The story of Nestlife Assurance’s founder, Vusi Sithole, is one of perseverance, determination and the willingness of one man to create a legacy not only for himself, but also future generations of South Africans. Vusi Sithole is not shy about his opinion on the value of working hard. His company was not built on the back of BEE funding, it was not an opportunistic move and he first learnt his industry from the inside out. He firmly believes that nothing in life comes easily, and that learning to roll up your sleeves and get dirty is vital for the development of individuals and the nation as a whole.
“Affirmative action means that young black graduates are snapped up by large corporates at big salaries as they leave university. They start their working life already successful, without really walking the path to success. It’s creating a generation of South Africans who don’t have to work for their dreams, which I find worrying. I want to leave a legacy that shows what you can achieve if you want something badly enough, and you are willing to work for it, without a hand-up from the system. That will be Nestlife’s legacy,” says Sithole.
Having painstakingly built his company from the ground up, he knows what he’s talking about. Nestlife began as Life and Pension Insurance Corporation (LPC), an insolvent insurance company about to be liquidated. Not even its holding company wanted to take the risk of keeping it open.
But achieving dreams comes at a price, and for Sithole, that was giving up his cushy executive’s salary, with the second home, boat and overseas holidays just over the horizon, to build his vision.
Today he sits at his executive boardroom table, immaculate in a pressed suit, the head of a company that underwrites R150 million in premium incomes. It’s a long way off from a decade ago, when he filled the role of admin staff, salesman and GM all in one.
He had to, he had a staff of one: himself. “My journey to this point has been a rollercoaster of highs and lows. I have never been afraid to take a step backwards in the present if it meant future growth, but that has also meant sacrifices, for myself and my family.” It’s this commitment to a long-term goal that has really paid off.
Looking back to where Nestlife started takes us to 1996. Sithole had just used everything he owned as collateral to buy LPC, which was based in Mafikeng. His wife had already supported him through numerous changes in his life, and now he was asking her to support his decision to spend each week, Monday to Friday, in Mafikeng, away from his home in Johannesburg and his family. He didn’t give her all the details, particularly the fact that the house had been used as surety to buy the business, because he didn’t want her to shoulder the stress of the risk he was taking; and, he quips, he wanted to stay married.
Not only would her husband be away each week, but she had to accept that he’d given up his safe executive position, comfortable salary and future promotions to do so. His ultimate goal was to bring the business to Johannesburg, but he had no idea how long that would take. LPC was an insurance underwriting business with a limited licence to operate in the North West province. Before he could begin operating in Joburg he needed to raise R10 million to buy a national licence from the Financial Services Board (FSB). He had no idea how long that would take.
Why did he do all this you ask? Because he had a gut feeling that a business that no one wanted and was about to be liquidated was his ticket to achieving his ultimate dream of owning his own insurance business and building a legacy.
It takes a lot of faith in yourself to make that kind of commitment, but Sithole has self-belief in spades, and by 1996 he had also worked his way slowly and consistently through every position in the insurance industry, knowing that he would need to know the sector inside out before he launched his own company. He knew his market and he was determined to follow his instincts.
“I’ll take it”
Sithole’s introduction to LPC was almost accidental. By 1996 he had been in the insurance industry for over fifteen years. He had worked his way up the corporate ladder and he was the chairman of a subsidiary of Hollard. Life was good. And then he was approached by Capital Alliance, a local company that had its eye on him.
“It was the mid-1990s and Capital Alliance was rebuilding its reputation. Its short-term insurance business had suffered setbacks and although its life insurance side was still strong it was focusing on damage control. That meant restructuring and getting rid of dead weight, particularly subsidiaries that were not performing, or were not in line with the group’s new strategy.” LPC was both. While wooing Sithole, the group’s CEO, Ben Geldenhuis, invited him to visit the floundering subsidiary in Mafikeng. The group wanted to liquidate the company and if Sithole joined them it would be one of his first tasks.
“When we arrived in Mafikeng it took less than ten minutes to assess the company, including its five employees. There wasn’t much to see.” Which Geldenhuis of course knew. 1994 had seen a major change in South Africa’s political structure. The homeland governments were disbanded, replaced by new provincial governments. LPC had been formed to cater for the Bophuthatswana government’s insurance and pension policies. With the dismantling of that government, LPC lost the bulk of its client list. By 1996 it was underwriting an annual premium income of R5 million.
