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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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(p.vii) Preface and Acknowledgements

(p.vii) Preface and Acknowledgements

The Power of Your Life

Grietjie Verhoef

Oxford University Press

To do business in global markets emerging from humble parochial beginnings in the scope of a hundred years testifies to a determination to succeed. The rise of global companies has had a profound impact on domestic politics, the economy, and society, but multinational enterprise has also shaped the global environment. In the globalized world of business and society, new entrants can only succeed by strategic market selection and operational competitive advantage. Studying internationalization offers a range of possibilities to new entrants, but context changes so dynamically, that it has become almost impossible to predict the exact course of business expansion. When the opportunity arose to study the century of development of an anchor Afrikaner financial services enterprise, Sanlam, it was apparent that it would be a study in business sustainability, the adaptability of ethnic culture to the globalized world of business, and the changes those trends implanted in peripheral polities, economies, and societies. When taking on the history of a century of Sanlam, the aim was to explore business adaptability in the context of globalization. The history of Afrikaners in South Africa is complex. The history of Sanlam allows insight into the complexities of political, economic, and social empowerment of not only Afrikaners, but also those South Africans who exercised a distinct choice to put South Africa first. The centenary history of Sanlam is a history of South African home-grown entrepreneurship, business vision, and the inextricable socio-political development of the country from anti-imperialism, through competing nationalisms through to a society responding to the forces of globalization and international business. Sanlam responded in the domestic South African market to global trends in market deregulation and subsequently emerged as a global enterprise. This is an important achievement. Sanlam made this transition from humble but confident beginnings in the Cape into global markets capitalizing on its firm-specific advantages.

Empowering the marginalized and creating a century of sustainable wealth in Africa—this is the African success story of Sanlam, the only emerging market multinational company to adapt an inward-looking nationalistic business model to become a global player. Sanlam relied on its institutional learning of a century ago to conduct global business from Africa. A history of embeddedness in an economic and political environment of racial segregation and white power, was transformed into the firm-specific competitive advantage of understanding the business of mobilizing marginalized people in emerging markets to take ownership of their own destiny.

This history is good news from Africa. It explains how a financial enterprise rooted in a developing market, within an ethnically and culturally circumscribed community, (p.viii) utilized social capital and mobilized its community for empowerment. It offers insights into successful transformation strategies for companies in African and other emerging markets. The historical institutional perspective is important, since other global financial service enterprises such as Barclays failed to capitalize on its DCO (Dominion, Colonial and Overseas) legacy in devising a new African strategy. The perspective from humble African beginnings presents an important dimension to future financial service provision in Africa and other emerging markets.

This is the history of the South African National Life Assurance Company (Suid-Afrikaanse Nasionale Lewens Assuransie Maatskappy—Sanlam), established in 1918 amidst the international turbulence of World War I, the growing marginalization of poor Afrikaners in South Africa, and emerging nationalisms in the British Commonwealth. Afrikaner entrepreneurs consciously chose insurance to mobilize the people’s savings towards their own economic empowerment. First the South African National Trust and Insurance Company (Suid-Afrikaanse Nasionale Trust en Assuransie Maatskappy—Santam) was established in March 1918. Soon the short-term trust and insurance business separated from the long-term life business. Sanlam was established in June 1918 and made inroads into an industry controlled by English- and foreign-owned life offices. Sanlam leaders supported the call for the supremacy of South Africa’s interests above loyalty to the British Crown. Sanlam leaders aligned themselves to the politics of white supremacy since the formation of the National Party in 1914. This history provides a unique perspective in Business History. It illustrates the business of using nationalism to mitigate risk in deeply divided societies progressing through socio-economic transformation. Sanlam used strategies to enter the life market in South Africa through actively canvassing the non-insured segment of the white population and ultimately grow an inclusive business able to outgrow the ethnic enclave. This is an exceptionally complex, but inspiring business history, unprecedented in the history of insurance and financial services development in developing markets.

