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The Power of Your LifeThe Sanlam Century of Insurance Empowerment, 1918-2018$

Grietjie Verhoef

Print publication date: 2018

Print ISBN-13: 9780198817758

Published to Oxford Scholarship Online: December 2018

DOI: 10.1093/oso/9780198817758.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 23 June 2021

Forty years: protection, isolation, and diversification, 1945–1985

Forty years: protection, isolation, and diversification, 1945–1985

Chapter:
(p.89) 3 Forty years: protection, isolation, and diversification, 1945–1985
Source:
The Power of Your Life
Author(s):

Grietjie Verhoef

Publisher:
Oxford University Press
DOI:10.1093/oso/9780198817758.003.0003

Abstract and Keywords

In tandem with international economic growth, Sanlam displayed progressive growth in the insurance and investment markets between 1945 and 1985. In a period of mounting political opposition against the National Party Government, international sanctions resulted in protectionist policies, which limited investment opportunities to the financial sector. Growing concentration and inward-looking industrial policies offered insurance companies investments outside insurance. Sanlam diversified extensively outside insurance in property and industrial conglomerates. By 1985 this portfolio called for strategic redirection. Afrikaner empowerment resulted in a notable presence of Afrikaners in industry and mining, with Sanlam as anchor shareholder. In 1954 the Sanlam Private Act terminated the parent relationship with Santam. Sanlam rose to the second position amongst long-term insurers in South Africa, using product innovation, technology, and distribution innovation.

Keywords:   strategic investments, management continuity, equity, mutual, diversification, investment-linked policies, product innovation, asset growth

Global growth, exclusion, and global entry

The ‘golden age of capitalism’ commenced with the end of World War II. The boom in the world economy was rooted in the rebuilding of the economies of Europe and Japan. World GDP per capita rose on average by 3 per cent per annum between 1950 and 1973, which outpaced the growth performance of the former decades threefold. Productivity gains, increasing real income levels, and declining commodity prices combined to allow factor mobility, capital, and labour, and financial improvements in social services. The Bretton Woods institutions developed mechanisms to intermediate between the private capital market of the world and capital-short countries. These institutions aimed to achieve macro-economic stability and to negotiate global free trade. Unfortunately, the positive effects of decolonization in large parts of sub-Saharan Africa were offset by state breakdown, recurring civil wars, genocide, and famine.1 The era of the Cold War brought the stark contrast between developed and developing countries into the international arena. The division of the world after 1945 resulted in what Borscheid calls ‘a de-globalization’ of the insurance industry. Insurers in foreign markets found themselves faced with a plethora of obstacles to overcome, a type of ‘xenophobia’ of legal restrictions prohibiting foreign companies from acquiring a majority interest in national firms.2 The division of the world between capitalist Western nations and the centrally planned nations aligned with the USSR left many African states to negotiate a new position in the non-aligned movement led by Jawarlal Nehru of India. South Africa had a relatively stable white-controlled government, resisting the pressures to relinquish white power to black majority rule. The buoyant economic growth of the 1950s and 1960s seemed unstoppable, until the oil price hike of 1973 brought it to an abrupt halt.

The post-depression Keynesian conviction that government must stabilize aggregate demand in order to avoid high and rising unemployment, prompted states (p.90) worldwide to intervene in managing economic activity. In post-colonial Africa, state ownership in almost all the sectors of the economy expanded. The state was seen as the representative of the newly independent people, the owner of the capital means to establish and manage public enterprise. The state was expected to provide a framework of physical and social infrastructure, such as a legal framework and general education, while simultaneously encouraging the entrepreneur, investor, and manager of economic activity. As many of the very high expectations of prosperity after colonization failed to materialize, political systems moved away from Western democracy. Developing countries gradually shifted the blame for poor performance to the organization and regulation of international economic relations. The South African economy was able to sustain strong growth throughout the turbulent times of post-independent Africa between the end of World War II and the early 1970s. Economic growth in Africa declined consistently during this period of political instability. In Tanzania full ‘African socialism’ was introduced, and democratically elected leaders were ousted by coups d’états in many African states. Between 1950 and 1970, twenty-one military takeovers occurred in Africa. In 1971 the democracy of Milton Obote in Uganda was overthrown, and in 1974 Emperor Haile Selassie’s feudal regime was toppled by military power. By the mid-1970s more than half of African states were under civil-military rule.

South Africa experienced equally turbulent times on the political front. In 1960, the Prime Minister Dr H.F. Verwoerd led South Africa from the British Commonwealth and in 1961 South Africa became a Republic. This occurred amid rising South African nationalism and support for Verwoerd. Verwoerd gradually strengthened the power base of the National Party government and in 1966 almost swept domestic opposition in Parliament aside, winning 126 seats in the 166-seat House of Assembly. The strengthening of white political power occurred against the backdrop of mounting domestic opposition. Political opposition was banned—in 1950 to the Communist Party of South Africa, and in 1960 the African Nationalist Congress (ANC) and the Pan Africanist Congress (PAC). As these opposition movements went underground, other incidents of civil protests such as the public burning of passes at Sharpeville in March 1960, occurred. Police action resulted in the death of protesters. This incident poised anti-South Africa international sentiment, causing the flight of capital. While the civil war was raging in the former Belgian Congo and Belgian settlers fled the country, the political situation stabilized in South Africa. The political tensions of the 1950s and 1960s in South Africa were controlled by a powerful state, through the policy of separate development. Although the international community criticized South Africa for not implementing majority rule in a unitary democratic state, it was possible to grow the economy on the back of global growth. Between 1948, when the National Party rose to power on the policy of separate development, and 1970, real income per capita had risen by 70 per cent and real GDP rose by an average of 4.2 per cent per annum in the 1950s and (p.91) 5.5 per cent in the 1960s.3 Massive speculation on the JSE (Johannesburg Securities Exchange) led to a crash in May 1969, ending a period of sharp increases in equity prices. These fortunes turned as global fortunes were turned upside down.

Relative political stability and sustained economic growth in South Africa could not shield the country, or the continent, from international turbulence. In 1971 the Bretton Woods fixed exchange rate system was terminated when declining USA current account surpluses virtually disappeared, resulting in a mounting USA balance of payments deficit of US$30 billion by 1971. The USA abandoned the fixed exchange rate system, leading the international community into floating exchange rates. Volatility entered global markets. In October 1973 the Yom Kippur War erupted in the Middle East, followed by an Arab embargo on oil sales to the USA and the Netherlands, and a 214.8 per cent increase in the oil price by OPEC (Organization of Petroleum Exporting Countries) in December 1973. This price increase was most probably the largest economic shock the world economy has ever experienced.4 Rising inflation characterized Western economies, including South Africa, throughout the remaining years of the 1970s. The average annual rate of inflation was around 3 per cent between 1950 and 1970, but then spiked to 13.4 per cent between 1974 and 1975. In 1979 a second oil price increase hit global markets, and Middle Eastern current account surpluses rose beyond US$2 billion by 1978. These were invested in Western markets, allowing lending to escalate to unprecedented levels, especially to developing countries that resorted to borrowing rather than structural adjustment of their economies. Borrowing to balance budgets rather than adjusting expenditure, especially in the countries of Latin America and Africa (notably Mexico and Nigeria), created a time bomb. By 1982 Mexico, an oil-exporting country, announced its inability to service its debt, ushering in the global debt crisis. By the early 1980s Western economies had adjusted to high inflation and slow growth—‘stagflation’, a term coined in this period. Keynesian economics offered no solution to embattled economies. A return to growth was dependent on liberalizing markets.

A revival of appreciation for the liberal market model of the Austrian school’s Friedrich von Hayek was notable in the political groundswell towards the libertarian right. Margaret Thatcher rose to power in Britain in 1979 and Ronald Reagan in the USA in 1980. The liberal market orthodoxy swept across Western economies. Deregulation, contraction of state economic involvement, and a renewed appreciation for entrepreneurial endeavours constituted core elements of the restructuring models of the post-global recession world of the mid-1980s. Africa was especially indebted—with total foreign debt amounting to more than US$162 billion. Debt rescheduling and macro-economic (p.92) adjustment policies challenged African economies to consider the liberal market. South Africa did not escape the turbulence. The international gold price rose sharply in the wake of the global oil-led recession. The gold price rose from US$37.87 in August 1972 to US$675.99 in September 1980. This meant that South Africa was cushioned from the immediate effects of the oil shocks. The South African currency depreciated against the dollar and other foreign currencies. Before the 1970s, South Africa experienced a relatively stable net inflow of foreign capital, but this changed as the political uncertainty following the independence of Mozambique and Angola and domestic unrest in South Africa impacted negatively on investor confidence. It was not only global economic turbulence that made South Africa a very challenging market. The mobilization of black opposition to the National Party Government manifested in so-called student protests, popularly known as the Soweto Uprising of 1976. State repression of sustained domestic unrest led to the declaration of a state of emergency in July 1985.

Domestic growth was under pressure. Inflation was spiralling and no longer in step with that of South Africa’s main trading partners. The state fuelled inflation by not implementing restrictive fiscal and monetary policies. Inflation peaked at 18.6 per cent by January 1986. The South African government obtained its first IMF (International Monetary Fund) loan in January 1976. This signified the sustained weakening of the economy. The first annual capital account deficit since the 1960s was recorded in 1977. During the first half of the 1980s there were some large capital inflows into the country again as international markets remained liquid and South Africa remained a credible borrower. The South African government also encouraged foreign borrowing by providing forward cover at attractive rates. A shift occurred from long-term direct investment in the non-monetary private sector to shorter-term borrowing by the public sector and the banks. This borrowing held imminent risks. Borrowing was coupled with large uncovered interest rate differentials and lack of experience by borrowers in dealing with the magnitude of potential losses involved in uncovered forward borrowing.5 As domestic political instability mounted, a confluence of international and local events occurred. These included the collapse of the gold price after 1980, a sharp decline in exports, unprecedented sharp depreciation of the SA currency, high levels of short-term borrowing on international markets, and contraction in international capital markets. As a result, foreign banks refused to roll over South African short-term debt of US$14 billion in 1985. The expectations in August 1985 that President P.W. Botha would announce radical political reforms towards political power sharing with the black majority were dashed in his speech in Durban on 15 August 1985—the so-called ‘Rubicon’ address. (p.93) It failed to satisfy the international expectations of fundamental reform in South Africa.6 In this climate the South African government issued a moratorium on debt repayment in August 1985—the so-called ‘debt standstill’. In response, financial sanctions were introduced against South Africa, leading the country to become a capital-exporting country. This was the world in which South African financial services enterprises operated after 1945.

During this period of global turbulence and the accompanying revision of Keynesian macro-economic orthodoxy, the South African government appointed the De Kock Commission of Inquiry into the monetary system of South Africa in 1977. Following global trends7 the commission recommended the introduction of a market-related monetary policy. Market-related policy instruments such as annual growth targets for the M3 money supply, discount policy, and support for open-market transactions became the main policy instruments of the South African Reserve Bank. Financial institutions took advantage of the less-regulated markets. As foreign insurance companies were required by the 1965 Insurance Amendment Act to be incorporated in South Africa, most foreign insurers complied. This followed the international trend. In a study published in 1971 SwissRe found that the number of foreign insurers operating in non-national markets had steadily declined in absolute as well as relative terms since 1960. Primary insurers had withdrawn behind their countries’ borders.8 In South Africa, insurance companies were afforded similar protection and benefited from financial services deregulation of the mid-1980s. Diversification of operations into other financial services was slow in developing. The full impact of financial services deregulation was only felt after 1990. The excessive liquidity in the South African market during the 1960s and 1970s encouraged functional diversification in the insurance industry. By 1985 this development had direct implications for the focus of Sanlam as a life office.

Managing for growth and diversification

The establishment years had passed. The insurance industry faced the opportunity of post-war growth, while the fruits of the Volkskongres of 1939 were gradually taking shape. At the end of the war the total premium income of all insurance companies was £11.8 million, rising to £23.1 million by 1950. In 1945 Sanlam was only the fourth-largest life office in terms of premium income, but moved into second position after 1948.9 (p.94) The financial services market became more competitive, specialized, and diversified. Management directed Sanlam into a diversified operational environment as the founding generation of managers made way for the second generation of managers. Gys de Villiers and Tinie Louw, joint General Managers, both retired in 1946. Louw stayed on as Managing Director of Sanlam until December 1949, while A.D. Wassenaar succeeded De Villiers as General Manager in October 1948—a position he held until the end of 1965, when the title of the senior manager changed from General Manager to Managing Director. Wassenaar held this position until 1969, when he was succeeded by P.J.F. (Pepler) Scholtz in March 1969 until the end of April 1978. Scholtz was the Managing Director until 1978. When Wassenaar stepped down as Managing Director, he then joined the Board, from which he retired at the age of eighty, bringing to an end a career of sixty years in Sanlam. F.J. (Fred) du Plessis succeeded Scholtz in May 1978 and served as Managing Director of Sanlam until April 1985. Up to 1978 the top managerial positions in Sanlam were occupied by men who had progressed up the company ladder. Wassenaar started his career as an employee of the Department of Census and Statistics in Pretoria. He completed his first degree part-time at the Transvaal University College (TUC). He then joined the South African Air Force as a pilot, but soon accepted employment at the Standard Assurance Company in Edinburgh. While in Scotland he qualified as an actuary. In 1937 he accepted an appointment as Assistant Actuary at Sanlam. In 1947 he was promoted to the position of Assistant General Manager, succeeding Feenstra who had retired. Working with Tinie Louw, Wassenaar emerged as a strong campaigner for the free market, the development of entrepreneurship, and Afrikaner empowerment through market opportunities.

The management team of the 1950s and 1960s were all Sanlam men. It was a stable, ageing and tight-knit team. When Wassenaar succeeded Feenstra, he in turn was succeeded as Actuary by Dr H.G. Hansman. P.J.F. Scholtz was one of the assistant actuaries. When Wassenaar moved into the General Manager’s position in October 1948, he handed the responsibility of the agent network to W.J. (Bill) Bezuidenhout. Bezuidenhout (after whom a major arterial road leading from the Sanlam Head Office was named) was a devoted Sanlam employee his entire life. Pepler Scholtz moved into the position of Managing Director after a career of thirty-five years at Sanlam—first as Assistant Actuary, then as Investment Manager, and then as Actuary from 1959. Once these managers retired, their services were often called upon by the board. The Sanlam Private Act, No. 3 of 1954, provided for the incorporation of Sanlam as a mutual life assurance company. The act made no reference to an age limit for directors, but in 1964 the act was amended. Article 41(k) on ‘disqualification of directors’, was amended to add that a person who reached the age of seventy-five automatically has to vacate his office as director. As soon as the amendment took effect in December 1966, Charlie Louw had to retire as director at the age of ninety-one, Piet Malan at the age of eighty-six, Tinie Louw (p.95) at the age of seventy-eight, and Eric Louw at the age of seventy-six. In January 1983 the board decided to lower the automatic retirement age of directors to seventy.10 This tendency perpetuated the longevity of stable management, since the institutional memory of earlier managers was ever-present in the board of directors.

The generation of founding members worked in a close-knit managerial team under the sympathetic leadership of Willie Hofmeyr as Chairman of Sanlam. When Hofmeyr died suddenly in 1953, Charlie Louw succeeded him as Chairman until 1966. He then retired at the age of ninety-one, having served the company, of which he was a founding member, as director for forty-eight years. Hofmeyr was not only a symbol of Afrikaner perseverance and drive, but also succeeded in inspiring able young new managers with a vision to direct future strategies for progress and modernization. The position of Chairman was not an executive one, but Hofmeyr was well on top of operations and strategic direction. He allowed the new generation to grow the company in the challenging post-war era, but provided stability in the core strategic direction. Inward-looking Afrikaner control was illustrated by Wassenaar’s ascendancy to the position of Chairman of the Sanlam board in January 1967. He held this position together with his executive position as Managing Director until he retired from the latter in 1969. Wassenaar was Chairman of the board until he turned seventy-five in September 1982. He retired as Chairman, bringing to an end a period of thirty-five years in Sanlam—twenty-two years as General Manager/Managing Director, and thirteen years as Chairman of the board. Fred du Plessis succeeded Wassenaar as Chairman in 1982. In 1982 Du Plessis was made Executive Chairman of Sanlam and assumed the duties of Group Chief Executive in 1985, positions he occupied until his death in 1989.

Sanlam found itself in a boom economy immediately after the war. The aspirations of growing Afrikaner participation across the spectrum of economic activity demanded strategic planning. Hofmeyr and Tinie Louw called on the domestic credit market to invest in local equities, especially risk capital. The calculated and responsible actuary-manager Louw and his successor A.D. Wassenaar operated firmly within the post-war management model of the human resource theory, and later in the 1960s the ‘Theory Y’ management style, emphasizing the dependence on managerial ingenuity to unlock the full potential of employees.11 The shared destiny instilled in all employees on all levels of management as displayed in the agents conferences of the 1930s and the Head Office ‘family-like’ organizational culture, was characterized by the esprit de corps in Sanlam also after 1945. Immediately after the succession of Wassenaar, a managers conference was held in December 1948. Attention was drawn to the necessity to grow Sanlam’s market among English-speaking South Africans. By 1945, English-speaking policyholders (p.96) constituted less than 10 per cent of the total Sanlam policyholder base. The post-war era up to 1978 can justifiably be described as the Wassenaar era, since he exercised executive control in a firmly centralized U form of organization. When he moved on to the position of Chairman of the board with Pepler Scholtz as Managing Director, he remained the captain of the ship. He was an ambitious man. His ascendancy in Sanlam was described as phenomenal, and his leadership was strategic and performance-driven. Married to the daughter of the Lord Mayor of London, Wassenaar found himself fitting comfortably into the Sanlam aspirations of Afrikaner empowerment encompassing a wider strategy of the promotion of local South African business interests. Hertzog’s ‘South Africa first’ slogan embodied his ambitions. He was an Afrikaner nationalist, but he was not an uncritical supporter of the ruling National Party.

The opportunity for expansion under the buoyant economic conditions of the 1950s and the functional diversification of Santam’s operations required a fundamental rethinking of the relationship between Santam and Sanlam. By the end of the war Santam and Sanlam were still managed primarily by the same people. At the time shortly before Willie Hofmeyr’s death in October 1953, the Santam board consisted of Willie Hofmeyr, Dr J.F.J. van Rensburg, Charlie Louw, Piet Malan, Dr J.P. Schabort, S.F. Malan, D.J.A. Kotze, Eric Louw, P.D. Rousseau, G.F.S. de Villiers, and Tinie Louw as alternate director.12 The Board of Directors of Sanlam in 1953 comprised the following: Charlie Louw (Chairman) and Piet Malan, S.F. Malan, D.J.A. Kotze, Dr J.F.J. van Rensburg, Eric Louw, P.D. Rousseau, Dr I.P. Schabort, Tinie Louw and G.F.S. de Villiers.13 The two companies shared the same board members. The business of Santam comprised the trust and executor business, short-term insurance (operating through various companies such as Santam Insurance Company and Brandwag Insurance Company), the bulk of this business being fire, motor vehicle, and employers’ liability insurance. By the early 1950s Santam did less than 5 per cent of the total short-term insurance business in South Africa,14 and Santam did banking business. Sanlam was the subsidiary of Santam, paid no dividends to Santam, but paid Santam commission to manage its mortgage investments at a commission of 1 per cent of the capital allocated and 5 per cent collection commission on mortgage rates. Sanlam had to obtain permission from Santam to start any new commercial initiative, such as the business of short-term insurance.15 While composite insurance companies (companies conducting both short- and long-term insurance) were prevalent in the industry globally, in the Santam/Sanlam case operational diversification was constrained by the subsidiary relationship, despite the shared oversight structures.