From this revenue, claims and other business expenses had to be paid, and in terms of the Insurance Act, insurance companies had to maintain a stipulated capital adequacy requirement, or they would be declared insolvent. LPC was dangerously close to this mark and the FSB wanted to revoke its limited licence, which meant it wouldn’t be able to trade at all, and Capital Alliance had no real interest in trying to secure new clients in the struggling North West province, which had taken the place of Bophuthatswana. Liquidating the company was a no-brainer.
But not for Sithole. “I can’t explain what happened. Here was this struggling company and instead of agreeing with Ben, I suddenly had this irrational but burning fire in me that this was it. Here was an opportunity for me to get into the industry on my own. I had been prepared to start a business from scratch — I was planning for it even — but this was a way in now, and I was ready.
I literally walked in and thought ‘I’ll take it’. Ben couldn’t believe it. In fact, he put a lot of effort into trying to convince me not to do it. He told me I was crazy, highlighting that I’d need to raise R10 million before I could move the business to Joburg, and Mafikeng did not offer that many potential clients. Maybe I was crazy.
I certainly didn’t know where I would get the money to buy the company, let alone how I would make the R10 million to buy a national licence, but I wanted to buy it anyway. One of the things that I believe is that at the core of all successful entrepreneurs is the ability to see the moment of truth when you are facing it. I knew what I was capable of, and I needed to trust in myself that I could get it done.”
Despite all the hurdles Sithole faced, he and Geldenhuis agreed on the terms of sale. Sithole raised just under the required money by putting his house and everything he owned up as collateral, for which he would own 74% of LPC. Capital Alliance would retain 26%. “I remember the day we signed the papers. Ben turned to me and said, Vusi, now you own an insurance company. Don’t f*** it up.”
Leaving his position as chairman of an insurance company to go it alone was not the first time Sithole had started from scratch. His entire career is marked by decisions to take the difficult road, rather than be satisfied with his current situation.
“I was a black varsity student at Fore Hare during the early 80s, when activism was rife in South Africa, and that influenced me. I wasn’t going to accept a life of mediocrity because of South Africa’s political system. I had big dreams for myself, and the will to achieve them.”
That activism got Sithole kicked out of Fort Hare early, and he arrived back in Johannesburg without a degree or a job. “It was the early 80s and work was not easy to find. Black people were carrying pass books, which the government used to keep track of employment status and work permits.
After months of looking for work, my father managed to get his boss at Anglo American Shipping to organise me a clerk’s position. My first day arrived, and as a young, idealistic young man, I looked at the office job I now had and rebelled against it. I arrived late, I took an extra long lunch hour and I left early.
I didn’t like the office space or the work. I didn’t appreciate the necessity of a job. The next day I was fired and while I wasn’t really sad to see the job go, I didn’t realise the problems the ‘unemployed’ stamp one day after the ‘employed’ stamp in my pass book would have on future job prospects. I was unemployed for months after that. Finally, I was put in contact through a family member with Sam Moseu, who sold insurance policies to the working class in Joburg. He needed someone to do admin for him, and so I was introduced to the insurance industry.”
It was the mid-80s and Sithole was back in an office, doing clerical work, which was exactly what he didn’t want to do, but months of looking for work had taught him the value of a job, any job. That didn’t mean he was giving up on his ambitions though. “I had my eye on hitting the streets with Sam. It took some convincing, but within a few months he let me join him in selling policies. Sam ended up being the man who taught me my first lessons in sales, and the ins and outs of the insurance industry.”
Once there, Sithole soon proved his flair for selling policies. Under Moseu’s guidance he gained enough of an understanding of the insurance industry to become a partner in the business, an arrangement that would last for almost five years. By the late 1980s, the business was doing well, but Sithole knew it would never reach the heights he was ultimately aiming for. And then an opportunity presented itself: local insurance company African Life opened a ‘black’ branch to target the burgeoning working class in the city of Johannesburg. “African Life needed black consultants to sell the policies, and I was approached to join them.”
It was an interesting choice for Sithole. He had now been running his own business with Moseu for almost five years. African Life was not offering him a managerial role. He would be a sales consultant earning commission only and working with Khehla Mthembu.
Many people would have seen this as a step backwards. Not Sithole. “I saw an opportunity to increase my skills base and learn from the best. I would be working in a large corporate firm, and if I worked hard I would move up through the ranks.
“I started at the bottom. I thought I understood my industry, but it didn’t take long to realise how little I knew. I hadn’t been formally trained as a salesman either, so I needed massive growth in that area as well. But I also knew why I had made the move. The whole point was to learn where my shortfalls were and to fix them.”
