 4.4 billion ] provision and then ZAR 4.5 billion again in 2020 and then the ZAR 7.8 billion in 2021. I think what is important to note here is the dark blue because we provided -- in 2020, we've provided ZAR 250 million. And you could see in the first half the ZAR 4.3 billion. And then you can see we started releasing as we started to understand what is happening with COVID. So as we're standing now, we've got ZAR 3.2 billion. That has been provided for COVID. And I think the next couple of months will tell us what's going to happen in that particular space. This has been a very important slide. It just shows what has happened with digital. You can see our digital transactions have gone up from 516 million in 2019 to over 1 billion in 2020. And we haven't increased our prices on digital for the last 3 years. It's a very simple sum. It's ZAR 1 per transaction. And you can see the very strong growth. We could also see in the 6 months prior, there was no drop. If you look at the point-of-sale transactions, you can clearly see that in the first 6 months, 419 versus the 584. But again, we -- over 1 billion transactions on our card transactions. And then cash, basically staying pretty much flat. And for us, that is very promising. We would like to get our clients, moving them away from cash to electronic payments. But I think, yes, this is a very positive slide for ourself. If I look at our transactional income, how has it grown over the last couple of years, you can see the impact has grown steadily. And then last year, we managed to increase it to about ZAR 1 billion. That's driven by our digital -- increase in our digital transactions of about 260 million, 270 million. That's also on our cash. We increased our prices on our cash because we wanted to move people away from cash of about ZAR 260 million and then about ZAR 100 million due to Mercantile. But I think overall, we've done exceptionally well. And you can see the impact of funeral plan. We've launched it in 28 May 2019, and the contribution to our income was ZAR 54 million, then ZAR 413 million and now ZAR 650 million. So I think we've done exceptionally well on our transactional and our funeral income. I want to now spend time on the bank for all South Africans. There's a perception in the market where people think that we're actually focusing on a certain segment of the market. When we wrote our business plan in 2000, we always said we want a bank 96%, 97% of all South Africans. So that was the aim. And I think we're starting to get to that aim. So I would like to unpack that to show the inroads that we've made. I think if we look at our number of clients, the number of clients, you can see how it's grown basically for the last 2 years, 3 years. We've grown with 2 million. That gives us a good -- 2 million per year. That gives us a very strong base. We're now over 16 million clients. The 2 numbers that we're driving very hard is the digital number, the 8.6 million clients that's on digital. That figure is now over 9 million. And then the quality clients, the quality banking clients, which is just over 4 million. And then the credit clients, I think the credit clients stayed flat actually over the last couple of years at 1 million. And that's, I think, a reflection of how we've actually moved out of the lower-income segments where the big volumes were and secondly, our appetite, given the economy and given COVID where we pulled back. So we're quite happy with that 1.1 million clients that is actually -- that's taken up credit with ourself. I think the last very interesting stat is that the online retail transactions in 2020 grew 66% for South Africa in totality to 30 billion. That's 4.2% of total retail volumes in Africa. Now just to give you indication, America and China wasn't really [indiscernible] about their latest figures. America was at 15%. China was at -- 30% was done online. So there's still a lot of way for South Africa to grow in that particular area. But that's why the digital space is quite so important. There's about 10 million people that is doing transactions on a digital or online platform. And you could see with clothing and groceries what COVID has actually done. So I think this stream is there to stay, and I think it's going to grow quite a lot. This is to me a positive slide. It shows clearly that we are the market leader when it comes to digital. You can see that we've downloaded -- from 2019, we're the leader. 7 million people have downloaded the app, and you can see the other banks where they are. And the slide on the right, the cellphone is actually one that we watch quite a lot. This is Apple's stats, and that was the stat of yesterday. It's showing if we compete with WhatsApp and TikTok, you can see we're #3, meaning we're the app that is the third most downloaded. These vary. We vary between first place, second place and third place the whole time. So you can see there's a big adoption on the app for ourself, which is very encouraging. This is actually the interesting slide for me. What we've just done is we've unpacked the 15.7 million clients and unpacked it into age groups to see who is making use of Capitec. And you can see on the left people that's younger than 20. There's 22 million people in South Africa. A big portion of our population is below the age of 20. We've only got 1 million clients that is in that segment. Then if we look at 21 to 40, there's 20 million people in South Africa. We've got 9 million clients. So we've got about a market share of about 44%. So you can see