(p.97) By the end of the 1940s the assets of Santam represented only 3.7 per cent of the domestic short-term insurers and 1.2 per cent of the total insurance market in the Union. In 1950 Sanlam’s assets, in comparison, constituted 10.8 per cent of total industry assets and Sanlam’s premium income put the company in the second position of all insurance companies in the Union. The planned mobilization of Afrikaner economic activity that followed the Volkskongres of 1939 manifested in an emerging group of Afrikaner-controlled enterprises and business initiatives. The Sanlam/Santam relationship displayed a growing imbalance with respect to the asset base and managerial control. Sanlam’s assets rose from £9 394 751 in 194516 to £32 901 535 in 195317 (an increase of 250.2 per cent within eight years), while Santam’s assets amounted to £194 688 in 1948 and increased to £644 157 in 1953.18 Santam’s business was dwarfed by the business expansion of Sanlam. The latter’s business was expanding rapidly after the war; the company had just moved into its own head-office building in Bellville in September 195319 and was developing a strategic role in the unfolding of the network of Afrikaner-controlled enterprises.

As the new generation ascended to power, management operated in an environment very different from the 1930s and 1940s. They needed to respond to the highly liquid financial market, the change in consumer demand following improved remuneration and living standards, and the opportunities for growth in the rapidly industrializing domestic economy. In December 1952 the Santam board decided to restructure the company as two separate entities—an insurance company and a trust company. Sanlam would receive a stake in the restructured insurance company equal to its premium contribution to the Santam premium income. It was minuted explicitly that Sanlam would refrain from competing with Santam in both short-term insurance and trust business.20 As Sanlam, the subsidiary, expanded successfully in the long-term insurance market, internal tension in the intimate relationship with the less focused parent company was imminent.

In 1950, SA Mutual initiated proceedings to amend its Private Act (No. 16 of 1915) to extend permission to conduct different forms of insurance business and engage in a wider variety of investment operations. SA Mutual went back to Parliament on different occasions for purposes of wider jurisdiction in operations and geographical locations. As the companies in the Santam Group (Santam, Sanlam, Federale Volksbeleggings (FVB), Saambou National Building Society, and Bonuskor) developed the Afrikaner presence in South African business, the legacy relationship between Santam and Sanlam entered the (p.98) public domain. Santam sought legal advice on restructuring options. The company was advised that the mutual form of organization would be beneficial to the business of Sanlam in as far as the mutual company would not be liable for income tax. It would take a long time before Sanlam would benefit from a tax-exempt structure. Santam management assumed that a private act would be passed by Parliament with less delay, since fewer stakeholders would feel obliged to comment or object to aspects of the proposed bill. In March 1953 the Santam board therefore decided to restructure the relationship between Santam and Sanlam by means of a private act of Parliament.21 The Sanlam management acknowledged the state of divergence between Santam’s business and its own, which mandated what they called ‘constitutional’ amendments.22 Since 1918 Santam and Sanlam had always maintained that the life business had been conducted on a mutual basis whereby all profits accrued to policyholders, but in fact Sanlam had to report to its shareholder (which was Santam) at the end of each financial year.23

The two companies entered into an extended agreement. It provided for Sanlam to become an independent legal entity, permitted to conduct only those operations stipulated in the private bill, which excluded all trust and short-term insurance business. Sanlam emerged as a new legal business entity able to conduct the following business: life insurance in all its branches; sinking fund, industrial, and funeral insurance business; issue annuities; engage in reinsurance; trade in securities, movable, or immovable property; lend money; mortgage property; underwrite share issues, stocks, or debentures; create and maintain a pension fund for its officers; and register as an insurer in the Union as well as any other country.24 In preparation of the Sanlam Private Bill the Sanlam management found that SA Mutual had already commenced more amendments to the SA Mutual Private Act in order to expand the operations of the Old Mutual Life Office, especially to enable the company to engage in trust business.25 These developments encouraged swift action and the private bill was tabled in the South African Parliament in February 1954. The bill was passed without opposition. To Sanlam the statutory position simply aligned the de facto position with the de jure position. Sanlam always did its life business on the firm assumption and practice of mutuality. Despite Santam being the only shareholder, no dividends were paid to Santam, but the latter received payments for services rendered to Sanlam. The Sanlam Private Act, No, 3 of 1954, determined that Sanlam had to pay Santam £50 000 as reimbursement for the capital Santam held as sole shareholder in Sanlam (Section 8). Sanlam acquired all (p.99) its assets, liabilities, rights, and responsibilities vested in the company prior to the promulgation of the Act and was permitted to conduct insurance operations as stipulated in Section 5 of the Act.26

This Private Act clarified much of the uncertainty about the scope of Sanlam’s operations at a time when its development required strategic certainty. In the period up to 1985 Santam’s business focus often seemed blurred. Santam restructured itself again in the mid-1960s into a separate insurance company and a bank. Sanlam also diverged operations into substantial shareholdings in non-insurance companies. As a much stronger market player it no longer reported to another parent company. The Sanlam business reported to policyholders, who at that stage were fairly inarticulate, uncritical, and non-activist. The growth in market share and the performance of its subsidiaries were the signals of success or failure, depending on the rapport between management and policyholders. As Afrikaner business penetration gained momentum during the late 1950s and 1960s, the perceived unified Afrikaner front in business began to show a more nuanced character. Most Afrikaner enterprises were operating in the financial services industry and were therefore competing for funds. During the rapid growth era of the late 1950s, the country experienced capital shortage. This situation prompted the state to pass statutes to compel financial enterprises to invest their funds in government stock, which delivered lower returns than other investments. Intra-Afrikaner friction between Sanlam and other companies in the group surfaced in 1954 when FVB (in which Sanlam held a controlling stake) contemplated the formation of a trust company, Federale Trust, a pension fund for various other companies and the National Finance Corporation. In a memorandum to the Sanlam board in August 1958, Wassenaar stated unequivocally that if the almost aggressive competition for savings was allowed to continue unchecked, it could impact negatively on Afrikaners’ business aspirations (‘Afrikanersaak’ was the word he used).27 The popular conception of Afrikaners as a monolithic entity was gradually subjected to the forces of the market.

The Sanlam management team emerged during the 1950s as the strategic leadership of Afrikaner economic empowerment. Wassenaar led the team of Sanlam stalwarts: Nico Bonthuys as Secretary, Hansman as Actuary, Karl Ehmke as Accountant (one of the earliest Afrikaans persons to qualify as a Chartered Accountant in South Africa), and Bill Bezuidenhout as Agents Manager. The regulatory context of insurance changed and the complexity of Sanlam’s business portfolio escalated beyond the simple long-term insurance business of the pre-war era. The Insurance Act, No. 27 of 1943 (as amended), remained in force until new legislation was passed in 1997. The general monetary policy environment changed fundamentally. In 1972 the Commission of Inquiry into Monetary Policy was appointed under the Chairmanship of Dr D.G. Franszen. The Franszen (p.100) Report (RP87/1972) expressed grave concern about the emergence of groups of financial services companies, bank holding companies, and cross-shareholding between banks and insurance companies from the perspective of the protection of depositors’ interests. The risk Franszen anticipated was that non-depositors’ interests in conglomerate business groups could result in the application of funds to the effect of jeopardizing depositors’ interests. This concern was even more alarming if financial services companies were controlled by foreign shareholders. The recommendations of the Franszen Commission were therefore to disallow more than a 10 per cent cross-shareholding between banks and insurance companies and that all bank holding companies had to register as such in terms of the Banks Act of 1965. Furthermore, foreign shareholding in South African banks and insurance companies had to be reduced to less than 50 per cent within a period of five years.28 In a growing isolated South African market, these developments effectively enhanced an incubator effect of protecting domestic companies from international competition, and strengthened market concentration.

As Santam considered aggressive strategies to grow its business, it was suggested to Sanlam to consolidate the business interests of the two companies in a group structure.29 The Santam board was enthusiastic about the formulation of joint group goals and policies. The idea was well received in Sanlam. The board immediately agreed to guarantee the independence of the Santam companies (at that stage Santam Bank and Santam Insurance) on condition that contentious matters would have to be ratified by a Sanlam director. The Sanlam decision signified the role of a senior partner to this relationship. However, the recommendations of the Franszen Commission thwarted the plans for such a group structure as that would bring about a holding company owning both banks and insurance interests. Business operations at Sanlam had become much more diversified, which mandated clarity of focus and management.

Functional diversification in a growing economy

The close association of the Santam and Sanlam leadership with the Afrikaner collective action to pull themselves up by their own bootstraps, commencing at the Volkskongres in 1939, resulted in various actions to establish industrial, mining, and other financial interests. Tinie Louw’s plea for the establishment of a finance house to finance industrial development led to the establishment of FVB. The next step was to apply policyholders’ funds for the same purpose. Louw prepared an extensive memorandum to the Sanlam (p.101) board, motivating the establishment of a vehicle for direct investment in securities, especially in the emerging industrial sector of the economy. He publicly criticized the investment policies of credit institutions in South Africa. He observed that savings in South Africa were primarily flowing to banks that were ‘under British influence’ and which followed a very conservative credit policy that favoured loans instead of investment in ordinary shares of industrial enterprises. Of the £600 million at commercial banks, savings and small loan banks, trust companies, building societies, and insurance companies, less than 1 per cent was finding its way into ordinary shares. Furthermore, he doubted whether the finance and investment corporations had sufficient funds to finance long-term growth in the mining and manufacturing sector. Louw was not only arguing from the perspective of the Afrikaner’s aspirations of meaningful participation in the industrial economy of the country, but also reflected international developments. The establishment of The Finance Corporation for Industry in Britain to assist in the reconstruction of British industry after the war, and The Industrial and Commercial Finance Corporation with guarantees of the Bank of England, specifically to assist small commercial and industrial enterprises, were used as support for his plea for dedicated investment in ordinary shares. Investments in debentures, mortgages, or government securities were not addressing the full commitment to industrial development, since that amounted to loan capital. In contrast, investment in shares made the investor a partner to the enterprise, sharing in the profit of the enterprise and not only fixed-interest-bearing paper. Investment in shares contained an element of risk. The investor was a partner to the business with an interest in its growth. A well-managed enterprise can exceed any return on interest earnings.30

Louw was preaching to his own people. Up to the 1940s Sanlam’s investment policy was ‘safety first’. Sanlam’s investments were primarily in interest-bearing securities, debenture, mortgages, and preference shares.31 This investment behaviour was fully in line with industry best practice, but Louw was a South African patriot: he wanted to support and finance domestic growth from within. It should be noted that the liabilities of Sanlam (and other insurers) were also changing from largely non-profit policies, i.e. all benefits guaranteed, to reversionary bonuses (carrying a ‘bonus loading’ that could be seen as a risk premium to cover more risky investments) where bonuses were not guaranteed until declared and vested.

The actuary, Tinie Louw, stepped forward as the strategic thinker. In a submission to the executive management in August 1945 he outlined a proposal for a subsidiary to divert cash bonuses from policyholders into direct investment in higher-risk ordinary share investments. During the war Sanlam’s premium income rose by 163 per cent (p.102) and total profit by 121 per cent.32 Access to an enlarged investment pool prompted management to revise the previous cautious investment strategy to provide for the riskier investment in ordinary shares of industrial enterprises. It was also a rising interest rate environment. Sanlam directed more investment funds into industrial enterprises, but Louw motivated a wider investment focus as high liquidity in the post-war period and domestic demand for industrial finance offered lucrative returns. Louw made numerous visits to Pretoria and Johannesburg to consult with the Registrar of Companies on the capital structure of the new venture, and with the President of the Johannesburg Securities Exchange about listing requirements of an investment company. Full agreement was secured from both authorities on the concept of an investment company as a vehicle for the direct investment of policyholders’ cash bonuses in industrial equities. Legal opinion was sought on the formation of a dedicated industrial investment company directing voluntary cash bonuses from policyholders into higher-risk, higher-revenue-earning industrial equity. Legal opinion confirmed that the Sanlam Articles of Association permitted the investment of policyholders’ cash bonuses provided that policyholders were given a choice of either reinvesting bonuses in the existing policies or withdrawing bonuses as cash for the purposes of investing it in equities.33 Bonus Beleggingskorporasie van Suid-Afrika Bpk (Bonuskor) was incorporated on 20 February 1946 with a capital of £2 million34 and was later listed on the Johannesburg Stock Exchange. This development signified the progressive strategic leadership in Sanlam.

This action was significant in two respects. It was an innovative strategy whereby policyholders were offered an investment product to supplement ordinary life policies. For the first time an insurance company enabled policyholders to have direct access to investments in equities. Sanlam used this strategy to give effect to its goal of giving South Africans a significant share in the development of their domestic economy. The communication to policyholders described the offer to invest in Bonuskor as a practical means to improve the living standards of all South Africans. Indirectly such investments would contribute to employment creation as the seed capital for new industries. The public, through policyholders, was offered access to the equity market using the knowledge of the Sanlam investment managers to select equity in well-performing listed entities. The unfamiliarity of policyholders with equity investments was backed by the Sanlam knowledge base, which could result in growing the demand for (p.103) Sanlam investment products and policies. Insurance companies followed conservative investment policies. Life offices invested on a portfolio basis in safe investment instruments. Never before had an insurer opened up an investment medium to policyholders to exercise a direct option for investment in ordinary shares. The significance of the development was that Sanlam set its foot on the path of direct investment exposure in industrial enterprises—this is apart from ordinary portfolio investments. Bonuskor was established with capital to which Sanlam contributed £400 000 immediately paid-up shares. Policyholders were invited to apply for ‘contributory shares’. Each contributory share automatically gave the owner fifty ordinary paid-up shares of 10/- each. Sanlam held the controlling shareholding,35 appointed the Managing Director (which was M.S. Louw) and the Board of Directors (W.A. Hofmeyr, M.S. Louw, and Prof. W.F.J. Steenkamp). FVB was the issuing company that managed the establishment and share issue. Bonuskor was the first ‘managed trust’ company in the South African insurance industry. Investments, according to its statutes, were to be made in ordinary and preference shares of mining, industrial, and commercial enterprises. Only holders of profit-sharing policies to a value of £500 or higher were eligible for participation. Policies on the lives of children or issued on the lives of more than one person were excluded. Profits were distributed in dividends to shareholders.36 Bonuskor declared a dividend of 5 per cent after the first year of business.

The establishment of Bonuskor was significant, as it was yet another innovation in assurance business operations in South Africa. The reason why this development is afforded explicit attention, is because it represented the realization of one of the aims of Sanlam at its inception, namely to contribute to the development of the domestic economy. Bonuskor was another vehicle devised by Sanlam to incentivize its policyholders to invest in the future of the South African economy. It is also significant because it showed the innovative thinking at Sanlam in developing investment products that served a dual purpose—making local savings available for industrial development, and securing policyholders a share in the lucrative market of listed equities. Afrikaner policyholders were not experienced or inclined to invest in the securities exchange. Bonuskor assisted the ‘education’ towards engagement in the world of shares.

The demand for the investment of bonuses in Bonuskor shares exceeded expectations. Management considered every single application at the weekly meetings of the executive management. This routine was followed until October 1947, when the responsibility to authorize these investments was transferred to the investment manager as it had simply become an extremely cumbersome task. The Bonuskor strategy addressed the ‘infertile’ capital phenomenon so publicly criticized by Tinie Louw. Bonuskor invested in ordinary shares, preference shares, and debentures of industrial enterprises and participated in the (p.104) capital of new enterprises. Policyholders bought into the opportunity. By September 1947 more than £50 000 had been invested in Bonuskor shares. Bonuskor paid regular dividends. The steady flow of investments of cash bonuses by policyholders in Bonuskor shares reached £750 000 by 1959.37 Towards the end of 1959 shareholders’ interest in Bonuskor had risen to £4.5 million and total assets to £6.5 million.38 Bonuskor’s profits grew from £22 500 in 1947 to £350 150 in 1961, by which time it had equity interests in 148 different companies. The establishment of Bonuskor was a significant contributor to the much-needed venture capital of a growing South Africa, but it also gave Sanlam policyholders the option to supplement their life insurance and retirement provision by investing their cash bonuses. Sanlam kept a close watch on the Bonuskor share price. Trading conditions were sluggish during the early to mid-1950s and that prompted Bonuskor to request the parent company to support the price by buying shares in the market to prevent the price from dipping below the issue price. When Sanlam issued more Bonuskor shares at par to support the issued share value, it in effect led to a dilution of the value of existing shares.39 This was an unsustainable situation.

As investment conditions improved towards the end of the 1950s Bonuskor was faced with a different dilemma. Investment funds from policyholders were showing no signs of slowing down, but the number of suitable investment opportunities did. Bonuskor invested heavily in companies within the group of Sanlam-linked concerns, such as the mining house Federale Mynbou Korporasie (Fedmyn, established in 1953), and the Sentrale Finansie Korporasie (Central Finance Corporation). Bonuskor’s investments tended to become too concentrated in its own group, which focused the risk instead of spreading it. The management of Bonuskor became increasingly involved in the management of the new enterprises. This was not the original intention, as Sanlam’s managers were insurance experts, not managers of industrial companies, mining, or finance houses. Management had two choices: issue more shares at net asset value, or limit the issued share capital of Bonuskor to, say, £5 million and establish another investment vehicle, a ‘second Bonuskor’.40 Management was reluctant to issue more Bonuskor shares at a premium. The issued capital of Bonuskor was fixed at £5 million in expectation of a gradual improvement in the market once the number of shares issued was fixed. A new investment company, Sanlam Beleggingskorporasie (Sankor—Sanlam Investment Corporation), was subsequently established in 1959 to succeed Bonuskor as its capital was restricted to £5 million. Sankor was not to invest directly into ordinary shares of industrial and commercial undertakings but rather into ordinary shares of investment companies listed on the stock exchange. Sankor had applied for its stock to be quoted on the Johannesburg Stock Exchange and was quoted under ‘Financial Shares: (p.105) Industrial and General’ in April 1962. Sankor then ceased to be a subsidiary of Sanlam; however, Sanlam would remain the largest shareholder in Sankor. Sanlam committed itself by continually investing its funds alongside its policyholders’ bonuses in Sankor as it did in Bonuskor, which both resembled diversified portfolios in their own right. The risks of direct involvement in the greenfields enterprise development that resulted from some Bonuskor investments, raised cautionary flags. In the next decade the investment operations in Sanlam placed the company on an empowerment path, but also more extensive investments of functional importance to the company.

Sanlam was the only life office in South Africa conducting its business alongside so-called ‘associated’ companies. Bonuskor addressed the persistent drive in Sanlam to provide venture capital for domestic industrial development. Sanlam’s investment policy was conservative up to 1950. Investments were primarily made in safe, low-risk investments such as mortgages, fixed property, and state/municipal securities (as prescribed by the Insurance Act of 1943). By the end of the 1940s Sanlam had invested only 5.2 per cent of its funds in ordinary shares. Hofmeyr, and later also Wassenaar, criticized state policy prescribing insurance companies to cover liabilities by investing 40 per cent of investment funds in state securities, while the capital demands of the industrial and mining sector exceeded supply. Such prescription was detrimental to the development of the economy. Sanlam engaged in the public outcry against the statutory compulsion preventing insurance companies from more productive investments.41 Considering the expansion of investments in Bonuskor and the sustained demand by policyholders for investments in ordinary shares rendering inflation-beating returns, in 1951 Sanlam management decided that the time was ripe to embark on a more risk-prone investment strategy. This decision was prompted by two considerations: the economy was in a strong upward trend, but inflation was rising, and the mining and industrial sectors were dependent on foreign capital. A decision to embark on direct investments in ordinary shares was backed by a carefully thought-out framework for the selection of shares. The first principle was that investments were to be distributed among companies and industries. Companies selected for investment had to be well established in the industry, own active products in the market, and have a share price that displayed a consistent upward trend. The company itself had to pursue a conservative investment strategy and control assets in excess of £1 million.42 A dedicated investment strategy was in the making.

Sanlam invested in a diversified portfolio of shares on the JSE. These shares were spread across a number of prominent local enterprises, such as in Imperial Cold Storage, Tiger Oats, De Beers Industrial, Natal Canvas, O K Bazaars, and in Dorman Long Africa and Hume Pipe in the heavy engineering industry. Local steel industries such as the Union Steel Corporation, the footwear manufacturer Edworks Ltd, the (p.106) packaging company Amalgamated Packaging Industries, and SA Motor Assemblers and Distributors were recipients of Sanlam investments.43 Locally incorporated industries, despite being owned and controlled by English business, were given the patriotic thumbs-up by Sanlam. By the mid-1950s companies in the industrial and mining sector under Afrikaner control constituted only 6 per cent of the market.44 By 1960 Sanlam’s investments in ordinary shares amounted to £8.4 million compared to £1.2 million in 1950—still only 10.3 per cent of its total assets. The exposure to industry and mining soon gained a life of its own when Sanlam decided to invest more funds in the development of Afrikaner-owned industrial and mining conglomerates.