It wasn’t an easy process. “I was on commission only. I had just gotten married and I actually took a pay cheque home one month worth zero Rands. Policies had lapsed or been cancelled and the returned
commission meant I earned nothing that month. It was an important lesson: don’t sell something to someone who doesn’t want it, or can’t afford it. Their cancelled policies meant I took no money home that month.”
Sithole’s perseverance paid off though. Over the course of nine years he worked his way up the ranks, learning from each position. “I was a consultant, field manager, branch manager and finally area manager for Johannesburg before the BEE insurer Afgen approached me to join them.
It seemed like a good next move.” After a few years at Afgen the opportunity to join Hollard through a subsidiary presented itself. It was the early 90s and Sithole was a hot commodity. He was an experienced black man in the insurance industry at a time when political change was paramount. His future in the industry seemed assured. But still the dream of owning his own company persisted. He was simply biding his time, waiting for the right moment to present itself.
One of Sithole’s strengths is the discipline and patience to lay excellent foundations. By the early 1990s he had come a long way from the youth who was fired on his first day for being a lazy employee. He is a firm believer that the best things in life are earned, and his business success is a prime example of this philosophy.
“By the time I bought LPC I knew my industry inside out, mainly because I had held virtually every position the industry offers. I knew what it took to sell insurance policies, and conversely the administration behind receiving and honouring policies. I knew where things went wrong, and how successful underwriters operated. I had learnt the business from the ground up, and I didn’t make my move until I knew I was ready.”
After so many years of preparation, one would think that finally owning his own company would be the end of Sithole’s journey. In fact it was only the beginning. The decision to buy LPC once again took Sithole backwards before he went forwards.
The first challenge was buying the company. Once he managed to pull the money together though, he still needed to take the company from insolvency to making enough money so that he could raise R10 million in cash to buy the national licence. “I planned to take the company from Mafikeng to Johannesburg from the beginning. I knew there were no real growth possibilities in Mafikeng. As a life insurance underwriter my clients would be big companies, and those were all in Johannesburg. But, unlike Capital Alliance, I didn’t need huge clients in the North West to make LPC viable.”
In order to make LPC a sustainable company, Sithole needed to secure new clients and grow his existing client base. He also needed to run a tight ship, because although he would save money from his own salary, he needed to make the business profitable. “At that stage LPC was a tiny underwriter.
We couldn’t compete with large players in the industry on price, so we needed to differentiate ourselves in another way.” That way was superior service. Sithole shared his vision of growth with his employees and how they were going to get there.
Everyone was invested in his vision. He trained them in the art of customer service, and together they started growing the business, pulling it out of insolvency step by painful step. It took Sithole four long years to secure the national licence, which he achieved through the business’s profits, and by raising capital on the back of his own assets.
Four years of driving from Joburg to Mafikeng each week. Four years of wondering not only if and when he would reach his goal, but whether there would even be enough money to pay the company’s bills at the beginning of each month.
Sithole’s determination, intimate understanding of the insurance industry and support of his staff won out though. The company became ready to secure a national licence, which did not mean Sithole could rest on the success of achieving his goal; more work was ahead.
“When I bought the national licence from the FSB in 2000, I bought out Capital Alliance, changed the company’s name to Nestlife and moved the main office to Johannesburg, but I kept the office in Mafikeng. That was where our clients were, and we needed that business. But moving to Joburg presented its own challenges. After working as hard as I did for four years to achieve my first goal, I was now quite literally a one-man band again. I was making contact with the people I knew in the industry to pitch my business to them. I don’t think I slept for months.”
And then the tipping point came. Sithole had risked everything on being able to secure big clients if he managed to get a national licence, allowing him to sell insurance policies to companies across the country, and not just in the North West province.
His faith in himself and his reputation in the insurance industry were well founded. “I carried the differentiator we had used in Mafikeng through to Johannesburg with me. Even today, as a R150 million company, our differentiator remains service. Never underestimate the power of looking after your clients.”
His strategy was simple. He would use his reputation to secure a meeting, investigate what areas his potential clients were dissatisfied with in terms of their current providers, and find a solution for them. Success lay in following through on any promises he made to deliver those solutions. While doors opened slowly, they did open, and Sithole used every inch to gain a mile. “I approached insurance companies that I knew held big accounts, like Eskom, and I pitched our business as their underwriter.