we were very strong in the 21 to 40 age groups. We're focusing on marketing and our strategies on 20 to 35. And then one, I think, which is interesting is if you look at our 41 to 60, 11 million, 12 million people in Africa is in that age group. And we've got a market share of 38% or 4.5 million people as actually -- as part of that account group ourselves, our active account. And then the people over the age of 60, there you can see we've got a 20% market share. I think the challenge here is now we've got this 15.7 million clients. There's a lot of clients where we're not first in wallet. So we're not the first card that you actually take out, and we're second in wallet. You can argue that the people that can profile ourselves, that 4 million of quality clients, they will take out our card first. And it's actually how do we actually change it and how do we make certain that we actually can get these people to take -- to use our card first. I think if you look at our full bank offering, I just want to unpack that to you. So is -- if I look at Transact, that's our main account, you can see what is interesting is we've done 5.3 billion transactions last year on it, up 17%. We've got a market share on real-time payments, RTC, of 37%. And then you can see quite a new -- quite a lot of new solutions that's been launched. I think the one that excites us is that you can now open your account on that. You don't need to go through a branch. So if you want to lie in your couch and you want to open up a Capitec account, you go through it, you do a selfie, you go to the Department of Home Affairs, and you can open your account. And then we will deliver your debit card out to you. So from July, we will deliver your credit card if you qualify for a credit card. So there's quite a lot of things that's happening on that space. Then on the save side, we offer you 4 saving plan. It's always really quite nice if you talk to clients that they say what they like about it, they couldn't name it. So you can name it saving for something, if it's a car or a holiday, call it a holiday account, and then you put the money in there and that is segmented away and you can use it. You can see we're still offering very strong interest, the lowest interest of 2.25%. And we paid out ZAR 4.4 billion this year to -- on interest to clients. If I -- that was a little bit quick. If I look at insurance, we offer credit life, which cover you from retrenchment as well as for death. We basically were covered for death for a big portion of last year, but with retrenchment, we were self-insured. From the 1st of May, we are self-insured in both of those areas. We've seen a big increase in retrenchment claims as well as death claims, but we've seen in the last 2, 3 months, we've seen a big drop in that. And then on the funeral plan, I think that's where we've done exceptionally well. And maybe the best stats on the ground is that 37% of all new funeral policies sold is a Capitec policy. And if you go look at rand for rand, we offer the best coverage ratio for the lowest premium. And then on the credit side, that's where we've actually worked quite a lot. We're offering credit up to ZAR 500,000 for combined products. So if you choose between your credit card or your term loan, you can go up to ZAR 500,000. And we've launched access facility. You all know about [indiscernible]. And now in April, we've launched Purpose. We've spoken about Purpose, but you can see we launched Purpose now with CTM, with Stadio, with Mediclinic and WeBuyCars. So that's a big focus for us. And how that actually works is the client applies for credit. They apply in-store. We pay a third party, so the money doesn't go to the client, that goes to the third party. And by doing that, we can actually price the loan at a much lower rate. So for us, that's a very promising -- new incentives. I get quite a lot question on what is our business model. And we always ask the question is -- how do you feel about just being digital or how about the branches? We see these 3 circles as a critical part of our offer because we believe we need to have a branch. The branch is a platform where we sell from, where we engage with the client, where the client can sit in front of us. We see it with funeral. 85% of our funeral policies are sold in branch. The client is very serious about his funeral policy, and he really wants to make certain he takes up the right cover. Then you've got your digital side. We use self-help and where the client can increase transactions and operate. And as you know, there's 8.7 million clients on it. And the one that we're really focusing on now is client engagement because as the client is getting less and less into the branch, we need to engage with that client and make certain that he actually makes the right decision and is informed of new products and new developments at certain class. So there's a tremendous focus on client engagement, and so making certain that is part of the Capitec family. So we see that as key component, as crucial on our strategy going forward. The future, everyone is asking us about the future. I think if you look at the future, I think we first need to start with international. If I look globally, we all know that the vaccine rollout has actually moved -- has rolled out in Europe and America and all other countries. America's at about 55%. The U.K. is at 65%. Europe itself, it was at 45%. There has been very strong stimulus packages given in Europe and America. So that is stimulating the economy. So when