Functional diversification in the Sanlam strategy was directly linked to the Afrikaner empowerment ideals. The establishment of FVB in 1940 provided the first vehicle to grow a substantial Afrikaner presence, not only as an employee in industry but also as entrepreneur. Under Wassenaar the industrial strategy gradually steered the business of the life office into a diversified group configuration. The upward cycle in the economy favoured growth and investment. These opportunities suited Sanlam’s ideals. During the 1950s and 1960s the insurance sector outperformed the commercial bank sector, which was especially significant, since the relative contribution of the entire financial sector to GDP declined consistently between 1950 and 1984.45 Insurance companies were asset-rich in an economy in which inflation was spiraling. Returns outside the financial sector were offering better long-term prospects, and Sanlam intended to reap those benefits to grow its empowerment ambitions.

Building the economy for the people

Afrikaner idealism, social networks, and human capital came together during the post-war era. A drive to succeed in business allowed the proliferation of Afrikaner-controlled enterprises across the total spectrum of economic activity. FVB was the financing vehicle. Sanlam had a controlling interest in FVB, but did not manage the company. The social capital network of managers and directors of Sanlam formed the matrix of managerial control in the emerging industrial conglomerate. The first employee and later executive chairman of FVB was Christoph Hendrik Brink, a qualified chartered accountant. M.S. Louw employed him at Sanlam and when FVB was established it fell upon him to support entrepreneurs and investors through the acquisition, rationalization of (p.107) management, and the streamlining of Afrikaner enterprises to full profitability. Brink was a quick thinker, fast in taking decisions and driven by inspiration. As the son of a farmer in the Krugersdorp district in Transvaal, Brink was one of the first young Afrikaners to qualify as a chartered accountant in 1934, and when he entered the employment of FVB he was a first-generation Afrikaner in business. He was supported by a board from the Sanlam/Afrikaner social capital network: C.R. (Charlie) Louw (the first Chairman of FVB), Dr T.E. Dönges (a prominent member of the Sanlam Board and participant in the olkskongres), Senator A.P.J. Fourie, D.J.M. Jordaan, C.M. van der Merwe, and Professor C.G.W. Schumann (long-standing supporter of Afrikaner empowerment and participant of the Volkskongres). Jan S. Marais was one of the first FVB employees, together with William Bedford Coetzer who was sent to Johannesburg in 1941 to open the FVB office in the Transvaal. Coetzer would later take the leading role in the establishment of a mining subsidiary for FVB. Dr P.E. Rousseau was the industrial adviser to FVB—later in 1950 he was appointed by the Government to start Sasol. When Charlie Louw retired as Chairman in 1966, Hendrik Brink, who had risen to Managing Director of FVB, succeeded him as Chairman. The FVB business plan was simple: financing enterprises, not managing enterprises. Brink and Coetzer had very different temperaments: Brink was more inclined to offer support and rescue plans, while Coetzer was the calculated chartered accountant insisting clinically on maximum returns on investment. FVB formed a subsidiary, Federal Investment Corporation (FIC), as a closed-end investment trust. The bulk of the FIC investment portfolio consisted of the FVB shareholding in other underlying assets. These investments rose in tandem with the rapidly rising FVB investments. Brink took over as Managing Director of FIC and Coetzer of FVB. In 1966, Dr Kerneels Human succeeded Brink as FVB Chairman and was succeeded by I.J. Moolman in 1981.

FVB started by providing loans to emerging industrial enterprises. The first loan was to retailers Kriel & Company of Riviersonderend. This was a point of difference between Brink and Coetzer: the former supported loans to assist the small entrepreneur to get started. The latter favoured investments with prospects for long-term growth. The first FVB investment was in the South African Farm Implement Manufacturers (SAFIM) based in Vereeniging. In 1961 FVB acquired a 28 per cent stake in Massey Ferguson South Africa, while the Canadian parent company retained control of the South African operations. Massey Ferguson soon acquired SAFIM. As a wholly-owned subsidiary of Massey Ferguson, SAFIM manufactured farm equipment and Massey Ferguson managed distribution. During the late 1970s the Canadian parent company ran into difficulties, allowing FVB to acquire outright control.46 This is how Afrikaner business moved into the agricultural mechanical equipment industry.

(p.108) FVB also led the Afrikaners into the food industry. It all started with a loan to Jameson Welding Works, a small fishing company from Salt River in the Cape, in 1941. On the Cape’s west coast was another small fishing company, Laaiplek Visserye, which later changed its name to Marine Products. Marine Products merged with Jameson Welding Works and soon took on the reduction of fishmeal and oil from shoal fish. Marine Products developed into a jewel in the FVB crown, diversifying into other enterprises such as copper mining (Klein Aub Copper Mine), production of insulation wool from slag, and the production of malt and other feedstocks for the beer-brewing industry, as well as vegetable oils and allied products (Nola Industries). By the 1970s Marine Products and its subsidiaries contributed 37.4 per cent of total FVB earnings. The Financial Mail commented: ‘It is probably FVB’s most important money-spinner, and certainly one of its main pillars of prosperity since its inception.’47 The humble beginnings of farm equipment and fishing provided the foundation for the subsequent development of FVB as a diversified industrial conglomerate, a holding company managing more than thirty companies operating across the entire industrial and mining spectrum of the South African economy by 1970.

In that year the FVB conglomerate included FIC, Federale Lenings- en Assuransie Maatskappy (FLAM) (Federal Loan and Insurance Company), Federale Nywerhede Beperk (Federal Industries Limited), Fedchem, Transmar, and Champions. The first two subsidiaries were the funding initiatives responsible for finding the capital required to extend the loans to enterprising applicants. This capital was also used to fund the FVB participation in the establishment of new companies. In 1970 FIC’s assets stood at R18.4 million. These included FVB’s shareholding in Trust Bank, Fedmyn, General Mining, Sentrust, and Klein Aub Copper Mine. By 1970 FLAM had accumulated R15.2 million in assets. FLAM was headed by Dr Jan S. Marais, who later led the new bank in the FVB group, Trust Bank. FLAM issued and traded in debentures to raise working capital for the enterprises on the FVB book. By 1970 it was the only wholly-owned subsidiary of FVB. FVB needed a funding vehicle, since Sanlam refused to manage FVB or act as its source of cash. In March 1946 the Sanlam management refused permission for Tinie Louw to serve on the board of Federale Nywerhede,48 and in September 1946 the board declined an FVB offer to take up £25 000 shares in FVB.49 Sanlam forced Afrikaner business to develop capacity, secure its own funding, and expand beyond the Sanlam stable.

Federale Nywerhede was a listed holding company in which the fishing and food companies were held, with assets of R8.7 million by 1970. The interests in chemical companies were organized under Fedchem, another holding company. FVB had shares in Klipfontein Organic Products, a small chemical business. In 1967, FVB owned small (p.109) interests in BP Chemicals, National Chemical Products (NCP), and the Synthetic Rubber Company of the Industrial Development Corporation. All the chemical interests merged into Sentrachem, the largest chemical conglomerate in South Africa by the end of 1967. Further interests in chemical-related companies included a minority interest in Federal Fertilizer, SA Druggists (SAD), Aerochem, and two pharmaceutical companies, Sana and Petersen. FVB appointed Francis le Riche as Managing Director of Sentrachem. He turned the loss-making companies around and then FVB negotiated the acquisition by SAD of those enterprises in exchange for an increased share in SAD. By the early 1970s the Sentrachem interests were not yet delivering the returns anticipated, but were poised to do so soon. Fedchem, with assets of R19.9 million in 1970, was not an FVB subsidiary, since SA Mutual held a significant stake. This was another example of growing collaboration between the emerging Afrikaner businesses and non-Afrikaner business.50

Two smaller holding companies in FVB were Transmar and Champions. Transmar held the FVB interests in trade, tourism, and services companies. The retail stakes in the furniture retailer Morkels, the general clothing retailer Uniewinkels, the petroleum interests in Trek Investments, and Avis, the hotels and vehicle rental company, made up the R6.3 million assets of Transmar. Champions held FVB’s property interests and the minority stake in Massey Ferguson, and its total assets were R7.7 million. The complex pyramid holding company structure of the R47.8 million FVB assets was characteristic of the conglomerated business landscape of South Africa. The FVB stable comprised around thirty companies, nineteen of which were listed. FVB’s management strategy was to avoid a 51 per cent control, but to exercise effective control in collaboration with partners via the holding company structures. This was a conscious strategy. FVB wanted to build an investment company with a broad exposure to industrial interests, utilizing a minimum cash outlay—it had limited capital to start with. The board thought FVB could build its capital resources better through a reliance on a steady dividend flow, rather than a reliance on operating profit, which had the tendency to fluctuate beyond the control of management. FVB grew by a high rate of income retention in its holding, operating, and intermediate investment companies. It then injected loan and equity capital into its underlying companies. A loss of £1 390 in 1941 was turned around to profits of R2.5 million in 1970 (an 81 per cent annual compound growth), and total dividend payments of slightly more than £90 000 in 1950 rose to R1.2 million in 1970 (an increase of 12 per cent annual compound growth).51 The rapid expansion of the domestic economy, structural change, and rising equity prices obviously favoured industrial expansion. The relative contribution of agriculture and mining to GNP in 1939 was 33.4 per cent, but this declined to 18.7 per cent in (p.110) 1970, while the contribution of the industrial sector increased from 17.7 per cent to 24.7 per cent.52 By 1970 international pressure and exchange control encouraged both massive acquisition exercises and firm control through holding structures. The conglomerates diluted the value of underlying assets, but strategies to restore focus through the break-up of these empires only gained traction much later in the 1990s. What happened in FVB subsequently was not only an FVB managerial strategy, but also indicated the growing integrated strategic vision of Afrikaner business.

Sanlam’s investments in industries were not limited to its own portfolio investments and FVB, but extended also to other Afrikaner entrepreneurs seeking a foothold in the economy. The young entrepreneur Anton Edward Rupert shared the Afrikaner nationalist enthusiasm of the Volkskongres. Rupert was a son of a Graaff-Reinet lawyer and member of the so-called Cape elite. Rupert studied chemistry and lectured at the University of Pretoria for a while, but he was greatly inspired by the Volkskongres initiatives. He joined the Reddingsdaadbond (RDB) as head of the small business development unit in 1940. He was moved by the marginalization of poor Afrikaners, but was inspired by initiatives to foster Afrikaner entrepreneurship. With an entrepreneurial mind himself, he opened a dry-cleaning business in Pretoria, but had more ambitious dreams. In 1941 he established the Voorbrand Tabakkorporasie, a company that manufactured cigarettes and other tobacco products. He took on an established market with four foreign companies occupying a firm position in the market. Rupert opened his factory in Johannesburg. The early years were difficult. United Tobacco Corporation’s representative offered to buy Voorbrand several times, but Rupert politely refused. When he needed a market for the snuff tobacco leaves (not used for cigarette manufacturing), he used his social network. Rupert met Yusuf Ahmed Cachalia, an Indian textile trader, and Donath Desai, an Indian general trader, who assisted him in finding an outlet for the snuff leaves. FVB had invested in Voorbrand, but by late 1942 developed doubt about the prospects of the tobacco industry. Rupert, of course, did not. He spotted the entrepreneurial opportunity and devised a strategy to buy the FVB shares and establish a vehicle to finance future expansion. He and his partner, Dirk Hertzog, sold the dry-cleaning business they had in Pretoria and bought the FVB shares. In 1944 Voorbrand was restructured as a public company with capital of £50 000 and issued shares to the public to the value of £36 980. In the same year he also established a finance company, Tegniese Beleggings, to finance further business expansion. By the late 1940s Voorbrand owned more than forty registered tobacco trademarks, eleven types of packaged tobacco and eight types of loose tobacco, but was not permitted to manufacture cigarettes. In 1946 the Rembrandt Tabakkorporasie van Suid-Afrika was established as the holding company for the tobacco interests of Voorbrand and liquor interests, of (p.111) which his partner, Hertzog, had taken control. In 1945 Rupert met Sydney Rothman in London while shopping around for new technology. When it became known that Rothman wanted to sell his cigarette company, Rupert could not resist the opportunity. He entered into an agreement with Rothmans of Pall Mall to manufacture its cigarettes in South Africa in exchange for technical assistance. Rupert established more investment companies and finally organized them in a pyramid structure under Rembrandt Beherend, the holding company controlled by him and Hertzog.

It was from this systematically constructed business platform that Rupert acquired Rothmans from London in 1953. Sanlam, through Bonuskor, had taken up preference shares in Rembrandt in 1950. The Sanlam board was especially impressed by the quality of management in Rembrandt, but cautioned against two risks. The first was the highly competitive nature of the cigarette market and the other was the structure of Rembrandt’s assets. The Sanlam board expressed confidence in the management of the company and its capital structure, but was less comfortable with its asset structure. It was decided to insist on consultation with preference shareholders prior to any changes to its asset structure. Sanlam took 75 000 preference shares in Rembrandt as well as 100 000 ordinary shares.53 When Rembrandt clinched the Rothmans deal, the company had a serious cash problem: £750 000 was due to Rothmans in London on Monday, 25 November 1953, but Rembrandt did not have it. Rupert met with A.D. Wassenaar of Sanlam, then General Manager, in Johannesburg asking for Sanlam’s assistance. The Sanlam executive management met on 18 November at Sanlamhof, Bellville, to discuss the Rembrandt request for a loan of around £400 000. A special meeting of the executive management was called on Friday, 20 November 1953, for the urgent consideration of the loan.54 At that meeting Sanlam as preference shareholder in Rembrandt gave permission to Rembrandt to issue £500 000 7 per cent debentures. If the transaction was successful, Sanlam would take up £250 000 7 per cent debentures, secured by Rembrandt’s shares in Rothmans, as well as by combined and separate security offered by both the investment companies (Tegniese en Industriële Beleggings 1 and 2) in the Rembrandt Group. The Sanlam exposure was spread 50/50 between Sanlam and AHT, Bonuskor and FVB.55 The remaining funds were supplied by Volkskas taking up debentures. Sanlam’s permission to Rembrandt to issue debentures and the decision to take up half of the debentures collectively in the Sanlam group of companies and associated companies, provided Rupert with the means to make its first international acquisition. For the development of Afrikaner business in South Africa this was a major achievement. It was significant in the history of the Rembrandt Group, as well as the collective Afrikaner business effort. The insurance business of Sanlam developed (p.112) completely separately from the liquor, cigarette, and luxury goods businesses of the Rembrandt Group, but good relationships existed between the companies and individual leaders. When FVB celebrated its twenty-first anniversary in 1961, Rupert was invited to attend the occasion, leading to correspondence of mutual gratitude and respect.56

As part of the growing Afrikaner ambition in business, it was only a matter of time before an appetite for the mining industry would become a driving force. FVB was cautious of entering the mining industry. The high capital intensity of the industry, the dominance of foreign and English capital, the report by The Low Grade Ore Commission in 1932 that the low quality of ore and the deep level of deposits, coupled with rising working costs per ton, had put profitability under pressure, especially since the late 1940s.57 Afrikaners also had very limited experience in mining. A large number of urbanized poor Afrikaners did work in the mining industry, but Afrikaner entrepreneurs were wary of the industry. Young Afrikaners were gradually qualifying as engineers, for example Pierre Etienne Rousseau from Tulbagh, who qualified as a metallurgical engineer from Massachusetts Institute of Technology (MIT) and chemical engineer from the British Institute of Chemical Engineers. He entered a mining career with Anglovaal in 1938 and was appointed Managing Director of Sasol in 1950. Some entrepreneurial Afrikaners bought shares in small coal mines. Wentzel du Plessis and his brother Jacques established Klipfontein Collieries Pty (Ltd) in 1940, which owned the Klipfontein mine and later acquired the small Acme coal mine. A persistent cash-flow problem forced the Du Plessis brothers to seek financial assistance from FVB. The latter was not interested as mining was considered too risky and fell outside the business plan. FVB was finally persuaded by loyalty to fellow-Afrikaner entrepreneurs and the Du Plessis brothers’ close relationship with Professor C.G.W. Schumann, a director of FVB, to assist the company. FVB issued a guarantee to Volkskas in favour of a loan to Klipfontein Collieries, but encouraged Klipfontein to approach the market. In October 1944 Klipfontein Collieries made a public offering of 30 000 shares, underwritten by FVB. Coetzer, the FVB manager in Johannesburg, encouraged the Klipfontein management to locate better-quality coal deposits through exploration. Soon richer deposits were found at Horingkrans and later at Broodsnydersplaats No. 216 (later developed as the Blinkpan mine). In 1945 Klipfontein Collieries acquired options in Horingkrans, in 1947 at the Klippoortjie mine and in 1948 at the Koornfontein mine. Klipfontein Collieries lacked capital to take up all these options. FVB negotiated with the brokerage firm Michel & Bowman to underwrite a Horingkrans share issue—FVB did the sub-underwriting at 5 per cent commission and Bonuskor did the underwriting for 40 000 of the 100 000 issued shares. This was the first joint-venture mining transaction by FVB and Bonuskor. As Klipfontein Collieries (p.113) kept draining capital, and Wennie du Plessis entered politics,58 FVB moved closer to operations at the Klipfontein Collieries’ mines. More detailed investigation into the coal-mining operations convinced FVB that the mines required better management. By 1948 Klipfontein Collieries ran the risk of defaulting on the £40 000 Volkskas loan.59

By that time FVB was at a crossroads on mining: either call in the loan to Klipfontein or take full management control of all the coal-mining interests to secure profitability. William Bedford Coetzer was anxious to take on the Anglophone mining establishment in Johannesburg. This ambitious entrepreneurial step was considered even though Professor W.H. Hutt from the University of Cape Town had publicly expressed his opinion about Afrikaners’ capacity to succeed in business to a meeting of the Sons of England in August 1946. He claimed Afrikaners had serious deficiencies in engaging successfully in business.60 Afrikaner entrepreneurs were consequently clearly out to prove their abilities. Coetzer had to convince the FVB directors in the Cape that FVB had the capabilities to succeed in mining. The strategic business issue was to turn the focus of FVB beyond the safe small and medium-sized enterprises in which the bulk of FVB capital had been invested, towards the big business of mining.

The turning point came when Coetzer convinced FVB to grant a further £100 000 loan to Klipfontein Collieries on condition that FVB acquired sole mining rights to coal deposits at Koornfontein and Broodsnydersplaats, while Klipfontein shares held by FVB were retained as security. FVB thereby became directly involved in coal mining with full management control of the mines.61 In August 1948, FVB for the first time discussed the possibility of a mine holding company. In September 1948, FVB terminated public offerings of coal shares in the Klipfontein Collieries group of mines.62

The Koornfontein and Horingkrans coal deposits presented new prospects of successful coal mining operations, but profitability was dependent on access to a larger market. Coetzer then negotiated membership for Klipfontein Collieries with the Transvaal Coal Owners Association (TCOA), which landed Klipfontein Collieries a 2 per cent quota and the Koornfontein mine a 3 per cent quota in the TCOA coal market. TCOA was controlled by the Anglo American Corporation (AAC). The alliance with AAC’s Harry Oppenheimer was strategically significant. Coetzer was heavily criticized by his own assistant, Dr A.J. Visser, Wentzel du Plessis (then MP for Standerton, but a member (p.114) of the board of Klipfontein Collieries), and Mr Jan Steyn (MP for Potchefstroom). Collaboration with AAC was considered in breach of the goals of FVB to secure and promote Afrikaner business. Coetzer argued that doing business with well-intended English businessmen would afford the inexperienced Afrikaners valuable experience. The matter caused an unexpected upheaval at the FVB board meeting, since Visser and Du Plessis had secretly negotiated with the two wealthy Jonker brothers from Bonnievale (Herman and Japie) to buy out the Koornfontein rights from the FVB-controlled Klipfontein Consolidated Collieries. The FVB board then dug in its heels: its flagship mine was not up for sale, but if it was to be acquired, then negotiations were only to be with FVB and all outstanding FVB loans would be called up. The Jonker brothers could not foot the full bill. Visser, Du Plessis, and Steyn then resigned from the Klipfontein board and FVB was left with absolute control of Klipfontein Collieries.63 Coetzer delivered some sober business advice: he insisted that there was much to be gained from the TCOA’s experience and that there was no such thing as English demand for coal or an Afrikaans economy or that an Afrikaans coal-mining concern could be built on exclusive Afrikaner demand for coal.64 He established links with the leading mining company in the industry and secured the small nascent Afrikaner coal-mining interests access to the powerful TCOA market. He was instrumental in the appointment of the Anglo-Transvaal mining group of the Hersov family as consultants to the new Klipfontein Collieries group of mines.65 This strategy held the potential for the running of profitable coal mines. Coetzer was ambitious and eager to establish Afrikaners in the mining industry. Successful entry depended on very good management, patience, and much-enhanced technical surveys. He was very business oriented. To him there were no sentimental considerations in business, only profits, which could only be achieved through investment in big industry and mining. He opposed FVB’s approach of scattered small investments in mining. Instead, he suggested the formation of a holding company for all the coal-mining interests of Klipfontein Collieries, which by 1953 included Klipfontein, Koornfontein, Klippoortjie, Broodsnydersplaats (Blinkpan), and Horingkrans.