The unique Business History case is this transformation from an enclave to a global business focus. The complex political and economic environment of the first decade of the twentieth century presented limited strategic alternatives to an insurer aspiring to enter the market. These environmental complexities only intensified in the course of the century. The importance of excellence in top management for the performance of the company, as well as for the national economy, was consistently emphasized by Alfred Chandler in his study of industrial corporations in the United States. This is equally true for the role of management in the insurance company, Sanlam, since 1918. Marginalized Afrikaners were mobilized to trust Sanlam in growing their personal destiny as inevitably interlocked with the future of a sovereign South Africa in the British Commonwealth. Economic empowerment was the ultimate aim. Management was the agent providing the intellect and impetus for organizational innovation and performance improvement at the enterprise level. Sanlam mobilized savings, created an Afrikaner-controlled (p.ix) corporate business network alongside the existing English- and Jewish-controlled South African corporate world. Afrikaner business employed social capital to construct a significant position in the South African economy by the 1970s. Distinct Afrikaner-controlled business groups (Sanlam, Federale Volksbeleggings, and Federale Mynbou Beperk, later Gencor as one group, and Rembrandt as another group) emerged and established a distinct presence among the big English business groups centred around the mining industry. Sanlam outperformed competing long-term insurers to take up the position as the second largest life office in South Africa within forty years—through the development of competitive products, superior agent training, innovative computer technologies, and building broad trust amongst all South Africans. Fundamental environmental transformation in Africa and South Africa again altered the strategic options to Sanlam. Sanlam reconsidered its nationalistic ‘culture’ since the late 1970s as intra-Afrikaner voices rose against the hegemony of white rule. The study also debunks the myth of ‘Afrikaner’ unity or homogeneity, since intra-Afrikaner business competition displayed opposing ambitions, personality clashes, and a lack of some mythical united nationalist force. The fundamental transformation of the South African political economy at the beginning of the 1990s led to radical changes. The next level of contextual complexities manifested: transformation of the initial business model, focusing on white policy holders, was directly adapted to the political transition of black majority rule in 1994. Management devised the strategy of responding to global and domestic trends by determining long-term goals and objectives for the enterprise. Sanlam aligned to the trends in the global long-term insurance industry. Domestic regulation and global industry trends dictated a fundamental revision of the Sanlam business model. Domestic underperformance followed global industry experiences. The significant Business History case study is how management effected this strategic transition to sustain the company in the wake of potentially threatening contextual turbulence.

Global financial deregulation, the declining demand for traditional life assurance products, and the rising demand for innovative wealth products, signalled structural change to the mutual life industry. In 1998 Sanlam followed the global trend: it demutualized and entered the market as a diversified financial services company. This constituted a radical business model overhaul. It took almost five years to implement a new business strategy. Sanlam relied on its roots in the empowerment of marginalized people by realigning itself as an emerging market conglomerate with its firm-specific advantages from the home base as competitive advantage. Several South African conglomerates exited the local market through foreign primary listings—Sanlam chose deliberately not to pursue that strategy. The history of Sanlam leading from 1918 into the twenty-first century is the only case study of a successful emerging market financial services conglomerate from Africa illustrating the benefits of strong domestic market embeddedness, dynamic managerial capabilities, and socio-cultural adaptability in business sustainability and expansion.

(p.x) The study covers a century of Sanlam’s history from establishment, through crises, building capacity, and diversification, to threatening disaster caused by over-exposure to unfocussed conglomerate activities, the insulation caused by international isolation, sanctions and anti-apartheid pressures, to functional business restructuring, which resulted in responding to global trends in insurance—demutualization and business refocussing. The outcome is the creation of a diversified financial service enterprise able to operate in developed and developing markets. In entering other emerging markets, Sanlam relied on its understanding of emerging market dynamics, the empowerment of the marginalized by addressing human risk as a tool towards empowerment—socially and economically.

The study concludes with an explanation of the broad business mix in Sanlam, delivering sophisticated financial services to the broad spectrum of shareholders and policy holders—from the wealthy to those aspiring to be wealthy. This study shows how a business moved with the mentalité of Western European civilization—from European domination under colonialism, rising European nationalism, decolonization and independence—to respond to the pressures of globalization. These trends unfolded with a certain lag in South Africa under Afrikaner leadership and international isolation, but unmistakably in similar sequence, resulting in the twenty-first century universal democracy. The history of Sanlam is intertwined with this history. The adaptive capabilities of the Afrikaner leadership, the transition from Afrikaner mutuality to inclusive South African and international stakeholders, the capacity to deliver on promises and the strength to turn back from legacy decisions undermining progress, created the space to innovate and compete effectively. Sanlam went from highly centralized bureaucratic management to strategic division of authority on operational level in the diversified M-form of the Group. The golden thread through this history is leadership, management capabilities, and vision.