I'm talking to investors and people abroad, you can clearly see that the world is starting to normalize, and people is getting back to normal situations. That has got a very positive impact on South Africa. We've seen what the rand-dollar has done. I think if we ask anyone of you 6 months ago, will the rand be at ZAR 13.75 or ZAR 13.85, we would have loved, but there it is. There's a very strong market for our commodities and commodity prices as planned, and that is very good for South Africa. We also add on the food side and especially on the farming side, we've done exceptionally well. So for the first time since 2002, we had a surplus on our current account, and we are in a very strong inflow in tax income. And I think a big portion of that tax income is actually coming from our -- inside commodities. So that is plus, a very positive trend. And then I think yes, what is happening in government, what is happening, meaning on the ANC front, I think what it's done is it's bringing in a culture of accountability and a culture of doing the right things. And I think we won't see the effects in energy, but we will see it over time. But I think overall, that will have a very positive effect in South Africa. And then yes, if you look at the results of companies as it's coming through now, you could see much better results coming through from all companies right through. What are we seeing in Capitec? We've seen our client inflows, apart from hospitality, basically at the same levels. We're starting to see over time coming in, people starting to pay over time. And we start seeing appointments happening. So I think that is very positive. On the demand side for credit, applications were about 15%, 20% down up to about February. And basically now, March, April, May, we're basically back to normal levels on it. I've already mentioned retrenchments and deaths. We're seeing on retrenchments, just to give an indication, we see about a 20% to 30% drop in retrenchment rates coming through as -- and on death. I think death, it's going to be interesting to see what wave 3 is going to be, but we're seeing very positive trends coming through from it. And then we're seeing very strong transactional volumes happening right across the group. If I look at our merchant base, about 26,000 merchants that's transacting. They're basically back to pre-COVID levels. So if you look at this, it's all showing signs in the right direction. And then we've spent quite a lot of -- myself plus our senior executives have spent quite of our time visiting our branches, especially branches in the rural areas, [indiscernible], all those particular areas. And we're seeing a strong positiveness of people in those particular sectors and a strong informal growth coming through. And I've always said many times, I think it's one part of the economy that we're underestimating completely. I think the factors to worry about is our third wave. I think it's here. The question is how are we going to react and what the impact is going to be. The vaccine rollout is starting to happen. And hopefully, by the end of this year, we will have 50%, 60% of South African vaccinated. I think the 2 or the 3 that worries me the most is our high unemployment rates and inequality gap that has been caused by COVID because if I just look at -- education for us is very important. I think for South Africa to be successful, it's important. And if you haven't had access to a laptop or data, it was very difficult to get education in South Africa during COVID. So I think that inequality gap is still going to create problems for us going forward. And then I think the interesting one is the wage gap or the wage negotiations. Government agrees, the stance is no increases. And I think if you look at what the demand of the unions are, very unrealistic, coming up for 15% minimum wage of ZAR 15,000. It doesn't make sense. So it shows you that there's a big gap of understanding really what's happening in South Africa and what we need to do to actually correct South Africa. So I think overall, we're seeing a recovery. I think the concerns is the ones that I've highlighted. I think the most important thing is for government to actually implement all the strategies that they have actually spoken about and that they want to implement. I think that's the key to make South Africa a successful country. If I look at what are we going to focus on, I think the most important thing is scale. We've got 16 million clients now in our base. And how do you optimize that? How do we make certain that we are first of wallet? How do we make certain that they actually make use of product range? Then partnerships. I think we've done a very good job with a partnership with Sanlam, SA Home Loans, EasyEquities. So we'll continue to look and say how can we partner with certain people that's of strategic importance by ourselves, to partner with fintechs especially. So that will be a big focus. And digital and data, we believe, is going to be the most important going forward. Data, the whole payments, e-commerce space is for us important. If you go and look at China now, if you want to pay with cash, you can't. And I think we need to drive that. And it's not only Capitec, but it's the South African totality because we need to get people to do the electronic payments. At the moment, you can start doing electronic payments. You can then provide a bank account to informal sector or small businesses, and you can score, you can provide credit. But there's a lot of opportunities and then