FVB‘s directors were located in Cape Town, while Coetzer operated in Johannesburg. His business inclination and ambition to secure an Afrikaans mining house finally convinced the FVB board to establish a mine holding company. On 1 July 1953 he resigned from FVB and took up the position of Managing Director of the Klipfontein Consolidated Collieries. (He remained a director of FVB.) Support from Sanlam was forthcoming from Tinie Louw in his capacity as Managing Director of Bonuskor, as well (p.115) as the secretary, P.R. Rörich.66 Louw had been the Sanlam manager consistently calling for investment in manufacturing, but he supported Coetzer’s ambitions because it was clear that the coal mines under his FVB management had been improving profitability since 1948. Bonuskor did not have the required technical abilities to invest in mining options, but FVB had accumulated a core of expert technical staff to evaluate mining propositions. Hendrik Brink thus proposed an FVB and Bonuskor joint venture by forming a separate mine holding company. Bonuskor provided capital and FVB technically trained staff.67 The risk of new mining ventures was then situated in a separate mine holding company. A team of qualified technical staff could be brought together to assess propositions and provide expert advice, facilitating decisions to involve the company at the earliest possible stage of mining operations. This strategy would place the mining company in the driving seat of new operations, allowing it to manage operations to profitability. This new company could earn commission by selling its technical, managerial, and secretarial expertise to other mining ventures. Brink estimated that the new company could earn up to £20 000 per annum in commission. Both FVB and Bonuskor transferred all mining shares in their portfolios to the new company. FVB’s mining shares amounted to £320 000 and Bonuskor’s £130 000. It was agreed that FVB would acquire de jure control of the new company, but since Bonuskor would provide the working capital the two companies would be equal partners with equal representation on the board of the new venture.68 Detailed correspondence was exchanged between Louw, Rörich, and Brink prior to the formal establishment of the mining company. The firm agreement was that should the new company proceed with a capital issue with the aim of involving either the public or any other interested parties, FVB and Bonuskor would have the right to negotiate with, for example, Sanlam on the formation of a holding company for the mining interests to secure control by either FVB, Bonuskor, or Sanlam.69 The agreement on the formation of the new company was based on strict business principles protecting the interests of each stakeholder. There was a tangible confidence among these Afrikaner businessmen in their ability to venture into the mining industry and succeed.

Federale Mynbou Maatskappy (Fedmyn)70 was established on 6 June 1953 with authorized capital of £1 million, consisting of two million shares of 10/ each. FVB and Bonuskor were the joint controlling shareholders. William Coetzer was the Chairman, (p.116) and Managing Director. Bonuskor was represented on the board by M.S. Louw and P.R. Rörich and FVB by C.H. Brink and G.J. van Zijl. Coetzer insisted on Fedmyn’s operational independence from its shareholders’ focus on investment management and small business development. He immediately appointed consulting engineers, geologists, and technical engineers to the Fedmyn staff and within a decade the English Sunday newspaper The Sunday Times acknowledged that Fedmyn had obtained the services of first-class leaders, managers, and engineering consultants. In 1964 the South African Mining and Engineering Journal had to admit that investment in Fedmyn was not an act of sympathy for Afrikaans business, but justified by ‘its intrinsic merits as a virile young mining and finance house’.71 The expansion of Fedmyn’s operations soon required further capital. In 1958 intricate negotiations between FVB, Bonuskor, and Sanlam resulted in Sanlam acquiring a third equal shareholding in Fedmyn on 1 June 1958.72 FVB wanted compensation for its exposure to risks when taking control of the Klipfontein and Koornfontein coal mines. In this period the struggling mines paid no dividends to Fedmyn. Sanlam agreed to the same terms of agreement between FVB and Bonuskor on control of Fedmyn as documented in the correspondence between Tinie Louw and Hendrik Brink prior to the establishment of Fedmyn.

The rapid expansion of Fedmyn’s operations and its growing exposure to the gold-mining industry meant a consistent demand for more capital and therefore Sanlam became involved. Once the terms of Sanlam’s third equity stake were confirmed, Fedmyn increased its authorized capital to £2 million and listed on the JSE on 29 July 1959. The public issue of Fedmyn shares was 89 per cent oversubscribed before closing.73

The participation of Sanlam as third equal shareholder in Fedmyn was significant for three reasons. Firstly, Sanlam was still seen to be the main source of capital for emerging Afrikaner business, despite the establishment of FVB. Secondly, the involvement of Sanlam in the mining industry by direct shareholding in Fedmyn was the beginning of extensive investments in companies later to be described by the Sanlam Managing Director, F.J. du Plessis, as ‘strategic investments’. The notion of ‘strategic’ followed from the agreement between the three principal shareholders not to allow control of the mining company slip from their hands. Thirdly, the frantic attempts by FVB to secure its business interests in Fedmyn, as well as to secure financial reward for its exposure to risk during the formative period of the mining initiatives (at a time when Afrikaner business actually did not contemplate involvement in mining), signified the emerging business domain contestation between Afrikaner businessmen. Thirty years later similar contestation was described in the English press as ‘broedertwis’.

(p.117) The company for the people and the people of the company

Dedication and competitive performance in the insurance industry characterized much of the work by the Sanlam team of managers, Head Office staff, and agents. The motivational thrust was to succeed in an industry dominated by non-Afrikaners and a society publicly skeptical of the ability of Afrikaners to succeed in business. Since 1918 the organization, management, and public image of Sanlam portrayed Afrikaner conservatism, patriarchal authority, and a proud sense of nationalism. The passing of the Sanlam Act in 1954 occurred at the critical organizational intersection in the history of the firm. Key capabilities had been built in the firm through learning from experienced staff who joined the company in 1918. Human capital accumulated in the firm permitted the building of economies of scale and scope. This expansion occurred under the next generation of leadership who succeeded the founding fathers by the late 1950s. Management remained centralized, rigid, and bureaucratic. The business strategy was to expand in insurance as well as functional diversification. To build the core capabilities in support of the strategy and structure of the growing firm, apart from establishing a hierarchy of practical organizational routines, Sanlam also constructed an organizational culture to support the structure. When the Sanlam Head Office moved to Bellville in 1953, the ‘company village’ phenomenon represented a strategic management tool towards achieving firm objectives.

Sanlam’s management recognized that the confined office space in the Cape Town city centre was a serious constraint on operational expansion as far back as 1950. The idea of a company village was mooted at board meetings in 1943 and 1944. During 1950 Wassenaar visited insurance companies in the United State of America to observe the trends in the physical organization of those companies. Management displayed an enlightened sense of openness to international developments, and a willingness to move ahead with the leaders in the industry. Wassenaar reported that since 1925 American insurers had moved their head offices to extensive open land, away from shops in the business centre, perhaps in residential areas, but in close proximity to urban transport services. Sanlam was following an international trend in establishing Sanlamhof74 in 1953. To the Afrikaans life office there were three golden rules: move to a location where a commercial centre would not be able to catch up with the company, remain within the reach of transport infrastructure, and buy enough land to secure the (p.118) company the ability to keep other businesses at bay.75 The move out of Cape Town was mandated by the growth of the company, and management grabbed the opportunity to devise a functional location and physical structure to serve the needs of a growing enterprise.

The industrial paternalism sought to create a loyal and disciplined workforce able to sustain the growth of the company. Management created an environment in which the labour force was secure, submitted to the culture management instilled, and experienced satisfaction in work and personal development. The Sanlam management had been strongly paternalistic since 1918, as described in Chapter 2. A high degree of cultural homogeneity was considered vital to the success of a new entrant into a very competitive market. Management knew that a large body of its employees entered the urban environment for the first time. It was assumed that a home-like familiar socio-cultural environment would serve the firm’s as well as family purposes. By the early 1950s, Sanlam was competing successfully in the industry, but the company was only at the beginning of its empowerment strategy. Wassenaar motivated the relocation to Bellville from a company perspective, but strategically the physical space afforded management the opportunity to organize accommodation, social interaction, sport, and other cultural activities in accordance with Afrikaner customs. Sanlamhof was the place where the Sanlam company culture and operational efficiency were envisaged to meet and serve business goals. Management was aware of some resistance to the move, but hoped to compensate by offering subsidized accommodation, food, and recreational facilities, similar to those of international company towns. Management’s father-like conduct in providing for the staff was perceived to be justified in business. The staff periodical Die Sanlam Fakkel reported the paternalism in business as offering invaluable guidance to employees, opening avenues for progress and advancement of employees, encouraging studies in new industry developments, and displaying concern for the personal problems of workers.76 The planning, organization, and execution of the new Head Office in Bellville at the same time as the life office came into its own as an independent mutual life company, underpinned the functional diversification envisaged.

The Sanlam administration and management moved into the new building in October 1953. The Sanlam Fakkel dedicated twelve pages to describe the layout of the premises on the 27.4 hectare Sanlam site.77 The building was a modern version of international state-of-the-art insurance buildings: not too high—three storeys plus a basement—and open-plan group offices to facilitate communication and contact, meeting rooms and separate offices for only the most senior managers. The building, the adjacent staff accommodation, and the recreational facilities were presented to the readers as a (p.119) dream come true for ‘us all’. The new cafeteria provided meals, while breakfast and dinner were provided in the dining rooms in the staff accommodation. The three blocks of accommodation were named after founders of Sanlam: Carl Wilcocks, Fred Dormehl, and Willie Hofmeyr. The motive for the main building was to meet the expansion requirements of the company and assist staff to sustain and expand the delivery of high-quality services to the public. The modern technology of document transfers from one side of the building to the other to enhance record preservation, the state-of-the-art telephone system, the open communication facilities, and air conditioning on the top floor where the boardroom and executive offices were situated, all symbolized the progressive Afrikaner enterprise. The gardens were planned to enhance the appearance of the modern building. Sporting facilities (rugby field, cricket pitch, netball field, swimming pool, tennis courts, pool table, and table-tennis facilities) were all provided on the premises alongside the three blocks of flats and dormitory accommodation for staff. It was interesting that the former social club was replaced by the Sanlam sporting club, responsible for organizing all the different sports codes.

Industrial paternalism was visibly present in the structuring and organization of the new Head Office. Management wanted the staff to feel like one big happy family. However, not all staff members were always part of the happy family,78 but the staff magazine generally portrayed a consensus that served the public image of a successful company. This lasted as long as Afrikaner nationalism displayed a high degree of unity and action, but began to decline towards the late 1970s. Since the occupation of the new Head Office it fulfilled a significant symbolic organizational role. A high degree of unity incentivised better performance, and during the late 1950s and 1960s Sanlam produced a number of industry-leading initiatives. One important development was in computer technology, which clearly benefited from the consolidation of human capital at the centre.

The Sanlam management kept a close eye on international industry developments. Managers were regular attendees at international industry conferences. Particular attention was given to up-to-date technology and in 1934 Sanlam introduced Powers-Samas forty-five-column punchcard equipment. Sanlam was the first insurance company in South Africa to introduce this technology. In 1948 the technology was upgraded to the reading of sixty-five columns. From the beginning meticulous attention was given to administrative efficiency and systematic record-keeping. The drive to succeed in the industry incentivized further innovation. Sanlam computer technicians assisted Powers-Samas in building a new five-line interpreter machine, introduced in 1955. (p.120) This technology enabled Sanlam to process more complex policyholder information about renewal dates, premium payments, monthly bank and employers’ requests. These innovations enhanced the efficiency in communication with policyholders and saved time, which administrative clerks could allocate to other functions. Sanlam used the Powers-Samas technology for twenty-five years. In 1958/59 Sanlam switched to the IBM eighty-column cards before introducing IBM technology, which replaced the mechanical data input action of the Powers-Samas technology with IBM electro-mechanical technology.79 As the modern technology of American computers entered the market, Sanlam was fully informed of the applicability thereof to the life industry through the publications of the American Life Office Administrators and membership of the Scottish Faculty of Actuaries, of which Sanlam actuaries had been members since 1955. Sanlam dispatched its chief actuary Dr G.H. Hansman and another actuary in the actuarial department, Pepler Scholtz, to investigate the possibilities and implications of Sanlam making the transition from mechanical high-speed calculators to electronic computers. By this time, the company had invested in growing industrial enterprises and the mining sector. Sanlam was also the first insurance company in South Africa to install a Burroughs Datatron computer in September 1958. This computer was supplemented by an IBM eighty-column punchcard reader and IBM printer. The equipment was 50 cubic metres in size and weighed 12 000 kilograms. Sanlam sent a group of seven Head Office employees from the different departments—actuarial, policy benefits, mortgages, planning, and accounts—to the USA for training prior to the installation. The company appointed its own engineers, Francois Botha and Nick van Zyl, to take care of maintenance. It was a committee consisting of Sanlam employees, led by David Malan, who investigated the possibilities of acquiring a computer for Sanlam’s operation. They advised the board in great detail about the proposition and oversaw the installation and the introduction of the computer to the operations of the life office in November 1958 (this was the new computer, installed in September, that had come into full operation by November). Sanlam followed the advice of the American actuaries, namely that control of computer equipment should be in the hands of people who understand the life insurance business, ‘men who know not only what we do but also why we do it’.80 David Malan was in charge of the new computer, assisted by newly qualified actuary Uwe Voigt, who had just returned from studying in Scotland. With the first electronic computer utilizing magnetic tape in Africa, Sanlam improved operational efficiency exponentially.

Leadership in computer technology was not expected from the latecomer Afrikaans life office. This team, Malan and Voigt, addressed early implementation snags, such as longer-than-expected time to transfer data from the punchcards to the magnetic tapes, (p.121) because around only 106 out of 249 punchcards were reliable storage units. Malan acknowledged that transferring records from the punchcards to the computer’s magnetic tapes took much longer, partly because the employees were not fully up to the task. A stronger reliance on the actuarial staff was proposed. The task remained an absolute priority and by late 1959 it was feared that the actuarial records might be too late for the release of the 1959 annual report. The 1959 annual valuation reports were subsequently only produced in October 1959. In the following year the annual valuation reports were only released in December 1960—two months later than the release date of the 1959 reports. By 1961, back-up procedures were adapted to suit the mass of Sanlam policyholder records, to the extent that when South Africa introduced decimalization in 1961,81 the Sanlam computer was able to effect the migration to the decimal system. In 1962 the annual valuation programmes were run without punchcard data for the first time.

As with the entire Sanlam venture, the success of the ground-breaking transition to computer-based records and processing depended on human capital. Late in 1959, Carl Smit, Assistant Secretary (actuarial), was seconded to assist with the rounding-off of the 1959 valuation reports. Smit remained in the Sanlam computer department for thirty years, performing a key role in subsequent computer systems development in in the company. Management transferred more staff members from the actuarial department as well as the pensions division to the computer systems division in 1960. The complexities of decimalization, daily updates, cash renewals, and policy debt were finally resolved by September 1962. This was noteworthy, because Sanlam achieved the transition to the new computer by relying on its own staff, who adapted the systems to the needs of the company. Savings amounting to around £24 000 per annum as had been envisaged in 1957, were exceeded by 1962. All administrative functions were fully computerised by September 1962, enabling the daily performance of those functions electronically from then on.

But the 1960 world of computers was fast-moving. The company leased an IBM 1401 computer towards the end of 1962 as it needed more capacity. In 1964 the second-generation IBM 360 computer was purchased, followed by the third-generation upgrade, the IBM360/40, in October 1967. While waiting for the delivery of the 360/40 Sanlam systems engineers prepared an innovative integrated system to suit the Sanlam needs. The integrated system included a comprehensive membership data register, including address reconciliation, and a debit-order system, as well as an integrated policyholder system that included more than fifteen main and subsystems. The main policy system was supplemented by subsystems for new policies, area codes, renewal of policies, bonus (p.122) certificates, and internally linked policies. Additional systems were developed for commission payments, cash bonus payments, and Sanlam Trust-linked annuities. In February 1968 the first premiums were collected by debit order. Sanlam paved the way for the first ‘electronic funds transfer’ (EFT) transactions in South Africa and offered its guide to procedures for the implementation of a debit order system, since it was only a matter of time before the banks would have to follow suit. The security of the IBM computer did not fully comply with Sanlam’s requirements. Once tasks on magnetic tapes were completed, the computer had to be stopped and restarted, causing the congestion of awaiting tasks. The Sanlam systems engineers then developed an innovation to secure automatic resumption of subsequent tasks. They introduced the so-called ‘pumpkin card’, an orange-coloured card placed at the end of each task. Once the computer recognized the pumpkin card it signalled the completion of one task, triggering the automatic commencement of the next. This innovation was called the Sanlam MONITOR system, which was later adapted to store different programmes utilized by the computer, a recognition system identifying the type of paper required for the printing of specified notices and documents. Further systems for delayed annuity payments, mortgages, rentals (of property), and the administration of shares were also developed and in operation by the end of the first decade of Sanlam’s computerization.82 In just ten years a firm foundation had been laid. The significance of this was that Sanlam was a leader in the assurance industry in South Africa.

As the leader in the computerization of the life insurance industry in South Africa, Sanlam had access to human capabilities from its own ranks. Johan de Wit took the managerial responsibility as General Manager of computer systems in 1962. He was assisted by systems project leaders Jan Pretorius and Dirk de Bruyn, and Wallace van Wyk, an administrative clerk in the actuarial department, who later took up the responsibility for technical assistance and staff training in the computer department. The systems development was completed by Dirk de Bruyn and Apie Meyer as systems analysts. Management was visionary in establishing a department of Automation and Mechanization (A&M). De Bruyn headed up A&M and investigated the computerization needs in different Head Office divisions, documenting and advising strategies to integrate those requirements into computer capacity. H.S. (Cassie) Carstens, the first Sanlam bursary holder, joined the computer systems team and was involved in the development of the three generations of computers at Sanlam. By 1965 he witnessed new applications, transactions, and enquiries processed during the course of a working day, being integrated with existing policy records immediately. Jan van Rooyen, Jurgens de Kock, Japie Cloete, and Theuns Pienaar all contributed to the foundation of the Sanlam computer establishment decade. Except for van Rooyen they were all experienced (p.123) employees from the valuations section of the actuarial department, who moved to Sanlam’s systems and there contributed to the computer innovation of the company.

With the rapid expansion of computer capacity and of the Sanlam policyholder base, the company started to decentralize its computer system. A new IBM 370 computer enabled decentralized terminal networks using typing terminals, mini-computers, and personal computers operating on the central company network. New products, expanded product offerings, and the extended application of computerized routines in the daily operations at Sanlam Head Office paved the way for a permanent formal organization of the company’s computer capacity. Two permanent structures were established. The first was a computer bureau, later called Multidata. This bureau was a subsidiary of Sanlam, established to sell its computer services outside the company. The other was the Electronic Data Processing Committee (EDP) in Sanlam. It consisted of H.A. Peters as chairman, J.H. de Wit, Managing Director of Multidata, J.H. Söhnge, H.T. Kriel and C.J. Smit. These men were part of the Sanlam management team. EDP and Multidata operated in tandem to ensure systematic progress in Sanlam of the computer systems planning and implementation, while Multidata delivered the same services to other companies within the Sanlam Group or associated companies, such as FVB, Bonuskor, and Sanmed.

