Lifeline: Magda Wierzycka condemned the business practices and financial dealings of Net1 UEPS Technologies
Magda Wierzycka was just 13 years old when she and her family fled communist Poland, crossing the border illegally in the dead of night. Her experience of nine months in a refugee camp is still fresh in her mind. “I remember all of it. Think military barracks and bunk beds.”
There were no separate living quarters for men and women, or adults and children. “There was a guy in the bunker above me. He was from the Ukraine. He had actually walked from the Ukraine and I remember his feet were rotten. He had gangrene.”
Wierzycka’s parents, both medical doctors, were accepted into South Africa and arrived with just $500 to their names. They went to work for the state at a military hospital in Pretoria.
Now, at the age of 47, Wierzycka is the chief executive of Sygnia, a listed asset manager, which, through FinTech and because of low fees, is disrupting the market. She is also the richest women in the country, and was placed 34th on the Sunday Times rich list in 2016.
More recently, she has been making waves by calling out public and private sector players for the failures that nearly resulted in social grants not being paid on April 1. She has condemned the business practices and financial dealings of Net1 UEPS Technologies, whose subsidiary, Cash Paymaster Services (CPS), provides the technology for the administration of social grants. In a series of articles, she has explained how Net1 works around regulation and legislation to profit from making expensive loans to many of South Africa’s poorest citizens.
For the private sector to weigh in on such an issue is very unusual, but she watched her father fight the injustices of the Polish communist party, which is likely the reason for her overdeveloped sense of justice, she says.
“I have never been scared to be controversial or to voice my opinion. Being in the asset management industry, there are very few women. So you are always the one who gets talked about and you develop a thick skin.”
Wierzycka’s curiosity about CPS was piqued when the matter of paying grants became a major issue in recent weeks. “I started digging from an investment analyst perspective and started uncovering hideousness and predatory practices, and it wasn’t the CPS contract.” Instead, it was the way the company has found a way to make substantial profits by selling financial services to grant recipients, she says.
The private sector typically treads carefully around politically charged issues — the primary fear being that they will not be invited to tender for government contracts.
“It is not that we don’t want to make money. But I have a very good sense of what is right and wrong,” she says. “At Sygnia, we offer investment products at the lowest cost but we are still making money — that gives you an idea of what margins the others are making. It makes us unpopular with our peers,” she says.
Sygnia manages R158-billion in assets and can move hundreds of millions of rands on the market on any given day. But Wierzycka likes to remind her staff: “You start getting desensitised to the zeros, but you can never forget these are savings of individuals, of the average man on the street.”
She could not speak a word of English or Afrikaans when she arrived in the country and went to Pretoria Girls High. But she was proficient at other things.
“Eastern Europe has always had a very strong mathematical programme. As much as I couldn’t speak English, I was gobsmacked by the low levels of maths and science in South Africa.”
When she wanted to study further, Wierzycka was faced with few choices. Her family did not have sufficient money for her studies and insurance companies were offering bursaries to study actuarial science.
While working off her bursary from Southern Life, which went on to merge with Momentum, the young graduate found her real interest was in the investment team.
“At that time, Southern Life was already on a losing streak. They were struggling to figure out what they could offer to the market that was different.
“So they approached me and said, ‘Why don’t you design and run an index tracking fund?’ ’’
Wierzycka’s husband, and a cofounder of Sygnia, Simon Peile, was an actuary at Alexander Forbes at the time. It was at a dinner with him and his business partners that Wierzycka walked out with a job offer — after she recruited herself, as she says.
At Alexander Forbes she was tasked with setting up an asset consulting division from scratch.
Next came Coronation, a small boutique firm, which recruited the then 25-year-old Wierzycka, and she took on many responsibilities, ranging from legal to marketing and administration.
“I call it the Wild West days,” she says, adding that it gave her a huge amount of exposure and taught her how to run the operations of an asset management company.
After six-and-a-half years, and by then a director of Coronation, its owners decided to list and an opportunity for Wierzycka and others to buy shares in it did not transpire. They resigned and formed IQvest, the first fund of hedge funds in South Africa. It was ahead of its time and, Wierzycka says, it was a little too early.
“After the first six months, I was approached by a colourful character by the name of Mzi Khumalo.”
He was a businessperson shrouded in controversy after he had contravened the spirit of a black economic empowerment agreement with Harmony Gold and walked away with millions, leaving Harmony without a BEE partner.
In 2002, he acquired an asset management company, African Harvest, without doing due diligence. “He commissioned a report thereafter, only to find it was a complete operational mess.”
He turned to Wierzycka and offered to buy out IQvest if she would take over the running of African Harvest.
“When I joined as CEO, the first thing I found on my desk was a white envelope with a very sick report inside.” She phoned Khumalo immediately, only for him to say: “Magda, it’s not that I didn’t tell you the truth, it’s just that you didn’t ask the right questions.”
Wierzycka’s time at African Harvest completed her education. “I always called it my MBA. Whatever I didn’t learn at Coronation, I learnt at African Harvest.”
The company grew into the largest black-owned asset management company in the country. But as soon as Khumalo felt he had recovered his money, he instructed Wierzycka to sell. The active asset management side was sold off to Cadiz Asset Management.
But Wierzycka and her team bought out their fund of hedge funds, as well as the life insurance licence and the systems that had been developed to deal with the administration of funds. Sygnia Asset Management was born.
“We did not want Sygnia to be yet another asset management company — there were too many others out there.”
Instead it chose to compete as a multimanager company, of which there are just two others, but whose pricing was opaque, she says.
“I have always had a firm belief money should be managed through a combination of index tracking strategies and active management. Index tracking captures the return of the market at low cost. And then you have the money to pay the active managers.”
Sygnia offered customers fee transparency but it was its systems that caught the eye — and drew the business — of prominent fund and asset managers, who wanted to administer their funds through them. Having these clients on board lent the new company a great deal of credibility.
Sygnia then expanded into the individual savings market. “Again we looked at the range that was out there. We looked at our toy box to see what could differentiate us and we decide to launch the cheapest investment products in South Africa.”
They decided to price their products at a level no one could match, at 0.4% a year.
Listing the company on the JSE provided free publicity and offered more comfort to the retail investor, Wierzycka said. The listing was 21 times oversubscribed, with every active asset manager applying, she says.
As a result of the company listing and the subsequent market valuation of her shareholding, Wierzycka was suddenly catapulted on to the Sunday Times rich list, with an estimated worth of almost R1.5-billion.
She doesn’t seem to think much of it. “There’s a massive difference when it is because of you owning shares you are not going to sell, and which are valued at a particular point in time by the market. You can’t eat shares. What you are worth on paper is not necessarily the same as real life.”
Wierzycka’s Polish heritage lingers only in her accent and her blonde hair. She says she is a huge optimist when it comes to South Africa, both as an investment analyst and as a citizen.
“Maybe it’s being from the communist era, but I look at it from a different perspective. Political regimes come and go.”
And there is a pattern, she says. First comes the liberation movement, when everything is seen through rose-tinted glasses. “Next is when those who are as shrewd as hell and opportunistic come to power. I think that is where we are now.”
She believes only education and job creation will move South Africa forwards. “But that won’t come without economic growth and strategy. We need proper economic management. We need the right people in power … I’m a firm believer that it’s coming.”