I didn’t try to get everything at once. Instead, I convinced them to give me a small percentage of their business so that I could prove myself. Here my reputation in the industry definitely played a role. They knew me, and they were willing to give me a chance.
I wasn’t an unknown.” 5% of a company’s business soon grew into 10%, then 20%, until in many cases Nestlife now holds 100% of its clients’ business, all through an unwavering focus on service.
In 2006, Nestlife closed the year with R30 million in premium income, and has experienced exponential growth ever since. In March 2011 the company closed on R150 million, and Sithole aims to grow the business to R1 billion by 2015.
“One of the most interesting things I have learnt on this journey is that you never stop learning. Running a R30 million company is different from running a R10 million company, or a R150 million company. Each time the business has grown, I have had to grow with it, and expand my own horizons.”
Sithole recently completed an MBA degree, which took him four years to achieve on a part-time basis. “If I don’t keep my eye on the ball at all times, I won’t achieve my 2015 vision, or the goals I have set after that. I need to stay on top of everything happening in my company and the insurance industry.”
The human factor
Sithole does not attribute Nestlife’s growth to himself alone. “One of the biggest mistakes I have made is letting excellent employees leave the business without fighting for them. Without skilled staff there is no business, and if there is one piece of advice I can offer other business owners, it’s hold on to the people who make your business great.”
Nestlife employs 100 people across its four offices in Johannesburg, Bloemfontein, Durban and the Eastern Cape. The Mafikeng office was closed in 2006 and its employees relocated. 2011 will see further expansion with offices opening in Cape Town, Nelspruit and Limpopo province.
“Excellent service starts in-house. If employees understand and buy into a company’s vision, they can support that vision and the business’s overall values. We call it our 2015 vision, and it’s something that everyone, from the cleaning staff to our top brokers, lives and breathes from the moment they walk through the doors each morning.” Interestingly, this is one area that any business can achieve at no cost. Clients appreciate good service and follow-up support. Every business owner can foster this attitude in their staff.
Sithole has worked hard to earn the respect and dedication of his employees. He is particularly focused on helping each individual under the Nestlife banner grow. “We have data capturers and clerks that started as cleaning or gardening staff. If we recognise potential we will open every door we can for that individual to achieve what they are capable of.”
This isn’t ‘bleeding heart’ altruism on Sithole’s part. Netslife’s growth is testament to what employees can achieve if they believe in where a company is headed. “People are not productivity tools. They have personal and career aspirations. As a business owner I have worked hard to never stifle those aspirations, but encourage them instead.”
The discipline needed to take an insolvent company and turn it into a major player in an historically competitive industry cannot be downplayed. Sithole lives his life according to three strict pillars: physical, mental and spiritual. He is a firm believer that both the mind and body need to be maintained and worked out for overall health and success, and that spiritual awareness completes a healthy balance.
His passion gave him the drive to not only create a dream, but doggedly pursue it, even when he thought he couldn’t go any further. His discipline has allowed him to realise his vision.
“I want to create a legacy for myself, my family and even South Africa. I’m proud to say that Nestlife isn’t the product of a BEE deal, and I think it’s important for South Africa that companies like mine exist. I want to show our youth that if you put your mind to it, you can achieve anything.”
One of Nestlife’s goals is supporting people, particularly the historically disadvantaged. Sithole has watched people start their companies from scratch, and if he has believed in them, he has used Nestlife as a tool to give them business and support them, through mentoring and resources. One such story is a man who started a small local insurance broking firm. Nestlife supported him, and his insurance company has grown from strength to strength.
Four years since Sithole started supporting him, he has grown to the point of being able to place R11 million worth of business with Nestlife. “At our broker awards earlier this year, he came up to me and said, ‘Mr Sithole, I owe my company’s growth to you. A quarter of that R1 billion company that you are planning for 2015 will come from my business.’ That’s the commitment and the passion we share with the people we have walked our journey with,” says Sithole.
When Vusi Sithole bought a national licence in 2000, he had the perfect opportunity to rebrand the company. The name Life and Pensions Insurance Corporation (LPC) did not actually reflect what the underwriting firm did, as the company no longer sold pension policies. “I got the whole company involved. We had a staff competition to see who could come up with the most appropriate name.”
As it turned out, Sithole himself came up with Nestlife. “I was in the bush watching birds build nests. They were building their homes so patiently and deliberately, piece by piece. I started musing about what we did, helping people build their futures and support their families. The symmetry was perfect. Nests for eggs and protecting baby birds, Nestlife for security for people.”