By the mid-1980s the integrated systems solutions developed in Sanlam facilitated ongoing implementation of new systems to support product development and functional diversification. Systems management responded to the A&M proposals based on ongoing identification of company needs. The Sanlam systems department engaged in continuous research and development and kept a close eye on international developments. In 1972, Sanlam subjected its systems department to a voluntary international audit by the Diebold Organization, a USA-based computer consultancy and education organization. Sanlam’s systems department was applauded for its innovative work and applications introduced to the local hardware, but these added nothing new to the knowledge of the Sanlam staff. The value was rather in the open communication between the specialists in computer systems and the users of the technology. Sanlam was subsequently invited to become a member of the Diebold Research Programme. This was in recognition of the expertise accumulated in Sanlam and afforded the company staff access to ongoing international contact, conferences, and research output, which enhanced the application and innovation in Sanlam.83 These developments were incorporated directly into staff training. By the end of the 1970s a staff complement of seventy was engaged in the Sanlam systems division. The mid-1970s domestic unrest and subsequent state of emergency alerted the systems division to the potential security risks involved in its operations. Within three months a new secure underground location (p.124) was prepared to accommodate the Sanlam computer and related equipment. It was anticipated that South Africa might suffer international pressure capable of closing down access to new equipment. Additional security procedures were introduced to protect Sanlam’s data.

Innovation in financial services

As computer technology completely overhauled Sanlam’s administrative efficiencies, the door was opened to new products to support the growth vision of the company. Wassenaar placed strong emphasis on the opportunity of riding the wave of the stock market. Internationally the development of innovative life products was not typical of the industry. According to Clark, product innovation in the life industry was constrained due to the tense relationship between ‘prudence and speculation’.84 The most important innovation was structural—insurance companies increasingly became composite companies offering different classes of insurance. These companies expanded operations over such vast geographical areas that branches constituted the logical way of organizing extensive operations.85 Life offices were more innovative in their investment policies.86 Only in the late twentieth century did the life offices start to develop investment products, which responded to the demand for more sophisticated wealth products and subsequently undermined demand for ordinary life insurance.87 The South African life industry was only partially similar to the international experience. The competitive market stimulated product innovation to secure market position and respond to client needs much earlier. In the robust South African competitive environment after 1945 and with the benefit of advanced systems developed in-house, Sanlam wanted to encourage investment in improved yield-bearing savings products. As interest rates dropped significantly after the 1969 stock market crash, yields in investments stagnated. The only type of product that offered protection against the decrease in inflation was ‘with-profits’ policies, but these were still subject to the statutory investment restrictions and policies of the life insurance company. A further limitation was that life companies did not value their assets at market value, thereby restricting their ability to pass on capital profits.88 There were few (p.125) investment options available to consumers at the time, and life policies still dominated the market. The products with more investment features were endowment policies, which had an investment component. However, such policies were not yielding the inflation-beating returns needed and did not provide much liquidity. Investors were bound until maturity to realize the product.89 In the early 1970s with the rising popularity of with-profits policies, and after the introduction of unit trusts, policies linked to performance of share portfolios started to take the lead in the market.90

If a life insurance company wanted to survive it had to adapt to the changing market needs by proving wealth products generating higher returns.91 Sanlam was in great need of products that could make savings profitable again. By releasing itself from the regulatory burden imposed by the life insurance and pension fund legislation, this could be achieved. In 1969, referring to Sanlam, Wassenaar used the words ‘Sanlam, group of financial services’ for the first time.92 He referred to ‘adaption’ in reference to the adaptation of products to suit the changing circumstances and the greater demand for growth.93

One strategy was to develop new group life insurance schemes for a variety of occupational entities, such as professions and companies. Sanlam had established a total of sixteen group life schemes94 between 1954 and 1959.95 Another strategy was to innovate in pension provision. In 1959 Sanlam introduced the first retirement annuity policy in South Africa.96 After the promulgation of the Pension Funds Act No. 24 of 1956 there was a proliferation of pension funds. However, individual private participation towards retirement did not yet exist. Individuals either did not save at all (this meant there was a reliance on the state or family support), or engaged in personal savings and life insurance. The passing of the Income Tax Act No. 58 of 1960 subsequently allowed for the establishment of retirement annuity funds (commonly known as RAs) to enable private individuals to provide for their retirement with the help of a tax saving.

To protect the advantage it had secured in the retirement annuity market, Sanlam made a special arrangement with the Postmaster General to grant Sanlam a business reply service immediately after the Minister’s tax rebate announcement. Sanlam prepared and (p.126) mailed letters to existing policyholders, informing them of the new tax rebate and inviting them to take up retirement annuities with the company. The leave of Head Office staff was cancelled for the period immediately following the Minister’s announcement to secure a full complement able to capitalize on its existing advantage in the market.97 Competitors followed Sanlam. The company soon added additional investment options to its retirement annuities, such as investments in unit trusts, the new investment vehicle of the mid-1960s.98

This development pointed to two important trends in society: higher levels of income and a growing investment orientation among policyholders, since retirement annuities were primarily investment products.99 Sanlam identified an opportunity to take advantage of the strong growth in the economy (real national income rose by 8.7 per cent per annum between 1948 and 1961), the post-war demand for retirement provision, and the higher standard of living of the South African population, including Afrikaners. Sadie estimated that by the early 1960s Afrikaners’ personal income as a ratio of that of English-speaking South Africans had increased from 47.6:100 in 1946 to 64.6:100 in 1960 and 69.9:100 in 1970.100 When the Minister of Finance finally announced a tax concession in June 1960 (to a maximum of £300) to self-employed persons for contributions towards their own ‘pension schemes’, Sanlam established the Central Retirement Annuity Fund (CRAF), an open general retirement annuity fund. The CRAF was soon marketed to a much wider client base on the back of the new tax concession.101 Sanlam used this product to target what it came to refer to as the ‘senior market’, that is the high-income market. This target market was professional people, self-employed people, and any investment-conscious person wanting to add enhanced retirement provision to existing pension provisions. It also included persons belonging to provident funds, to whom the tax concession was not extended.102 As underwriter to the Professional Provident Society (PPS) retirement annuities for professional persons, Sanlam had them in mind.

The ordinary life, endowment, and annuity products remained operational in a very competitive life market. Sanlam had to innovate and think in a radically different way about product offerings. New products were developed by the actuarial department, where Sanlam employed many of the bright young minds the company had supported (p.127) with bursaries to study actuarial science and statistics.103 Three disadvantages existed for life insurance policies by the late 1960s. The ordinary life insurance policies lacked the ability to beat inflation, participate in broader economic investment opportunities, or participate immediately in the growth of assets. Owing to the steady rise in inflation, life insurance was constrained by investment regulations and long-standing conservative internal investment policies, both limiting the returns that life funds could earn. Furthermore, Sanlam found that the market did not necessarily want to share in the past economic growth of South Africa, but rather wanted to invest in newly established companies. Lastly, traditionally, only participating policies would share in the profit of a life insurer as well as in the growth of the insurer’s assets. The market felt that these forms of returns, which were mainly passed on to the policyholder by means of a bonus, were limited by the fact that the bonuses were only realized at maturity. When a bonus was declared it was added to the policy value attributable to the policyholder and would be paid out when the policy matured or at the death of the insured. Sanlam realized that the public wanted a means of immediate participation.

What was needed was more aggressive investing that could be liquid enough to adjust to the fast-changing investment environment. This could maximize opportunity wherever it arose, providing the policyholder with more active participation in the economic growth of South Africa. Such an investment policy should be capable of beating inflation. Sanlam responded to this with the introduction of the 100-Plus series of policies on 20 May 1969. These policies had the following characteristics: maximum exposure to growth-intensive assets by investing the net premium (net coverage after the cost of life cover and administration) in a fund that formed part of Sanlam’s total assets, but was separately accounted for, so that each policyholder’s share in its growth could be calculated. The fund would be limited in its investment scope only by the Insurance Act and thus would be able to make adjustments to its exposure to the best opportunities identified. Policyholders shared in the investment gains as they arose. This was achieved by the ‘sophisticated’ use of Sanlam’s electronic computer. Sanlam could keep detailed records of each individual policyholder’s contribution to the specific fund into which his or her premiums were channeled. A full range of policies was made available, including life insurance, endowment, retirement annuities, and child and savings policies. The asset bonus could not be negative. There was a guaranteed sum assured that would be paid, irrespective of what happened to the valuation of the assets in the stock market in which he or she was invested.104

(p.128) The 100-Plus policy range, introduced on 20 May 1969,105 offered an investment opportunity in response to the changes in the market. A portion of the 100-Plus fund was invested in government securities, prescribed investments, and in cash deposits. The main reason for the 100-Plus policies, or internally linked policies instead of the unit trust-linked policies, was to allow for the changing prescribed asset requirements. With external linkage the proportion of prescribed assets could not be changed easily, whereas it was easy with an internal fund.106 This combination changed as interest rate fluctuations determined the choice of alternative investment products. There were also three variations of the pension and provident fund offerings linked to the 100-Plus policies, namely the 100-Plus Guaranteed Portfolio, the 100-Plus Special Portfolio, and the 100-Plus Unique Portfolio. The difference in these portfolios depended on the degree to which the trustees would be involved. The 100-Plus Special Portfolio allowed the trustees to participate in the strategic decisions on the portfolio asset allocation such as moving the portfolio to a higher weighting in anticipation of an upcoming market movement. However, the 100-Plus Unique Portfolio offered the trustees full decision-making participation. Investments of R8 million were placed in the 100-Plus series within the first month on offer.107 Within three and a half years of the introduction of the 100-Plus series, Sanlam raised the value of every R100 invested to R111.50 for the funds where no tax provision were required.108 Longevity means success, and the 100-Plus policy series remained in force until the late 1990s.

At the Pensioenmakelaars (pension brokers) conference in 1977, Marinus Daling (an assistant manager, later to head up Sankorp as well as Sanlam) proposed that by investing the cash flows received by retirement funds (and probably provident funds too) into new assets rather than in the ‘current portfolio’, investors could increase the return yield on new cash flows by between 10.6 per cent and 12.25 per cent. Investing in existing portfolios resulted in all participants receiving similar yields, irrespective of the timing when the cash flows were invested. At that time (1977) the average return on the investment portfolios of the five largest life mutual companies in South Africa (within a particular class that was unspecified) was 10.6 per cent. Daling argued, ‘we (Sanlam) think it’s only fair that each participant should receive a return more or less matching the investment conditions that prevailed at the time that the investment was made.’109 (p.129) Subsequently, Sanlam developed investment products able to capture investment opportunities at the time of investment.

In 1977 Finplan was developed. It was a computer-assisted analysis service used by brokers and agents to calculate policyholders’ current and future financial positions scientifically.110 This analytical tool assisted agents in assessing the full financial profile of clients. In rolling out new investment products, Finplan proved a competitive advantage, especially as many new investment products were developed, which the agent could align with the client profile in an instant. As rapidly succeeding new investment products emerged, Finaplan proved to be successful and highly functional. In 1983 Sanlam again introduced three new investment-oriented products to offer policyholders such investment flexibility. Indexplan, launched in 1983, was a comprehensive insurance package designed to give the option to reinforce provisions for all eventualities (death, disability, or retirement and savings needs). It allowed for an automatic premium increase per annum to counter the effects of inflation. In June 1983 the Investment Series was launched to supplement the conventional series of policies. It included two options: one was the Sanlam Stable Investment Series, which fell in the category of conventional insurance with smoothed and largely vesting bonuses. The other was the Market Value Series, which was linked insurance that shared directly in the ups and downs of investment performance.111 Seventy thousand units of the Investment Series were sold within the first year. Furthermore, building on the transparency offered by unit trusts, the Investment Series introduced the so-called ‘transparent policies’, which made clear disclosure of the separate elements of the policy—the life cover, rider benefits, and investment portion.

The next product offered was the 200-Plus Portfolio to address some of the limitations of the 100-Plus portfolios’ investment scope. This was a unitized market value portfolio, with a scope of gilts, semi-gilts, equities, properties, and cash, where the unit price was declared monthly. The main difference between the two Plus portfolios was that the 100-Plus Portfolio had a moderate volatility profile, with a long-term focus, while the 200-Plus Portfolio was more volatile due to its pursuit of short-term investment opportunities. Because of this high risk/volatility profile of the 200-Plus Portfolio, Sanlam sold it as a complementary investment to the lower-risk pension and provident funds available. Unlike 100-Plus Portfolio, the 200-Plus portfolio was not constructed with a number of sub-portfolios.112 The consistent innovation or adjustment to existing policies was indeed a contributing factor to the growth in Sanlam’s premiums (see Table 3.1).

Table 3.1. Sanlam performance, 1945–1985

Year

Premum Income £/R since 1961

% Growth

Assets £

Return on assets

Death and disability claims paid £ / R since 1961

Branches

Bonus rate

Admin cost £ / R since 1961

1945

1 888 766

29

9 394 751

3.35

215 186

9

2.0

209 961

1947

2 729 424

44

13 051 675

3.35

286 669

9

2.2.0

352 285

1949

3 451 377

26.4

17 784 699

3.6

428 412

9

2.2.0

411 551

1951

4 492 179

30.1

23 898 986

3.81

441 325

10

2.2.0

604 806

1953

6 053 322

34.7

32 901 535

3.94

633 021

11

2.4.0

887 095

1955

7 895 133

30.4

43 877 475

4.3

800 188

12

2.7.6

1 105 107

1957

10 156 622

28.6

57 698 736

4.65

1 239 960

15

2.7.6

1 482 765

1959

12 237 986

20.4

73 148 133

4.94

1 890 885

18

2.10.0

1 695 695

1961

29 206 757

19.52

179 684 662

4.97

4 766 000

21

2.5.0

4 420 596

1963

35 177 460

20.4

219 747 632

5.21

7 633 000

23

2.5

5 300 169

1965

43 644 000

24.1

270 572 449

5.38

10 404 293

26

2.65

9 576 885

1967

52 312 406

19.86

334 042 988

5.86

11 237 722

26

2.75

9 995 673

1969

64 896 980

24.2

421 403 355

6.2

14 853 433

30

27.5

11 981 779

1971

93 818 000

44.56

528 607 000

6.26

22 692 000

36

31.0

10 000 000

1973

143 925 000

53.4

701 867 000

6.25

26 909 000

38

31.0

14 000 000

1975

189 972 000

31.9

973 442 000

7.26

35 979 000

38

31.0

19 000 000

1977

259 940 000

36.8

1 349 981 000

7.95

49 800 000

43

33.0

22 000 000

1979

392 124 000

50.8

1 940 442 000

8.00

62 206 000

49

35.0

25 000 000

1981

644 744 000

64.4

3 072 848 000

9.54

96 318 000

52

37.5

43 000 000

1983

1 079 303 000

67.4

5 044 560 000

10.7

149 030 000

56

45.5

71 000000

1985

1 605 000 000

48.7

7 785 000 000

11.20

229 000 000

57

46.5

107 000 000

Source: Sanlam Annual Financial Statements, 1945–1985.

(p.130) Health in Sanlam

A less successful initiative was health insurance. On 1 October 1939, Santam and Sanlam established the Santam/Sanlam Sick Fund, a closed medical scheme for employees, similar to what SA Mutual offered. When the Friendly Societies Act, No. 25 of 1956113 came into effect, all medical schemes where members controlled the scheme, were required to register as mutual funds. Santam and Sanlam refused to register their fund, because they wanted direct control of the medical scheme. The Sanlam actuary, Hansman, approached the board in 1954 to consider a commercial approach to medical provision by means of medical insurance. Medical insurance policies would be issued by Sanlam, underwritten by the company, and thus controlled by the company. By June 1956 the National Medical Aid Society of South Africa (NMASA) was in trouble, having had only two solvent years since its establishment in 1949. The Sanlam board agreed to (p.131) the concept of medical insurance and established a separate company, Die Suid-Afrikaanse Nasionale Siekte- en Ongevalle Maatskappy (SANSOM), on 29 March 1957. It was registered as an insurance company in April of the same year. The Board of Directors were all Sanlam managers, with Hansman as Managing Director. SANSOM then acquired the assets of NMASA even though Sanlam had not conducted a thorough due diligence of the latter. The scheme had around 20 000 members, thus it was a relatively large medical-aid society at the time, but the ‘better risk’ members did not move to the new SANSOM. Sanlam consequently acquired an unprofitable benefit structure, a very large variety of schemes, which the SA Medical Association (SAMA) refused to accredit, and exceptionally high administration costs.

As the Santam/Sanlam Sick Fund failed to get NMASA accreditation and preferential tariffs, it was not profitable. A request by AHT to join the Santam/Sanlam Sick Fund was turned down in 1945 and in 1960 Santam decided to establish a separate medical scheme for its own employees. This route to medical support placed Sanlam on a collision course with NMASA. The latter refused to grant the Sanlam in-house fund for employees, as well as SANSOM, access to preferential benefit tariffs because the schemes were not mutual funds managed by members. As long as medical insurance was managed as a commercial enterprise from which the owner of the policies could benefit, there would be no accreditation by NMASA. Sanlam paid itself dividends on the profits of the SANSOM business, which ensured that NMASA refused to include SANSOM members under preferential benefit tariffs. Members therefore did not have access to lower medical fees through a scheme accredited by NMASA. In 1968 the Sanlam in-house sick fund for employees finally closed its doors and employees were asked to join SANSOM.

Sanlam amended the SANSOM statutes to prohibit the payment of dividends to Sanlam. Subsequently, in March 1960, NMASA announced the accreditation of SANSOM for preferred benefit tariffs on condition that the number of schemes (options) available to members was reduced. Sanlam never succeeded in complying and NMASA accreditation was again withdrawn. Hansman, who had been appointed Managing Director of SANSOM, and Wassenaar failed to agree on a number of key elements of the medical business. SANSOM carried a heavy weight of the legacy of numerous options, ill-priced options, and a multitude of companies with in-house arrangements, which SANSOM accommodated without properly assessing the financial implications of the options available in each individual company (e.g. the SABC (South African Broadcasting Corporation) and the National Association of Local Governments had their own ‘schemes’ that were managed by SANSOM). The SANSOM offerings were simply never focused, correctly priced, or aligned with NMASA’s preferred benefit tariffs. Members were always dissatisfied with being excluded from NMASA’s preferred benefit tariffs. The Sanlam board twice categorically stated that SANSOM was subject to the authority and control of Sanlam, which indicated friction between the SANSOM management and (p.132) Sanlam. In August 1965 Hansman went on six months’ leave and subsequently retired. In 1964 the SABC was the first of a number of members to announce the withdrawal of their employees from SANSOM. Sanlam actuaries consistently struggled to price the options of medical assistance in the SANSOM scheme correctly: tariffs were based on medical association preferred benefit tariffs, but premiums were too low. Failing to mend the one, Sanlam again established a new medical-aid vehicle in 1965: The South African Medical Fund Limited (Sanmed).

Sanmed was Sanlam’s most successful medical insurance enterprise. From 1965 to 2000 membership grew to more than 140 000. Sanmed was a medical fund, but since it was denied registration as a mutual medical scheme, Sanlam again changed the statutes to prohibit the payment of dividends to the shareholder in an attempt to qualify for preferential benefit tariffs. Sanmed offered two schemes: Topmed, based on benefits equal to 100 per cent of NMASA benefit tariffs, and Helpmed, based on 80 per cent of NMASA benefit tariffs. Sanmed remained firmly under Sanlam control. Management improved the administration of the scheme to one of the best in the country, especially by linking it to the advanced Sanlam computer system. Administrative costs were reduced to less than 9 per cent of premiums and reserves in excess of 25 per cent were accumulated. The scheme was opened to black people in 1973, and in 1977 two separate schemes were established for Coloured people (Belmed) and black people (Bonmed). A new scheme was registered for Namibian members (Swamed) in 1980. Sanmed’s management maintained good relations with the SA Association of Medical Aid Schemes (SAMAS). From 1968 Sanmed representatives served on SAMAS until the retirement of Sanmed’s Managing Director, Nick du Preez in 1997. In 1979 Sanmed became a member of the International Federation of Voluntary Health Service Funds. Operational efficiency was underpinned by the computerized systems support of operations, which secured swift and efficient processing of claims. Despite Sanmed being a medical insurance product, benefits offered were based on SAMAS preferred benefit tariffs. The fine reputation of Sanmed as a voluntary medical insurance scheme ensured growing support. An increasing number of individual companies decided to close their in-house medical provision schemes in favour of Sanmed policies. Santam finally terminated its in-house scheme in 1980, resulting in more than 1 200 Santam employees joining Topmed. So did the employees of Nissan in 1985.