data. I don't think I need to elaborate on data. I think everyone knows it's the new oil. Then new solutions. We're focusing quite a lot on credit and payments. And then on the rewards program, we've always said we will not go into loyalty the way other people have gone in with points. We want to keep it simplistic, and that will be launched quite soon. And then business banking. Business banking is on track. We're building something completely unique on a digital platform. And we're still on track to launch that mid next year. If I look at what we need to deliver, I think the most important is you can't deliver anything if you haven't got people. So for us, it's all about developing talent and growing future leaders. If I look at the most important thing, it's to really understand the needs of our clients. That's why we're spending quite a lot of time in the market, understanding what's happened because during COVID, we've been sitting on our offices at home, and we didn't understand what was happening. So we're spending a lot of time out there. And I think client need is going to change quicker and quicker and quicker. Then we need to align our objectives of retail and business banking. I believe there's big opportunities if you combine those objectives and align it. And then culture. There's a saying that culture eats strategy for breakfast. We are a strong believer in that. And we will continue building our culture, making certain that our staff and our people can make decisions without thinking because it's actually part of their DNA. Then talent. We continue to appoint new people. It's actually quite scary. I shared with the Board this morning, we currently need to employ in the next 3 to 4 months about 500 people. About 300, 400 of them is in your digital IT space, client-centric and innovation. And we're starting to find the right skill levels in South Africa. So I think that's a big opportunity for ourselves and make certain that we get that right people and we develop them. And then yes, working from home, working from the office, we're strong believers that you can't only work from home or you can't only work from office. You need to have a balance being in those 2, and we've worked quite hard in the last couple of months to make certain we -- finding out the right balance, and we have that flexibility. With wave 3, we can move our people back. At the moment, the positive signs are coming through, we can actually bring the people forward. And then multi-skilling. It's interesting with direct lending now, which is situated and available, we've created the kind of capabilities that we can use our extra capacity in our branches to help give direct loans to our staff. So at the moment, there's a peak in a particular branch and there's quiet. We can move those volumes to that particular branch and make certain we can help our clients. So we believe multi-skilling and micro-jobbing is the future. We also believe there's a big opportunity to South Africans to actually use their skills and sell their skills abroad but actually sits in South Africa, and you don't need to move. Then -- sorry, with that, I think if we look at the year ahead, we're very positive. We believe in the brand. We believe in what we've built. So we're positive about the future. Thank you very much. We've got any questions now?

I think the first question, I will just read it out. It was indicated that reinsurance providers covered retrenchment and life cover for customer loans that expired, but the reinsurers decided that the COVID-19 risk was too great. Or what was the reason? Capitec was forced to self-insure as a temporary measure. No mention if this resulted in the loss of the company considering the premiums versus the payments settled. Will Capitec plan to, in the future, use reinsurance again? I think here, when you -- so one thing that COVID has learned us when it came to renew our insurance, nobody wanted to touch retrenchments. So we had to go into insuring it ourselves. We still manage to get death insurance. I think we've shown very clearly in our financial results, and now I've covered it in my presentation in April, that we still made a profit out of insurance in totality. I think it's learned us to say why do we need reinsurance. So currently, we're self-insured, but it will be something that we will cover from time to time. Second question is the Bank of Lisbon, subsequently called the Mercantile Bank, has resolved to install changes and introduction of Capitec personnel into the bank. This has led to a void of Portuguese-speaking persons who were the backbone of the Mercantile Bank lines. Are there at least some existing company staff who are capable of speaking Portuguese that can be used to fill this void? If I look at Mercantile, there's all the people that could speak Portuguese that's still there. That's still part of us. Nobody was retrenched. Nobody was asked to leave. But I think what we definitely are doing is we want to create a business bank for all South Africans. So we will make certain that we can handle all languages. I think a big factor of that is if you look at our branches, we employ people from the community to serve the community. And I think we'll use the same approach when it comes to Mercantile or Capitec Business Bank. I think there's no more questions. André, is there any other questions?

No further questions.

Thank you very much. Normally would have offered wine, but this is virtual. So have a glass of wine on a Friday afternoon. Thank you very much.