Special Hearings — Business Hearings — 1997-11-11

GERHARD VAN NIEKERK: Thank you, chairman.  We, as you know, we did submit a full presentation to the committee.  What we'd like to do today is to talk somewhat to that but also just in brief summary, add one or two other perspectives.  We hope that what we have to say will add to the understanding of the time of the organisation and what we stand for.  You've had opportunity now to hear from an individual from individual company, and from some business organisations and the added perspective that my presentation will probably bring; is to bring to the commission the question of a mutual life assurance society which is a slightly different kind of organisation and I hope that that will create some understanding as far as that is concerned.  We will be doing the presentation in three parts, first I will just briefly give a broad brush, historical overview of the organisation, where it comes from.  I will then briefly talk about this nature of the organisation, as a mutual society and then I will just go over some reflection of the past history and then open myself for questions after that.
 Mr Chairperson, the Old  Mutual was founded in 1845 as a mutual life assurance society.  It's founder and first chairman, was John Fairbairn, a community spirited individual who played a major role at the Cape during the first half of the nineteenth century.  He was a person involved himself in many issues such as the freedom of the press as well as the freeing of the slaves at the Cape during that time.  Old Mutual is therefore an institution which predates the formation of the Union of South Africa and has a strongly developed business culture.  Over the years, it has been managed by people from the various communities and countries in which we operate.  Those people have influenced the organisation, but in turn have been influenced by it.  Ten spite the change in economic, political and social environments, in many parts of Africa during this period, Old Mutual has remained true to its mission.  That is to help people to help themselves, by taking the benefits of life assurance to as many people as possible. 
  The nature of life assurance implies some stable form of employment in that for most of  this period, the bulk of the products that were offered, consisted of the payment of regular premiums over extended periods of time.  That is the nature of our business.  This mission of Old Mutual to distribute it's products and services aggressively is demonstrated by the fact that within months after its founding in May 1845, it was already operative in the Eastern Cape, to reach the cash economy which it already spread at that stage.  Another demonstration was the fact that one year after the discovery of gold on the reef, our name was changed from the Mutual Life Assurance Society of the Cape of Good Hope to the South African Mutual Life Assurance Society, and that was quite a few years before there was a country like South Africa, giving notice that it was to follow its customer base further north.  In 1889, the first branch was opened in Johannesburg.
 If I can now come to the period under review, 1960 to 1994, which you've asked us to talk to.  It is important to note that by 1960, Old Mutual already a well established and large organisation in relation to the South Africa of that day, was notably small by modern standards.   It was also exclusively involved in the traditional life insurance work, and therefore the nature of the market still determined regular employment and participation in the cash economy.  At this stage, the financial markets were in the early stages of change, and although the clientele of Old Mutual was predominantly but not exclusively white, we saw the beginnings of a real opportunity for black people to participate on a meaningful scale.  By the early seventies, this momentum was going quite fast.  It was around 1975 that Old Mutual took a number of bold new initiatives.  It recognised that the black community had entered and were becoming part of the main stream of South African economy in ever growing numbers.  Our client base was starting to reflect this and we had to prepare properly to accommodate these new members into our business on a much larger scale.  At the same time, we recognised that, as an employer, we had to ensure that we had access to the widest possible skill base and to ensure that everybody could participate in the growth of the organisation.  And after substantial strategic review and market research, it was in 1975 that we then created an organisation, a division, specifically aimed at supporting the growing financial needs of the black South Africans.  We also created a new division to serve, the first time buyers, mostly from the lower income workers, in providing a disciplined way of saving and assuring themselves via, initially  staff associations and thereafter going through the trade unions.  If one bears in mind, that it took Old Mutual a 110 years to sell its first million policies, this last initiative that I have just spoken about, demonstrates the change of pace.  Within ten years, another million policies were sold just coming from this single initiative.
 By the middle eighties, more than 50% of all new policies sold, were bought by black South Africans.  Today substantially more than half our total staff distributing policy, policies and advice in the market place comes from the black community.  And today more than one and a half million members are making use of the Old Mutual services for their financial security and we look after some three and a half billion rand worth of their assets.  During this time, an organisation was created to service the local communities, from the cities to the deep rural parts of our country.  Today we have approximately 600 locations in which people are being served, and they stretch from places such as Lesikisiki(?) and Mount Frare (?) in the Eastern Cape, Gigiyane (?) in the Northern Province and (unclear) in the North West.  In many of these places, office buildings have been erected since hardly any office accommodation was available in those areas.  The overall contribution of Old Mutual and its people in those communities have been meaningful and positive.  