By 1985 Sanmed managed premium income of R95 million for 90 001 members. Benefits paid out in 1985 amounted to R91 million and reserves stood at R24 million. The value of the successful management of Sanmed was the growing public exposure to the broad Sanlam product offering. The trend in medical schemes was already moving closer to the professional administration of individual schemes, rather than the management of very large schemes. Medscheme had been in the management market since 1968, but Sanlam was not interested in medical scheme administration despite repeated (p.133) advice to the board. Sanlam wanted control. Sanlam understood insurance policies and was comfortable with providing medical assistance to policyholders. However, the medical-aid landscape was changing and in the post-1985 period Sanlam’s fortunes in this industry took a turn for the worse.

Growing Sanlam

New product offerings and employee benefits were the tools in the hands of the Sanlam agents to grow the market. The English press acknowledged the growth of the company towards the late 1950s and early 1960s. In 1959, Carel Birkby commented in the Sunday Times on the FVB £1 million rights issue as ‘focusing attention on a healthy new development in the South African financial world—the rapid advance of Afrikaners into business. This expansion is warmly welcomed on all sides.’114 In a supplement to The Manufacturer in 1961 specific mention was made of the sound investment returns earned by the Sanlam policyholders, but also that additional capital was made available to numerous and varied private and public enterprises.115 While this recognition of the expanding Afrikaner business interests was welcomed, Sanlam’s market penetration was coming under increasing pressure towards the late 1960s. At the beginning of the post-war period Sanlam’s premium income was 16.28 per cent of total premiums of the domestic life industry. It increased to 17.7 per cent in 1950 and 28.04 per cent in 1961, but then contracted to 21.7 per cent in 1971. By 1972 the new life office in the market, Liberty Life, had achieved an overall third position. Management was concerned about agents’ productivity and the high lapse rate. The very competitive market made for the development of additional distribution channels. Sanlam’s competitor, SA Mutual, had contracted bank brokers since 1966 to attract business, but Sanlam’s management was sceptical.

By the late 1960s Sanlam was convinced of the superiority of its agent training programmes, but agent retention remained problematic. Persistent problems with a high turnover of agents, ethical problems in agent conduct, and low productivity led to a conscious agent training strategy. The beloved and respected Jan Feenstra retired in December 1946. He was succeeded in 1948 by Bill Bezuidenhout as Manager: Agents under the new General Manager A.D. Wassenaar.116 Wassenaar took a strategic view on distribution. He returned from a business trip to the USA in 1950 and immediately requested the board to send an official for a six-month training programme at Mutual Life Insurance Company of New York. Wassenaar was acutely aware of the fact that Sanlam was losing agents at an alarming rate. The Deputy Manager: Agent Affairs, (p.134) P.G. (Pally) du Plessis, was sent to the USA between April and October 1950. In 1955 Sanlam appointed as many agents in total as during 1949, but 50 per cent of the new appointees left the company within the first six months. In 1958 Bezuidenhout submitted a memorandum to the board concerning the recruitment of agents and the frequent resignations.117 Wassenaar himself lamented in 1960 that Sanlam employed eight fewer agents that year than in 1959.118 Comparing the Sanlam experience with the USA one brought some comfort, since the USA statistics showed that those companies retained only 57 per cent of their ‘inexperienced finance agents’ after the first six months of employment, while their ‘first-year survival rate’ was only 50 per cent.

Sanlam then restructured its agent training programme. Bill Bezuidenhout retired in 1959 and was succeeded by Pally du Plessis, then Assistant General Manager: Production. Following the advice of Dr Rains Wallace, research director at the Life Assurance Management Association, Sanlam introduced aptitude tests for new recruits. These were conducted in collaboration with the National Institute for Personnel Research from 1962, but by 1966 Du Plessis could not confirm that the aptitude tests had had any significant impact on agents’ resignations. Sanlam subsequently introduced competitions and additional incentives to encourage improved production, but Du Plessis had to admit that the training of new recruits had not involved much more than the handing over of a tariff book and stationery while the inspector explained how to use the tables in the tariff book. The disturbing trend of agents’ resignations by the late 1960s turned the focus of management back to six operational aspects of agent training. The company wanted a better co-ordinated training programme, more knowledge on estate planning and business insurance to be incorporated in agent training, more innovative products to compete in the market, and superior training to curb policy lapses by an enhanced selection process to match the right policy to the right person.119 At Head Office a new department of Marketing Promotion was established in 1963. Mr Hennie Rossouw, Production Manager: Agent Affairs was given the task of compiling the most extensive training manual in Sanlam to date. It consisted of eight manuals—four to be completed through self-study, reporting the progress of the prospective agent to the area or regional manager. Once the candidate was familiar with the material, a written test was conducted, in which 95 per cent was a pass. Then followed a final training clinic and the induction to a branch or region. The new recruit was then handed manuals five to eight, which dealt in depth with financial institutions (commercial banks, other financial (p.135) institutions, the South African Reserve Bank) and finally extensive guidelines on the promotion of sales. The guiding motto of the manual was ‘We at Sanlam do not sell products, we serve clients’ needs.’120

The agent-guided training programme was an industry leader and led to sustained high-level training of agents in Sanlam. In the annual report on agency matters Mr A.J. (Jack) van Wyk,121 Assistant Manager: Production, reported that in 1965, Sanlam had retained 57 per cent of the new appointees after twelve months, compared to the industry average of 32 per cent in South Africa. In 1969 this ratio had risen to 60 per cent for Sanlam and 37 per cent for the country, and by 1973 Sanlam secured a 63 per cent retention rate compared to 38 per cent in the entire industry.122 Wassenaar insisted on measuring the Sanlam agents against the best internationally. In 1960 Sanlam entered the International Quality Award of the Life Insurance Agency Management Association. The aim of this award was to reward agents with the highest policy retention rate—90 per cent or above. In the first year of the award, based on production of 1958 and 1959, Sanlam had sixty-eight qualifying agents. The Life Insurance Agency Management Association Newsletter reported in 1961: ‘Last year 221 qualifiers from outside the United States and Canada were awarded IQA certificates. These salesmen represented 16 companies and were located in 13 countries. Among the companies with high representation of qualifiers were the South African National Life Association in South Africa with 70 agents qualifying and Sumimoto Mutual Life in Osaka, Japan, which had 40 qualifiers.’123 In 1967 Sanlam had 183 qualifiers in the International Quality Awards and fourteen agents had qualified every year since the inception of the award.124 By 1985 the total number of Sanlam agents who had qualified for the award stood at 465.125

Improving the quality of agents through a more rigorous training programme began to bear fruit, but the company was still concerned about the high lapse rate. In 1962, 32 per cent of policies were allowed to lapse in the first year, and 9.1 per cent in the second year. The total lapse rate of policies during the first two years remained above 30 per cent up to 1964, then it dropped gradually and by 1974 had declined to 26 per cent.126 Management put this performance down to inadequate motivation among agents and in 1971 called in personnel consultants to conduct courses in Achievement Orientation for its agents. The outcome was utterly disappointing: the best-performing agents’ average gross commission earned for seven to twelve months after the course declined by 9.57 per cent and the poor-performing agents’ average gross (p.136) commission earned increased by only 9.09 per cent.127 In a submission to the board on 15 May 1974, Jack van Wyk, who later became General Manager: Marketing, after Pally du Plessis retired in 1967, insisted on more dedicated training of agents through the appointment of full-time training staff.128 The board agreed to an increased budget allocation for training and further restructuring of the extensive Sanlam training programme. This step was actually induced by the growing competition by brokers in the life market. Since 1966, other life companies had linked their sales strategies to brokers. Sanlam management was very careful not to allow inexperienced outsiders to market their products, but it was soon apparent that brokerage business had become an industry trend. Sanlam had to either get on board or fall behind.

By 1967 the market signals could no longer be ignored. Pally du Plessis and Wassenaar held long and penetrating discussions with Trust Bank’s Managing Director and General Manager about the possibility of accrediting Trust Bank as brokers to Sanlam. Du Plessis convinced the Board of the wisdom of entering brokerage marketing, but it was realized that the agent network might not respond positively towards this move. The positive side of the decision was that Sanlam had maintained close relationships with Trust Bank and a further broker agreement would cement this relationship and perhaps secure Sanlam a steadier stream of business from the bank. It was finally a matter of growing market penetration and brokers had already made inroads in the distribution channel. Sanlam would simply be burying its head in the sand if this reality was overlooked. Jack van Wyk, the new Assistant General Manager: Production (from 1 January 1968), took a pragmatic business stance: he was not impressed by the 1968 brokers’ production statistics, but when confronted by agents’ displeasure about the direct competition by brokers, he stated that Sanlam was not an employment organization, but a life insurance company. If the interests of agents clashed with those of the company, the latter took precedence. Van Wyk therefore requested authorization for the appointment of broker consultants to canvas new business for Sanlam from brokers.129 The decision by the board in December 1968 to appoint these consultants was a strategic shift in the traditional distribution channel. Broker consultants were located in branches and reported to agency management. The first two broker consultants appointed in November 1969 were Gerhard van Weesel in Durban and Piet van der Vliet in Cape Town. Annual reports to the board on the production by brokers showed a significant rise in the contribution by broker sales. In 1969 brokers contributed just under 6 per cent of total new sales in Sanlam. This ratio increased to 13 per cent in 1975.130 Jack van Wyk had fully bought into the concept of broker sales. When he was (p.137) threatened by leading Sanlam agents with resignation because they wanted to join the brokers, Van Wyk introduced volume-linked bonuses (Kwantum Opslag bonusse) for top-performing agents to keep them in the network. The loyal Sanlam agents remained a strong distribution network for the company. One agent, S.J. (Fanie) du Preez from Port Elizabeth, was Agent of the Year for thirteen years, starting in 1971. Between 1975 and 1984 he received the Gold Eagle award for agents exceeding a million units in policy sales, which gave him the highest cumulative earnings of all the agents. He achieved this performance within a period of six years, whereas no other agent had succeeded in achieving that exceptional goal in less than eleven years. Du Preez epitomized the Sanlam agent maintaining his direct relationship with the company in the wake of the sprawling broker business.131 A new dynamic was occurring in the market and Sanlam was benefiting from both the broker initiative and ambitious agents competing to sustain their market position.

In April 1975 Sanlam appointed its head of product development, the actuary Desmond Smith, to head up sales development via brokers—only to be relieved of product development and assigned Manager: Broker Division later that year.132 Smith had serious catching up to do, as SA Mutual had had a dedicated broker sales division in operation since 1967. Sanlam was the last life office to engage actively with the broker distribution channel. (In 1971 there were celebrations in Sanlam when the company’s total premium income exceeded that of SA Mutual for the first time, but SA Mutual had turned the tables again by 1976.) Van Wyk was skeptical of the longevity of brokers in the market. He warned that regulatory intervention would cap commission to brokers and finally lead to their demise. In 1975 the Life Offices’ Association (LOA) members discussed the ‘Equivalence of Reward’ principle, a maximum scale of commission payable to brokers. These negotiations failed to reach consensus and life offices continued to offer incentives such as bonuses on high sales volumes, which undermined the LOA attempts at reaching agreement on the matter.133 The perpetual competition with SA Mutual and Sanlam’s drive to grow market share simply meant that the latter had to address the new distribution channel strategically. Sanlam’s late entry into the broker market mandated seeking measures to control the level of competition. Smith had an excellent feel for client demand, the requirements of product design, and market pressure. His standing in the industry was instrumental in directing the discussions in the LOA on the ‘Equivalence of Reward’ proposal. The life industry expected state intervention in the regulation of commission structures in the assurance market. The life offices had hoped that an agreement on the proposed Equivalence of Reward matter would secure industry control, but the non-adherence to the idea of prescribed commission was (p.138) bound to result in state action. In 1977 the Government Gazette No. 5426 of 1 March 1977, Regulation 28 par (3), stated explicitly that ‘No registered insurer … shall pass or offer … to any independent intermediary … any consideration other than commission in monetary form.’ Par (4) stated ‘The value of such commission shall not exceed the values determined in accordance with the Schedule of this regulation.’ This directive defined the formulae for commission payable to different categories of policies (retirement annuities, single-premium business, etc.). Desmond Smith was closely involved in the drafting of both the Equivalence of Reward draft proposal and Regulation 28. Of course, as the Registrar realized, in the end, compliance would depend on ‘moral persuasion’.

In a market where competitors had early entrance advantage, it was important to Sanlam to secure some restraint to operational activity through agreements and institutional regulation. The playing field was more level, but the company gained confidence in moving forward on brokers following a survey on trends in client preference. In February 1978 Smith reported to the board that clients’ preference for acquiring additional life insurance had changed significantly since 1975. The survey indicated that between 1974 and 1977 more than 10 per cent less persons had desired to purchase life cover, and Afrikaans males had displayed a 40 per cent smaller appetite for long-term life products. The encouraging result was that at 51 per cent Sanlam was still the preferred supplier of choice to higher-income Afrikaans males for future life products (ahead of SA Mutual at 37 per cent), although bank brokers had risen by 25 per cent in the popularity of intermediaries for the acquisition of long-term financial products.134 This led the Sanlam management to authorize the immediate approval of computer-validated broker’s commissions, which was a clear marketing advantage to brokers. Soon Sanlam increased senior management’s focus on broker services. In 1978 the first Broker Services regional office was opened in Johannesburg and by 1982 more than 33 per cent of Sanlam’s new sales arrived via the broker channel, but less than a quarter of all brokered sales came to Sanlam.135 Despite a tendency of well-performing agents defecting to the brokers, Sanlam sustained a well-trained agency network alongside an expanding broker corps. By 1980 Sanlam’s overall market share rose to 27 per cent. Broker personnel were included in the ‘Komkamp’ national sales incentive for the first time in 1979. Brokers’ average premium per policy exceeded that of agents and in 1982 five new Broker Services regional offices were opened—all staffed by Sanlam employees.136 Hermie Laubscher, former Provincial Manager in the Cape, became Head of Broker Services in 1983 and invested heavily in USA best practice development training of brokers.137 The strong (p.139) advance of brokers’ sales of Sanlam products indicated growing broad confidence in the company. This unfortunately did not deliver a notable breakthrough for Sanlam into the English-speaking market. Its loyal agents, trained under rigid programmes aligned with international best practice, accepted the challenge of broker distribution. This development and Sanlam’s response displayed confidence in its agent network. Sanlam entered a more strategic phase in its distribution history.

The company in the community

Growing Sanlam between 1945 and 1985 also entailed strengthening the social responsibility dimension of personal benefits on the macro level of society. Corporate social responsibility was one dimension of putting South Africa first. Sanlam set out to promote Afrikaner economic empowerment in the context of the wider South African society. While charity started ‘at home’ with personal loans to policyholders, interest-free loans for medical procedures, mortgages, and payment restructuring in case the policyholder was unable to contribute to regular premium payments, the company’s employee benefit products were aimed at fostering self-help social security. To those in need, welfare contributions were forthcoming, but Sanlam’s corporate social responsibility actions were first and foremost motivated by an empowerment drive, rather than welfare transmission. Assistance went first to Afrikaners, because their well-being was integral to that of the wider South African society. The company’s focus started with its policyholder base, but as the profile of its policyholders changed, corporate social responsibility reflected that change.

The company did not have a distinct policy on corporate social responsibility in 1918. Donations were authorized from a personal budget allocated to the Chairman of the board. By the late 1960s the ad hoc donations approach made way for a more focused social empowerment policy. Applicants requiring assistance for their particular causes were expected to represent a nationwide constituency and not a limited sectional entity.138 Sanlam responded to ad hoc applications, but the empowerment mission led to favouring education and the facilitation of learning. By the mid-1980s, three broad categories of social engagement emerged: education and training, cultural affairs, and welfare. In 1958 Wassenaar insisted that there had to be a direct financial interest for Sanlam, as well as the insurance industry, linked to the social responsibility engagements it supported.139 Sanlam supported all South African universities as centres of education and empowerment. The closest institution to Sanlam was the alma mater (p.140) of many Sanlam leaders and ordinary employees, the University of Stellenbosch. A steady stream of donations went to that University, especially to the Faculty of Commerce, the Bureau for Economic Research, the Faculty of Engineering, and towards the establishment of the medical school, but similar donations were made to the University of Pretoria for the establishment of its medical school. At the University of Cape Town, Sanlam supported cardiac and organ transplant research. As many Afrikaans-speaking students studied at English tuition universities, the company extended donations to all Afrikaans and English institutions in South Africa. Sanlam supported the dedicated university colleges for African peoples as well as the Coloured and Indian communities as a matter of principle.140 The Universities of Pretoria and Stellenbosch received the highest allocation, and the rest of the institutions according to a formula based on student numbers. In 1968 this formula was replaced with support to universities linked to a ‘strategic or psychological moment’ at a particular institution for which funds were collected. Such an example was the construction of an auditorium at the Rand Afrikaans University, subsequently known as the Sanlam Auditorium, or specialist sporting facilities. Donations were made to the University of Fort Hare and the University of South Africa (UNISA) for the building of libraries.141

Apart from institutional funding Sanlam also extended support to students. These sponsorships were ultimately to serve the company’s need for qualified staff, such as actuaries, accountants, managers, and computer experts, towards its empowerment strategy. Sanlam realized early in the 1950s that many capable and bright young minds on the platteland could not afford university studies. The company needed the human capital and subsequently developed a bursary scheme for top-performing scholars in mathematics. Sanlam sent officials to remote schools to identify such top performers. Three bursaries were offered annually for studies in Statistics, Actuarial Science, or Mathematics. Qualified graduates were then employed at Sanlam. Two well-known recipients of a Sanlam bursary were Desmond Smith and Marinus Daling. Smith hailed from the Transkei town Indwe, where his father was a bank manager. He was awarded a Sanlam bursary and enrolled at the University of Stellenbosch for a BSc degree in Mathematics and Applied Mathematics. At the end of his first year he was introduced to Actuarial Science. That became his passion and career at Sanlam where he progressed from the actuarial department, through various management positions to Managing Director between 1993 and 1998 and Chairman on the Board between 2010 and 2017.142 Daling was from Nylstroom in the Northern Transvaal and matriculated in 1962. He completed his degree at the University of Pretoria and qualified as an actuary through (p.141) the Faculty of Actuaries.143 Daling was the Chief Executive Officer of Sanlam between 1998 and 2001 and Chairman from 1993 until 2001. These bursaries were awarded to deserving bright scholars from both Afrikaans- and English-speaking backgrounds and were perhaps the most important empowerment tool towards addressing widespread poverty. It was largely the non-urban origins of many Sanlam employees that convinced management of the wisdom of a company village, Sanlamhof, as it was later known. This university bursary scheme was later extended to existing staff.

As Sanlam advanced with computerization, a growing appetite developed for people with advanced qualifications in quantitative disciplines. A stern memorandum to the Board in 1962 called for the appointment of fewer staff members assigned to routine administrative functions and more ‘quality people capable of managerial decision making’.144 Sanlam had developed a need for highly qualified human capital in a growing number of specialized departments of its operations. This offered a natural way of eradicating poverty among Afrikaners and gain from high-quality human capital. Apart from its own bursary schemes, Sanlam also contributed regularly to the Helpmekaar Studiefonds (a study fund established from the surplus funds after the Helpmekaar had paid rebel fines),145 through general education and training.