The opportunity to research and write this history is a privilege. The accolade in moving the life office to commissioning a comprehensive research project on the history of a hundred years old Sanlam, goes to the former Group Archivist, Verity Rossouw. She liaised with the executive management, especially the Group Secretary, J. P. Bester, in 2007 to commission a research project comprising two Masters’ dissertations and four doctoral theses. I supervised these studies with the capable co-supervision of colleagues from the University of Stellenbosch and the University of Johannesburg. The research team received the assistance of several former Sanlam employees, who conducted research reports on aspects of the development of Sanlam. The following academic studies comprise the basis of in-depth research on aspects of the history of Sanlam. Randall Adams completed a MA degree in History at the University of Stellenbosch in 2010 with a dissertation, Die ver-Suid-Afrikanisering van die Suid-Afrikaanse ekonomie, 1918–1985. (The South Africanization of the South African economy, 1918–1985). Victoria Laburn completed a minor dissertation in Economics at the University of (p.xi) Stellenbosch in 2011, titled The Economics of Corporate Social Investment: Sanlam and Corporate Social Responsibility expenditure, 1970 to 2008. In 2013 Simone Halleen completed a PhD in History at the University of Stellenbosch on, From Life Insurance to Financial Services: A Historical Analysis of Sanlam’s Client Base, 1918–2004. In 2017 two theses were completed. Yolande Hagedorn-Hansen completed a PhD in Financial Management at the University of Johannesburg in 2017 on The Transformation of the South African Short Term Insurance Industry as Represented by the Development of SANTAM, 1918–2012. Wynand Beukes completed a PhD in History in 2017 at the University of Stellenbosch, titled, Van Afrikanerkultuur tot Korporatief: die geskiedenis van Sanlam se Hoofkantoor-personeelkorps,1918–2008. (From Afrikaner Culture to Corporate: the History of the Sanlam Head Office Corps, 1918–2008). Shaun de Wet has completed a PhD in Financial Management at the University of Johannesburg on The Role of Asset Management in the Transformation of a Life Insurance Company to a Financial Services Group: the Case of Sanlam. Supporting research was undertaken by Abie du Plessis on Die Veldpersoneel van Sanlam. 1919–2013 (The Agents/Field Staff of Sanlam 1918–2013); Adri Drotskie and Grietjie Verhoef on Management and Sustainability: the Development of Management in Sanlam, 1918–2015; Leon Venter on The History of Sanlam Broker Distribution, and on Regional Head Offices of Sanlam, as well as a compilation of the human resource development programmes under the supervision of Frederick Stroebel; The Sanlam Computer Group Research report (compiled by Barry Leo, Andre Prins, Andre Hoffman, Nico Ras, Marinda de Waal, Jaco du Plessis, Herman du Plessis) compiled an extensive report on The IT Journey: A History of IT Development in Sanlam 1990–2014. Nick du Preez completed a research report on Sanlam’s medical schemes, Sanlam Gesondheidsorg (Sanlam Health Care). The final integration of the vast historical material collected by means of the academic studies and research reports, as well as my own research on aspects of the history of Sanlam, was my privilege. The pioneering work by Sanlam in commissioning such research on an arms-length basis underlines the corporate responsibility of the Group as well as its sense of civil citizenship. Sanlam has taken the lead in corporate South Africa by making its well-organized archive accessible to bona fide researchers. The current Group Secretary, Sana-Ullah Bray, was instrumental in formalizing the legal structure of the research project, final publication avenues, as well as invaluable support in arranging access to Salam management for the purpose of interviews, questions, and clarification of processes in Sanlam.

Many aspects of the development of the insurance industry, of which Sanlam is a case study, were presented to numerous international scientific conferences and research projects. At successive congresses of the International Economic History Association, at Utrecht in 2009 (WEHC 2009), at Stellenbosch (WEHC 2012), at Kyoto (WEHC 2015), and at meetings of the Business History Congress in the USA, the European Business History Association in different locations across Europe, and at meetings of the Economic History Society of South Africa, scholars from across the globe participated in (p.xii) comparative insurance research presentations. After the 2009 meeting in Utrecht, Robin Pearson (ed.) published The Development of International Insurance (London: Pickering & Chatto). As part of the Dai Ichi Life Insurance project on Corporate Forms of Organization co-ordinated by Robin Pearson and Takau Yoneyama, comparative work on the organization of international insurance business were deliberated at workshops between 2011 and 2014. The outcome of this enterprise was the publication of R. Pearson and T. Yoneyama (eds) Corporate Forms and Organisational Choice in International Insurance (Oxford: Oxford University Press). Ongoing international engagement with the dynamically changing context of the insurance industry on matters of regulation, different cultures of risk, and insurance globalization is in process and will result in future international conferences and research projects.

The history of Sanlam offers a case from the emerging market context. This book invites the global readership into the unique history of an African emerging market financial services conglomerate. This enterprise seeks to bring scholarly interest to the world of business, finance and economic transformation in Africa. I hope to be the intermediary between this highly complex environment, that is simultaneously a world of opportunity. It was a journey of endless learning. I am indebted to all my students who completed their academic studies to assist the mining of the vast archival material on Sanlam and the insurance industry in South Africa. I also thank the loyal and dedicated Sanlam staff who assisted in submitting research reports on topics they had lived through as employees in Sanlam. I am forever indebted to Verity Roussouw for her vision and confidence in the company, the project, and the humble hands writing it all up. The executive management in Sanlam since the inception of the project, has given unfaltering support. The other Sanlam archive staff Jalynn Fortuin and Catherine Snel (current archivist) were the friendly assistants on call to find sources. I am also indebted to my international colleagues for the penetrating academic discourse on comparative insurance research. I wish to express a special gratitude to Monica Keneley, who has been an intellectual partner and friend over an extended period of insurance and business history research. Research assistants in the Department of Financial Management, Milan de Wet (doctoral candidate) and Waldo Oberholzer, assisted with econometric research methodology in analysing the Sanlam share price performance. The University of Johannesburg allowed me the academic freedom to engage in this project. The usual disclaimer remains: the responsibility for the contents is mine.

The history of Sanlam’s first hundred years is testimony to the quality of the human capital of the people of South Africa and the success embedded in vison, strategy, and work. This book is dedicated to the vision of entrepreneurs from Africa.

Grietjie Verhoef


May 2018