 Throughout this period, Old Mutual senior management has always encouraged the staff of the organisation to participate actively in the community.  Apart from active support for community development generally, we have a well-organised community development program among our own staff, whereby we will support people where they give freely of their own time and effort to involve themselves in community development affairs.  And since the 1970's we have also played an active role in social investment in our society as this was manifested both inside and outside the organisation.  Over all these years, the expenditure on training remained a very high figure and consists of up to 5% of our salary bill on a very consistent basis.  I was very interested to hear the presentation by Nafcoc, earlier this morning.  It was in the seventies that Old Mutual had a very close relationship with the Nafcoc organisation and in many parts of the country Old Mutual offices were used as meeting places and we gave secretarial support to those fledgling branches of Nafcoc right across the country. I personally made many friends in that process.  And I said many of the initiatives that Mr Roshalt mentioned, clearly we as an individual organisation, we were also involved with.  In the early nineties together with Nedcor, our banking organisation, Old Mutual sponsored a major scenario planning exercise to assist in the future direction of this country.  The concepts developed during that exercise, found a fertile ground in the development of the RDP programme of the government of national unity after 1994.  A massive investment into housing and electricity provision for the poor, as well as the urgent attention given to the social fabric of our society, are all aspects which were clearly formulated and documented during that exercise.  
 Chairperson, I would now just like to make a few comments on the nature of a mutual life assurance society.  How's it different from a company, how did this influence actions of management at the time?  A normal company makes profits for its shareholders from its customers who buy its goods and services.  A mutual life assurance society on the other hand, has no shareholders.  It is an association that exists simply to help its members provide financial security for themselves and their families.  In Old Mutual's case, these members are millions of ordinary Southern Africans; rich and poor, urban and rural, black and white.  The Board and Management of Old Mutual are responsible to these members.  Their task is to manage and direct the society efficiently.  The four million people who make up the membership of Old Mutual reflect the full spectrum of political cultural and  religious diversity of Southern Africa, and further afield.  The Board and Management of such a society therefore have no mandate to take a stance on political, cultural and religious issues, regardless of their own individual points of view.  If I can reflect to some extent just briefly, chairperson.  It is human to look back over the past and reflect on what could or should have been.  Old Mutual has been an international organisation for more than a 100 years.  During that period we have seen countries in  which we have operated at war with each other.  During the century we have a experienced a number of, a period of decolonisation in many countries.  IN some our business' were nationalised, in others laws were passed that made it impossible for us to continue our operations.  In all cases, we attempted to do the best for our members.  In most of these cases, severe damage was done to the financial security of our members.
 These experiences have led to a firm belief, that even apart from this lack of mandate that I've mentioned before, it is not in the interest of our million of members and policy holders, for Old Mutual to take any party political stand.  The management and board have not felt that they could represent the political views of millions of members of different countries.  The ability of governments, by way of either poor legislation, ideological pursuits or even vindictiveness could cause major damage to the financial security of our members, have been demonstrated, and we have actually experienced that.  As part of our practice in maintaining political neutrality, we have never made any financial contribution to any political organisation.  Over the period it became progressively clear, however, that human rights were being abused within the political system.  Looking back, it is feasible to think that we could have short, a broad mandate from our members to take a firm public stand.  The truth and reality is, that we as management did not seek it, nor did we ever receive a request from a concerned group of members to do it.  Old Mutual's decision to aggressively build its membership base in what was the homelands, is another case in point.  In doing so, it could be argued that we gave credibility to the policies of the government of the day.  On the other hand, it enabled more than one million people to improve their financial security, many jobs were created, training took place and infrastructure was developed.  From time to time, key Old Mutual people were made available to government to serve on various advisory and other bodies.  This can also be construed as support for the government.   On the other hand, use of those structures to influence the matter of economic policy of the government did hopefully improve the lives of people over what they might have been. 
 In conclusion, chairperson, although we have a new dispensation in South Africa, where the protection  of human rights have been entrenched in different parts of our constitutional framework, Old Mutuals' dilemma in this sense has not gone away.  In more than one other country where we operate, there are accusations of human rights violations.  In some countries the rules of economic games has not been objectively determined.  It remains a difficult issue to deal with for us as an organisation.  We have been in conclusion, chairman, members of different business organisations. We are members of AHI, Handelsinstituut, SACCOB as well as Nafcoc.  And through those organisations, our people have played an active role in helping those organisations formulate some of the policies that you have heard about here, party today and will still hear about in the future.  That has been our avenue for expressing our views in terms of changing the way that the country was managed.  But as an individual organisation, we took the line that we took and I would now be very happy to answer some questions.  Thank you.