From bursaries towards university study, Sanlam identified a need for financial support to poor children simply to complete school. The company established a bursary scheme for deserving scholars to write the Standard 8 examinations and the final matriculation examination in Standard 10. A survey by the Afrikaanse Christen Vrouevereniging (ACVV) revealed the dire needs in the Cape Province. Similar needs were reported by the women’s church societies in the other provinces and by school headmasters and the Helpmekaar organization. From 1959 Sanlam provided £2 000 per annum for school bursaries to deserving boys to complete either Standard 8 or matric. The school bursaries were later also offered to English-speaking scholars and to girls. By 1963 Sanlam had paid out 233 school bursaries—244 in 1964 and 285 in 1965—each for a duration of two years. Sanlam commented as follows on this enterprise: ‘Through this bursary scheme we are delivering unique service to our people, by enabling wanting boys and girls to develop into valuable citizens of their country.’146

The next social need was the physical accommodation of scholars in school hostels, especially after the war of 1939/45. Many children from remote areas and farms needed to live in school hostels in the towns, but schools did not have sufficient funding to erect such hostels. Church congregations often had access to land, but not sufficient funding to (p.142) build such facilities. Sanlam then devised a scheme whereby the church, the Dutch Reformed Church (DRC), was granted loans for the construction of hostels, backed by endowment policies taken out by the DRC and guarantees for the capital by the Provincial Administration. The loans were in the form of debentures issued to the DRC at prevailing interest rates. The DRC paid the interest annually. By the late 1960s many DRC congregations were struggling to pay the interest on the debentures and more debentures were issued. These hostels were known as ‘Goeie Hoop Koshuise’ (Good Hope Hostels: GHKs). Finally, the Provincial Administration redeemed the last loan guarantees by the end of 1975.147 This enterprise initially accommodated a total of 2 270 school children in safe facilities for the duration of their school careers. Sanlam engaged in the business of lending at current interest rates, where the return on policyholders’ funds was optimized. The GHKs were an example of how Sanlam conducted its life business through innovative strategies, which in the long run built its business and contributed to Afrikaner upliftment and empowerment through education.

As the Sanlam policyholder profile changed to include a growing English-speaking portion of the South African population, educational needs across language barriers were supported by Sanlam sponsorships. The South African Council for English Education (SACEE) was the recipient of a sustained Sanlam sponsorship for many years.148 Funding went towards Coloured teachers wanting to improve their qualifications in mathematics, as well as to the University of the Western Cape where a mathematics laboratory was established to develop Coloured children’s skills in mathematics.149

Sanlam was also involved in donations to an extended range of welfare initiatives, such as support for old-age homes, care societies for the aged, holiday camps for underprivileged children, and orphanages for children of all race groups in South Africa. Cultural activities, the preservation of historic monuments, locations and other heritage, Afrikaans language initiatives in compiling specialist dictionaries, prizes for national mathematics competitions, and Bible distribution all found a very sympathetic ear at the life office. Donations were getting out of hand and by the late 1970s Sanlam revised its stance on corporate social responsibility. For the first time management took a holistic view of expenditure on corporate social responsibility. Between 1965 and 1969 Sanlam contributed 0.16 per cent of annual premium income to donations, but this ratio declined to 0.05 per cent between 1973 and 1979. In the context of growing social turbulence and tension with the state regarding the role of big business, a formal policy position was necessary. Management introduced a fixed quantitative ratio between premium income and donations or sponsorships of between 0.05 per cent and 0.1 per cent of annual premium income for social responsibility expenditure. All payments exceeding R10 000 (p.143) required board authorization. The policy framework for social responsibility expenditure was that projects had to comply with the following criteria: they had to be topical and afford Sanlam optimal media coverage, enhance the Sanlam public image, and have the consensus support of the governing body of the organization. Sanlam had to be able to identify with any project calling for its sponsorship and it had to contribute towards enabling Sanlam penetration into that market. Social responsibility projects had to assist the company to honour its responsibilities towards society.150 This policy focus consolidated the plethora of engagements with numerous ad hoc applicants in a clearer social responsibility function.

Strategy and management: from a single centralized organization to the multidivisional form of organization

In the period under discussion, Sanlam slowly started to progress from a centralized unitary organizational structure (the so-called U form), as described by Alfred Chandler Jr, to a diversified organization displaying an M form of organization. This means that functional diversification led to the branching out of operations into decentralized business units. The development of the management style and strategic objective of the company testifies to this. Management was characterized by two elements between 1945 and 1985. The first was the direct, hands-on style grounded in centralized control. All financial, operational, and staff matters were discussed and final decisions taken by the Board of Directors. The management style remained rigid and bureaucratic. A multitude of processes, procedures, and rules relating to operational and staff matters were introduced. These were administered by the same generation of managers who had established Sanlam. Only in 1978 did a non-Sanlam rank-and-file person take up the position of Managing Director of the company, namely Dr F.J. du Plessis. When he became Chairman in 1982, he elevated the position to that of Executive Chairman, a role suited to Du Plessis’ dominant personality. He perpetuated centralized personal control.

The second element of more human resources-based control emerged later on, as a clear adjustment in the style of management occurred in Sanlam. This did not change central control, just gave it a more human face. Centralized control, which characterized the U form of organization under G.F.S. de Villiers, A.D. Wassenaar and P.J.F. Scholtz, remained dominant. Even the chairmanship of the Board of Directors still displayed the control of the generation responsible for establishing the company. No real difference (p.144) followed Charlie Louw’s succession of Hofmeyr in 1954. Although Louw had a different management style, the only real impact on the board was organizational. He introduced a more people-oriented approach to the management of the people who constituted Sanlam. Management improved benefits and working conditions for all employees. Modernization of the Head Office operations improved operational efficiency as well as the working environment. A Sanlam Cricket Club was established and the company even had its own choir. Board meetings were streamlined by organizing them into business and functional areas from 1955. When staff matters were discussed, the general manager responsible for staff matters attended the meeting, and when the investment portfolio was discussed the general manager responsible for investments was present. This signified recognition of delegated responsibilities and empowerment of people. In 1958, the minutes of the meetings were also streamlined by deciding only to minute decisions and not all discussions. In 1960 the approval and decline of mortgage loans (previously dealt with one by one) were consolidated and approved as a group.

Wassenaar did not introduce any new strategic directions for Sanlam when he succeeded Charlie Louw as Chairman. His concern was the stability of the company. His business skills and leadership were acknowledged by the Harvard Business School, which named him the ‘South African Businessman of the Year’ in 1968.151 From 1955, a shift from generalists to specialists occurred in operations. Various specialists were appointed to develop specialist functions in the organization, such as a public relations officer (1955), an English language expert (1956), a technical consultant for the purchasing of electronic equipment (1958), a legal adviser (1978), and art advisers (1978). Delegation and the empowerment of a new layer of management signified a limited change in management control when Pepler Scholtz assumed office. The approach to staff also changed. A report on ‘more effective utilization of human resources’ was presented to the board in 1973. In 1980, decisions on salary increases to a certain predetermined level were gradually delegated to management on different levels of operation. In 1983, the decision-making powers for investment decisions were also changed, clearly pointing towards the delegation thereof to a differentiated level of management.

In 1979, discussions during the board meetings became much more strategic and factual. The detail was handled by the general managers within their areas of expertise. The strategic direction of Sanlam was gradually becoming more defined when Fred du Plessis took over as Executive Chairman. His vision for Sanlam was a prominent role in the South African economy as an Afrikaner business conglomerate. Management therefore took a distinct contextual view of its operations and sought to develop its human resources accordingly. In 1983 a Code of Conduct was introduced for Directors and the (p.145) following year the remuneration structure of Sanlam employees was benchmarked against the rest of the industry to secure appropriate industry positioning.

The most significant characteristic of the post-war period was the diversification of its investment base, which positioned Sanlam across all the sectors of the economy. The company did not engage directly in the management of the companies in which it invested, but the sheer size of its investments would become a cause for serious concern. The operational efficiency of many of the ‘stakeholder’ companies lagged the market towards the late 1970s, with shares trading at a notable discount. The Sanlam management took up directorships on the boards of the companies in which Sanlam held large shareholdings. This was one way of seeking closer access to operational control over the extended interests. The Sanlam management came to rely on the specialist services of experts, since insurance people were not industrialists, bankers, or mining experts. The board was acutely aware of the external environment and engaged more frequently in discussions on the state of the economy, the trends in political developments, and how those would impact on the company, as well as the government’s growing anxiety about the role of ‘big business groups’ in the economy.

The organization had a very good understanding of client demand, as reflected in new product development and other services, such as medical insurance and employee benefits. The marketing of products and services extended more successfully into the market for other race groups. In 1954, an agent of colour was appointed in the Bloemfontein branch. In 1962 the English business market was identified as a specific target market. As the domestic environment was deeply affected by the 1976 Soweto riots, the company gradually moved to terminate the race loading of policies. Public relations were recognized as a strategic tool to enhance Sanlam’s marketing strategy. In 1984 Du Plessis introduced nationwide ‘roadshows’ where policyholders were invited to cocktail functions hosted by the Executive Chairman. As an exercise in public relations Du Plessis wanted to establish a closer relationship between the life office and policyholders.

An important aspect of Sanlam’s management since the beginning was its close alignment with international developments and personal contact with international leaders in the industry. Management attended international conference, sent staff members on study trips, and frequently conducted investigations into new international trends. Indicative of the international inclination was the visit in 1957 to the USA, which led to the introduction of new computer equipment. Sanlam actuaries also attended the international conference of actuaries in New York. In 1970, a commission was sent to England, USA, Canada, and Japan to investigate the global experiences of banks controlling insurance companies, or vice versa. This was a crucial issue in the South African market during the 1970s, when cross-shareholding between banks and insurers in South Africa was regulated by statute. Banks could not own more than 10 per cent in insurance companies, but as sanctions became more effective, the (p.146) insurance companies in South Africa were the only institutions with sufficient capital to acquire the shares in local banks dumped by disinvesting foreign shareholders.152 In 1975, Sanlam was the first South African life office and also the first outside Europe to become a member of Insurope, a European-based multinational association of life offices of group benefit insurers.153 Insurope specialized in group and pension benefits to multinational firms’ employers and their employees and it was this dimension Sanlam was beginning to explore as the domestic market came under increasing pressure. International expansion beyond the established offices in Southern Rhodesia (later Zimbabwe—these offices were closed in 1980) had already started in 1971, establishing life insurance branches in Lesotho, Botswana, and Swaziland.

In 1961 a tendency towards longer-term planning was beginning to manifest. Management accepted a plan for the long-term development of new branches. In 1970 a long-term planning session for the company was organized by facilitators from the Universities of Washington and Columbia. In 1983 the first five-year planning was considered by the Board. The Board gave attention to the restructuring of the branch offices, regions, and Head Office. Sanlam was contemplating the restructuring of the group by incorporating Santam into a single group. Organizational restructuring of the company followed the growing diversification of Sanlam’s investment portfolio. The centralized management structure, where the board and the management functioned as one and the same authority, had to make way for more professional management. Amatori and Colli noted: ‘Out of these changes (development of professional management) arose the modern multidivisional corporation.’154 Diversification presented Sanlam with a twofold challenge. On the one hand, a population experiencing rising living standards began to demand more innovative investment products. This development mandated more innovative and differentiated products on offer. On the other hand, the expanding investment activities of Sanlam and its support for the Afrikaner economic empowerment initiatives, engaged the company increasingly in non-insurance business operations, which create a dilemma for Sanlam. Sanlam could not indefinitely manage this relationship with its so-called ‘strategic investments’, simply as ‘investments’. It became important to exert influence on the level of operational efficiency of those investments. The company’s organizational structure had to change. On 1 October 1978 the management committee was abolished as Du Plessis set out to build the Sanlam conglomerate. In 1984, the Board approved the formation of a Group Holding Company, acknowledging the functional diversification of operations and embarking on the M form of organization. The key management characteristics of Sanlam changed. The unitary form (U form) of the past, which was embedded in the (p.147) scientific management theory and manifested through strong central managerial control in a centralized organization, developed strain. The classical management theory with its emphasis on authority and unity of command, direction, and the subordination of individual interest to that of the collective entity (in this case the managers), gradually changed. The emphasis on stability and tenure of staff and the promotion of a unity of interest between management and employees, could no longer be sustained in the more dynamic multidivisional enterprise. The rapidly growing economy after the war mandated change in organizational form and managerial practice. The bureaucratic and administrative management approaches made way for a more people-oriented approach. The human relations theory found growing application in the managerial style of the Sanlam management. By the 1980s the economic changes of South Africa impacted directly on the organizational and managerial structure of the company. The Peter Senge ‘learning organization’ soon manifested in the changes to the organizational structure as well as the nature of management in Sanlam. The multidivisional organization needed greater diffusion of decision-making powers. Top management developed a more strategic role as ‘commanders-in-chief’, and directed the next level of management, the divisional managers, who operated as the ‘field generals’.155 Du Plessis’ autocratic management style between 1978 and 1989 temporarily placed a hold on the full manifestation of the M form.

Sanlam in the industry

The strong economic performance of the domestic economy after the war supported the expansion of Sanlam. While the company’s total premium income had increased by 16.4 per cent annual compound growth between 1918 and 1945 (Table 2.1), compared to an increase of 6.45 per cent for the entire long-term insurance industry, its performance after the war made the company the second-largest domestic life office. Total premium income increased by 9.55 per cent annual compound growth between 1945 and 1985 (Table 3.1), compared to industry growth of 3.81 per cent. Sanlam’s total premium income increased by a total of £170 000 000 during the forty years. This was the largest single increase in the premium income of any South African long-term assurer yet.156 By 1965 Sanlam’s annual premium growth had exceeded the growth of all other long-term insurance companies.157 In 1945 Sanlam’s premium income was 16 per cent per cent of the industry, but by 1985 the relative position of Sanlam’s premium was 25 per cent of the industry.

(p.148) Sanlam’s total assets increased by 5.47 per cent between 1945 and 1985 (Figure 3.1), compared to industry asset growth of 3.35 per cent (Table 3.1). In 1945 Sanlam’s assets made up 8.1 per cent of total industry assets, but by 1985 the company owned 18.2 per cent of total industry assets. Sanlam’s assets were more diversified than in the preceding period between the wars. During the strong growth of the immediate post-war era, the largest portion of the assets was in mortgages and government paper as a result of the statutory requirements of the Insurance Act. During this period strong interest rate growth and well-performing listed entities gave rise to a stronger emphasis by management on investment in shares. This is reflected in the larger portion of assets in equities. Fixed property made up a smaller portion of assets but was still an anchor asset class. The company improved returns on assets from 3.35 per cent in 1945 to 11.2 per cent by 1985 (Figure 3.2). This performance was enhanced by improved investment income, which had increased on average by 35 per cent per annum since 1980. Operations were becoming more efficient, as administrative costs increased by only 3.7 per cent annual compound growth during the forty years (Table 3.1). During the time of socio-political instability between 1961 and 1976 (Figure 3.3, Figure 3.4), the profile of Sanlam’s assets changed. The dominant asset class was government bonds, then shares (equity), and then real estate. The yield on these assets (Figure 3.6) beat inflation only up to the beginning of 1970, where after the downward trajectory of GDP growth and spiking inflation suppressed the yield on the long-term nature of the asset base. During the last decade of the period, 1976 to 1985 (Figure 3.5), high domestic volatility, high inflation, and a further contraction in economic growth resulted in investments in government bonds to exceed other asset classes by almost 50 per cent. Figure 3.6 (p.149) shows the impact of these volatilities on the yield on Sanlam’s assets. Yield remained below the Consumer Price Index excluding mortgages (CPIX), except for a brief period in 1984, but the yield on assets posted substantially stronger growth than domestic GDP growth. The insurance industry offered stable returns. Sanlam’s large investment in so-called strategic investments (shares in industrial, financial, and mining conglomerates of variable performance) contributed to stable, but not exceptional returns. This allocation of capital resulted in investment inflexibility and illiquidity, and was bound soon to be the subject of strategic policy debate.

Forty years: protection, isolation, and diversification, 1945–1985

Figure 3.1. Sanlam asset profile, 1945–1960 (£)

Forty years: protection, isolation, and diversification, 1945–1985

Figure 3.2. Sanlam yield on assets, 1945–1960

Forty years: protection, isolation, and diversification, 1945–1985

Figure 3.3. Sanlam asset profile, 1961–1976 (R)

Forty years: protection, isolation, and diversification, 1945–1985

Figure 3.4. Sanlam yield on assets, 1961–1976

Forty years: protection, isolation, and diversification, 1945–1985

Figure 3.5. Sanlam asset profile, 1976–1985 (R)

Forty years: protection, isolation, and diversification, 1945–1985

Figure 3.6. Sanlam yield on assets, 1976–1985

(p.150) (p.151) Sanlam was leading the industry on cost efficiency. During the 1970s, Sanlam’s administration cost as a proportion of total income was 7.1 per cent, but by 1985 this ratio had dropped to 4.1 per cent, the lowest in the industry. The industry only matched Sanlam’s cost efficiency of the 1970s in 1983.158 The company’s use of advanced computer technology and the intensive agent training programmes, coupled with the tightly controlled Head Office enabled this operational advantage in the market. This performance Sanlam portrayed as the growing confidence by the public in its business, especially a growing policyholder base among non-Afrikaners. The company maintained bonus declarations throughout, increasing the rate of bonuses incrementally but very conservatively. During the 1940s, bonus declarations hovered around 2 per cent, but after decimalization bonuses of 27 per cent per 1 000 were declared. By 1985 Sanlam paid bonuses of 46.5 per cent on policies qualifying for reversionary bonuses. The company introduced a variety of other bonuses, thereby enhancing the attractiveness of policies. When the government introduced income tax on insurance companies in 1959, the Chairman of Sanlam, A.D. Wassenaar, criticized the move as penalizing savers and discouraging saving in South Africa. He repeatedly expressed concern about the tax, stating that it was not in the interest of the country to tax savings, which constituted the source of capital for domestic capital investment.159 In almost every annual Chairman’s address the company expressed its opposition to and dismay at the penalization of savings through insurance. The tax liability affected the payment of bonuses.

(p.152) By 1985 the Sanlam policyholder base reflected the penetration into the broader South African population. Sanlam then had more than 1.6 million individual policyholders and an addition one million people belonging to group schemes. The English-speaking market was targeted more systematically from the 1960s. Where English-speaking policyholders made up only 10 per cent of the total number of Sanlam policyholders in 1960, this ratio rose to 20 per cent by the early 1980s and 40 per cent by 1990. Sanlam addressed access into the African market (this is black, Coloured, and Indian people) from 1958, when the board was advised that Sanlam had underwritten only 1 786 policies to a value of £597 833 for Africans by 30 September 1957. Sanlam acknowledged the potential of the African market, but had a stronger penetration in the Coloured market, since that population spoke predominantly Afrikaans, was concentrated in the Cape Peninsula and Eastern Cape, and many Coloured people were employed by AHT. Despite calls for a massive drive into the African market, total African business was equal to only 0.5 per cent of the total white business.160 By 1968 this ratio had risen to only one sixtieth of Sanlam’s policyholders161 and by 1975 Sanlam had 5 390 African policyholders.162 By the mid-1980s Sanlam’s share in the total African insurance market had tripled from 5 per cent in 1975 to 14 per cent in 1985.163 The entire life insurance industry started easing race loading of policies to African people in South Africa by the early 1950s. As the living standards of Indian and Coloured people was perceived to be closer to that of whites, insurance companies considered the risk similar to that of white policyholders. Sanlam started scrapping race loading on African lives from 1951, especially as the company obtained more reliable information about African mortality rates.164 Sanlam followed broad industry trends in assessing applications from Africans. By 1957 only 28 per cent of policies issued to Africans had a race loading.165 By the late 1970s, when African trade unions were authorised following the Riekert and Wiehan Reports, Sanlam had a strong presence in the employee benefits markets as well as group policies. The SA Mutual had moved faster than Sanlam on insuring African lives by offering more favourable rates than Sanlam. The latter was the cautious life office: African applicants were categorized based on education, income levels, and occupation. Individuals with a tertiary education, a stable and above-average income level, and occupied as a professional person, were exempt from any race loading. This demonstrated a business rather than a racial consideration for the implementation or removal of loadings. In 1976, for example, (p.153) Africans in ‘Category A’ who had an annual income of R4 000 or more, or teachers with an annual income of R2 400 or more, and university graduates or ministers from recognized church organizations were insured at the same rates as whites.166 These requirements were later adjusted to an annual income of R5 000 or more per annum or teachers earning R3 000 or more per annum.167 Sanlam emerged as a major player in the group and pension schemes market of trade unions in the late 1980s. The company’s African policyholders increased to 13 per cent of its total policyholder base,168 and this percentage was set to rise substantially during the following decades.

Notes:

(1) R. Skidelsky (1998): ‘The growth of a world economy’ in M. Howard & W.M. Louis (eds) The Oxford history of the twentieth century. Oxford: Oxford University Press: 55–9.

(2) P. Borscheid (2012): World Insurance. Oxford University Press: Oxford: 20–2.

(3) C. Simkins (1999): The political economy of South Africa in the 1970s, in South African Journal of Economic History, 14: 13.

(4) I.M.D. Little, Richard N. Cooper, W. Max Corden & S. Rajapatirana (1993): Boom, Crisis and Adjustment: The macro-economic experience of developing countries. New York: Oxford University Press: 17.

(5) B.W. Smit and B.A. Mocke (1991): Capital flight from South Africa: magnitude and causes, South African Journal of Economics, 59.(2): 314.

(6) H. Giliomee (2013): Die laaste Afrikanerleiers. ‘n Opperste toets van mag. Cape Town: Tafelberg: 202–8.

(7) J. Singleton and G. Verhoef (2010): Regulation, deregulation and internationalization in South African and New Zealand banking, Business History, 52.(4): 536–63.

(8) P. Borscheid (2012): World Insurance, p. 23.

(9) Registrar of Insurance, Annual Report, 1945, 1948.

(10) SA: Minutes of Sanlam Board, 26/1/1983.

(11) G.R. Jones and J.M. George (2011): Essentials of contemporary management. 4th edition. McGraw-Hill Irwin: New York: 42.

(12) SA: Santam AGM, 1953.

(13) SA: Sanlam Annual Report, 1953: 16.

(14) Union of South Africa: Summaries of Returns deposited with the Treasury by Insurance Companies, 1948.

(15) WCA-A2213: Agreement Santam/Sanlam, 19/6/1945.

(16) SA: Sanlam Annual Report, 1945.

(17) SA: Sanlam Annual Report, 1953.

(18) Report of the Registrar of Insurance Companies, 1950: 40; Report 1954: 34.

(19) The official opening of the new building was on 16 October 1953. Two days after the grand opening Willie Hofmeyr passed away.

(20) SA: Minutes of Sanlam Board meeting, 29/4 1953.

(21) SA: Santam Minutes of Board meeting, 18/3/1953; 25/3/1953; WCA-A2213: Ex parte SANLAM (Bpk): 30/12/1952.

(22) SA S5/1, 5/1/4: Sanlam Management Special Committee Meeting, 17/2/1954.

(23) Die Fakkel, February 1953: 2; Sanlam Annual Report, 1954: 1.

(24) Private Act, No. 3 of 1954: Section 5.

(25) WCA-A2213: Memorandum to Sanlam Board, 29/10/1952; WCA-A2213: SANLAM minutes of Board meeting, 28/1/1953.

(26) WCA-A2213: Union of South Africa, Private Act, No. 3 of 1954.

(27) WCA-A2213: Memorandum to Sanlam Board, 18/8/1958.

(28) RP87/1972: Report of the Commission of Inquiry into Monetary Policy in the Republic of South Africa.; G. Verhoef (1987): Die Geskiedenis van Nedbank, 1945–1973. Unpublished DLitt et Phil thesis, Rand Afrikaans University: 150–62.

(29) SA: Santam Board meeting, 12/5/1970.

(30) SA: 6/1/7: M.S. Louw address, 12/09/1945, Stellenbosch: Association for Economy and Trade.

(31) SA: 5/2/1: Sanlam Annual Financial statements, 1935–1940; SA: 3/1/2: Memorandum on investment in ordinary shares, 9/02/1951: 1–2.

(32) SA: 5/2/1: Sanlam annual financial statements, 1939, 1945.

(33) SA: 6/1/7: M.S. Louw Documents; Vertroulike Memorandum insake die voorgestelde stigting van ‘n beleggingskorporasie die kapitaal waarvan voorsien word deur kontant-bonusse op Sanlam-polisse, [Confidential memorandum on proposed formation of a bonus investment corporation, of which the capital is provided from cash bonuses on Sanlam policies] 26/02/1945: SA: 6/1/7: M.S. Louw Memorandum, 20/5/1945.

(34) SA: Minutes of Sanlam Board, 25/07/1945; 5/10/1945; 21/10/1945; SA: 5/2/1: Sanlam Annual Report 1943: 4; SA: 3/1/2: Beleggingsnavorsing: Hoofbestuurder: Memorandum i.s. SANLAM/Bonuskor verhouding, 5/02/1960.

(35) SA: 6/5/1: Minutes of Sanlam Management, 13/03/1946.

(36) SA: 6/1/7: Sanlam notice to policyholders, March 1946.

(37) SA: 6/5/1 Sanlam Annual Financial Statements, 1959.

(38) SA: 3/1/2: Beleggingsnavorsing: Memorandum insake Sanlam/Bonuskor verhouding, 5/2/1960: 1–13.

(39) Ibid., SA: Sanlam Annual Report, 1959: 4.

(41) Sanlam Chairman’s Statements, SA: 5/2/1: Sanlam Annual Report, 1951: 5.

(42) SA: 3/1/2: Sanlam Beleggingsnavorsing: Memorandum insake beleggings in gewone aandele, 9/2/1951: 1–5.

(43) SA: 3/1/2/: Beleggingsnavorsing: Memoranda insake beleggings, 18/8/1954; 20/10/1954; 14/4/1959.

(44) SA: 6/7/1: M.S. Louw documents: M.S. Louw address to FAK: ‘Opkoms van die Afrikaner op ekonomiese gebied’, 14/3/1950.

(45) F.S. Jones (1992): ‘Introduction: The growth of the financial sector, 1950–1988’, in F.S. Jones (ed.) (1992): Financial Enterprise in South Africa since 1950. London: Macmillan: 5.

(46) G. Verhoef (1995): ‘The development of diversified conglomerates: the case of Federale Volksbeleggings—a case study’, Joernaal vir Eietydse Geskiedenis, 24 (2): 60–1.

(47) Financial Mail, 19 June 1970: 17.

(48) SA: Minutes of Management meeting, 13/3/1946.

(49) SA: Minutes of Sanlam Management, 18/9/1946.

(50) G. Verhoef (2010): ‘The chemical industry’ in S. Jones and R. Vivian (eds), South African economy and policy, 1990–2000. Manchester: Manchester University Press: 143–58.

(51) SA: FVB Annual Report, 1970.

(52) H. Jones and A. Müller (1992): The South African economy, 1910–1990: 130.

(53) WCA: A2213: C.R. Louw Collection: Memorandum on Rembrandt, 19/9/1950.

(54) SA: Minutes of Sanlam Executive, 18/11/1953.

(55) SA: Minutes of Sanlam Executive, 20 November 1953.

(56) WCA: A2213: Correspondence between C.R. Louw and A.E. Rupert, 20/6/61; 7/7/61; 27/7/61.

(57) Transvaal Chamber of Mines, 61th Annual Report, 1950: 60.

(58) In 1948 Wentzel du Plessis opposed General J.C. Smuts in the elections of the constituency Standerton and defeated him. Du Plessis then devoted his attention to politics and resigned from the operational responsibilities at Klipfontein.

(59) FVB Minutes of Board Meeting, 8/9/1948.

(60) SA: 6/5/1/8: C.H. Brink papers: Cape Argus, 15/8/1946. The Vice Chancellor of the University of Cape Town, Sir Carruthers Beattie, also told a public meeting that the ‘poor whites were “intellectually backward” and that there was something inherent in the Afrikaners that resulted in the phenomenon of [poor whiteism] assuming such alarming proportions in their case’. H Giliomee (2003): The Afrikaners: 348.

(61) FVB Minutes of Board meeting, 29/9/1948.

(62) FVB Minutes of Board meeting, 23/6/1949.

(63) FVB Minutes of Board meetings, 30/11/1949; 1/12/1949; 11/8/1950.

(64) FVB Minutes of Board meeting, 30/11/1950: Memorandum by W.B. Coetzer.

(65) FVB Minutes of Board meeting, 11/8/1950.

(66) Rörich was the holder of an MCom degree and had been employed by the Industrial Development Corporation of South Africa and Sanlam. See SA: Sanlam Annual Report, 1946; Chairman’s Address: 7.

(67) SA: FVB Memorandum by C.H. Brink. 26/2/1953.

(68) SA: Memorandum P.R. Rörich, Bonuskor, 16/3/1953.

(69) SA: Memorandum P.R. Rörich, Bonuskor, 20/3/1053; Letter M.S. Louw–C.H. Brink, 24/4/1953; Memorandum C.H. Brink, 29/4/1953; Letter C.H. Brink–M.S. Louw, 29/4/1953.

(70) On 1 February 1958 the name was changed to Federale Mynbou Beperk.

(71) SA Mining and Engineering Journal, 4/9/1964.

(72) SA: Fedmyn Minutes of Board meetings, 3/8/1956; 16/6/1958.

(73) SA: FVB Minutes of Board meetings, 14/5/1959; 29/7/1959.

(74) The new Sanlam Head Office was later known as Sanlamhof. The SA Mutual followed the international trend and moved out of Cape Town as well, but only in 1956, after Sanlam had relocated in 1953. P. Brooke Simonds: Old Mutual: 146–8.

(75) WCA: CRL Collection: Wassenaar Memorandum to Board: Verskuiwing en beplanning van hoofkantoorgeboue: 12/1/1950.

(76) Sanlam Fakkel, November 1959: 14.

(77) Sanlam Fakkel, October 1953: 8–19.

(78) W. Beukes (2017) Van Afrikanerkultuur tot korporatief: die geskiedenis van Sanlam se Hoofkantoorpersoneelkorps, 1918–2008: 315, 321–2. Some staff members were not content with the dominant paternalism resulting in prescriptions on dress code, times of going out in the evening and returning back to the residence, permission to make personal decisions, such as getting married, or purchasing their own vehicle.

(79) C. Smit (1993): Sanlam in die Rekenaareeu, 1953–1993: 6–9.

(80) Report by USA actuaries, 1952, quoted in C. Smit (1993): Sanlam in die Rekenaareeu, 1953–1993: 13.

(81) Decimalization was introduced in South Africa in 1961. The South African currency was changed from the British Pound Sterling to the South African Rand, consisting of R1 = 100 cents, and £1 was exchanged for R2.00. All measurements were also changed from feet and inches to metric measures of millimetres, centimetres, etc., and liquids from gallons and pints to litres.

(82) C. Smit (1993): Sanlam in die rekenaareeu: 38–9; 45.

(83) Ibid., 92–3.

(84) G. Clark, Betting on lives: The culture of life insurance in England, 1695–1775. Manchester University Press, Manchester, 1999.

(85) D. Jenkins & T. Yoneyama (2000): History of Insurance, pp..33–6; T. Alborn & S. Murphy (2013): Anglo-American Life Insurance.

(86) R.E. Wright & G.D. Smith: Mutually beneficial: The Guardian and life insurance in America. New York: New York University Press, 2004, pp. 351–5.

(87) J.D. Cummins & B. Venard: Handbook of International Insurance. New York: Springer, 2007.

(88) K. Romain (1989): Larger than Life: Donald Gordon and the Liberty Life story. Johannesburg: Jonathan Ball: 129.

(89) Interview Ronnie Masson.

(90) Finance Week, 14/3/1993: 18.

(91) SA: Sanlam Annual Report; Chairman’s Address: 11.

(92) Ibid., 6.

(93) Ibid., 9.

(94) SA: 1/2/1/3/3/Vol. 30, Group insurance: Rate Books, 1954, 1967, 1974.

(95) Hospital Employees—1/10/58; Prison Services Employees—1/12/58; Municipal Employees—1/6/59; Teachers—1/5/54; Post Office Employees under trusteeship of the Afrikaans Language and Cultural Society (ATKV)—1/9/58; Salaried staff of the South African Railways & Harbours (SAR&H)—1/2/59; SAR&H Employees’ Union—1/3/59; SAR Police Staff Association—1/11/58; SAR&H Running and Operational Staff Association—1/4/59; Public Servants’ Association—1/7/58; Iron and Steel Corporation of South Africa (ISCOR)—1/7/59; Iron and Steel Allied Industries Union—1/9/59; South African Police—1/12/58; Professional Provident Society (PPS)—1/11/58; South African Army Scheme Fund (Scheme 1)—1/6/57; South African Air Force Fund—1/7/58; South African Navy Fund Scheme—1/5/58.

(96) Sanlam Product List, August 2013.

(97) SA: 1/2/1/6, Letter J.A. Vorster–Field staff, 6/5/60.

(98) SA: 1/2/1/3/4, Special tariffs: Memorandum, 22/8/67.

(99) RAs contained two risks: firstly that of early death, when the full RA was payable to the policyholder, and secondly, longevity, where the policyholder’s contribution extended beyond the period initially anticipated by the policyholder.

(100) J.L. Sadie, The Fall and Rise of the Afrikaner in the South Africa Economy. Stellenbosch Annals 2002/1, p. 56.

(101) SA: 1/2/1/3/4, Special Tariffs, 9/5/67.

(102) SA: 1/2/1/6, Senior Market Development, 12/6/1960.

(103) SA: B23: Memorandum to Sanlam Board, 25/10/1955: Bursaries to students in mathematics; Memorandum to Sanlam Board, 17/8/1962: Bursaries to matriculants. Mr M.H. Daling, later the CEO of Sanlam, was a recipient of a Sanlam bursary and qualified as an actuary at the University of Pretoria. So was Mr D.K. Smith, later CEO and Chairman of the board of Sanlam.

(104) SA: 1/2/1: Product development: Sanlam 100-Plus Policy document.

(105) SA: 1/2/1: Product Development A 101, August 1970.

(106) Interview G. Rudman, 13/2/2010.

(107) SA: 1/2/1/2/1: Product Development: Notice, 17/11/70; Cape Times, 25/7/68.

(108) SA: 1/2/1/: Product Development Report, 11/2/1972.

(109) Sanlam Press release (1977): Sanlam has new investment plan for pension funds; Sanlam Annual Report, 1977: 2.

(110) SA: Sanlam 1/2/5: Product development: Finplan, 4/2/1977; Sanlam annual Report, 1977: 3; Sanlam (2010): Sanlam: The IT journey from 1990 to 2014: 12 ̶14.

(111) Sanlam Annual Report, 1983: 6, 15.

(112) Sanlam Annual Report, 1990: 7.

(113) This act regulated the activities of all mutual aid societies, which included mutual societies formed to provide medical aid to members.

(114) Sunday Times: 18/10/1959: ‘Afrikaner “Big Business” grows by £23m a year’.

(115) The Manufacturer, Supplement, July 1961: 5.

(116) Die Fakkel, October 1948: 3.

(117) SA: Memorandum on Organization to Sanlam Board: B25: Bemarking—Algemeen en Bevorderings, 1944–1962.

(118) SA: Memorandum on Organization to Sanlam Board: B25: Bemarking—Algemeen en Bevorderings, 1944–1962.

(119) SA: Agents’ Bulletin, 11/07/1969: 5.

(120) SA: 1/2/4/3: Sanlam Opleidingsgids vir Verteenwoordigers, 1970.

(121) Jack van Wyk succeeded Pally du Plessis as head of agents on 1 January 1968

(122) SA: Appendices to Sanlam Board Minutes, 17/2/1971; 18/3/1975.

(123) SA: Die Fakkel, July 1961: 11.

(124) SA: Die Fakkel, 18/6/1965:1; 8/3/1967: 21.

(125) SA: 6/5/1: Chairman’s Address to Annual General Meeting 19/03/1986: 13.

(126) SA: Minutes of Board Meeting, 8/5/1975: addendum on policy retention.

(127) SA: Report by D.C. van der Merwe: ʼn Ondersoek na die invloed van ʼn ‘Prestasie-oriëntasiekursus’ op die verteenwoordigers van ʼn lewensversekeringsmaatskappy: 90.

(128) SA: Minutes of Board meeting, 15/5/1974.

(129) SA: Minutes of Board Meeting, 17/4/1968.

(130) SA: Minutes of Board meetings, 18/3/1970; 18/2/1976.

(131) Die Fakkel, 24/9/1971; 21/11/1975; 8/01/1982; 18/01/1980; 6/1/1984.

(132) SA: Fakkel, 6/2/1976; 18/2/1976.

(133) SA: 7/5/1: LOA, Minutes of General Meeting, 6/12/1976.

(134) SA: Minutes of board meeting, 15/2/1978.

(135) SA: Minutes of board meetings, 21/11/1979; 19/11/1980; 9/12/1981. Die Fakkel, 29/10/1982.

(136) SA: Die Fakkel, 6/11/1981.

(137) Laubscher introduced development training of brokers based on the Thomas Peters and Robert Waterman book In Search of Excellence (Peters & Waterman, 1982). The brokers received this training support from Sanlam, underlining the progressive approach to sales in Sanlam.

(138) SA: 5/3/2: Minutes of Board meeting, 23/1/1980.

(139) SA: 5/2/: D4: A.D. Wassenaar Memorandum, 1/12/1958.

(140) SA: 5/2: D4A: Letter Wassenaar–Board, 20/2/1962.

(141) SA: 5/2/: D4B: Memorandum to Board, 17/7/1968.

(142) Sanlam Indaba: 1/9/1995: 8.

(143) SA: 5/2: B23: Bursaries: Memorandum to Board, 25/10/1955; B23: Bursaries: Memorandum to Board, 17/8/1962.

(144) SA: B23: Memorandum to Board, 17/8/1962.

(145) The HS is still an educational NGO operating in the field of study funding. SA: 5/2/D4B: Helpmekaar Studiefonds, 1963–1972.

(146) SA: B23: Memorandum to Board, 15/11/1965.

(147) SA: 3/1/3/2: Lenings aan Koshuise, A, B; 3/1/4/2: Letter Provincial.

(148) SA: 5/2/D4: Donasies SACEE, Letter SACEE–Sanlam 6/6/61: Letter Beak–Sanlam, 13/6/63.

(149) SA: S17: Donations, 1980–1989.

(150) SA: 5/3/2: Minutes of Board Meeting, 23/1/1980.

(151) SA: Die Fakkel: 53 (49): 13/12/1985: 1.

(152) SA: Nuusuitreiking 25/6/1979: Press release LOA on Cost structure of Life offices.

(153) SA: 7/5/2: LOA files: Insurope News, 17/1/1975.

(154) F. Amatori and A. Colli (2011). Business History: Complexities and Comparisons: 101.

(155) Ibid., 103.s.

(156) SA: 6/5/1: Annual Report 1959: 1.

(157) SA: Annual Report, 1965: 3.

(158) SA: 6/5/1: Sanlam Annual Report, 1985, Chairman’s address: 15.

(159) SA: 6/5/1: Annual Report, 1959: 3; Annual Report, 1960: 4.

(160) SA: Memorandum to Sanlam Board, 25/8/1959.

(161) SA: 6/5/1: Memorandum to Sanlam Board, 17/4/1968; Marketing Report 1967.

(162) SA: 6/5/1: Memorandum to Sanlam Board, 18/3/1972; Memorandum to Sanlam Board, 17/10/1972; Conditions for non-white lives, 9/6/1977.

(163) SA: 6/5/1: FINWEEK, 10–16 June 1993.

(164) SA: Memorandum to Sanlam Board on the loading of Indian lives, 27/11/1951; 25/8/1959.

(165) SA: 6/5/1: Memorandum to Sanlam Board, 17/6/1958.

(166) SA: 6/5/1: Minutes of Sanlam Board, 15/6/1976; 21/6/1976; 15/6/1977.

(168) S. Halleen: From Life Insurance to Financial Services: A Historical Analysis of Sanlam’s Client Base, 1918–2004. PhD thesis, Stellenbosch, 2013: pp. 149.