INTERVIEW: Simon Peile, new head of the Bishops Council Together with his wife Magda Wierzycka, Simon Peile is the majority shareholder of the Sygnia Group. He is also a formidable opponent of corruption, new Chairman of the Bishops Council and a committed birder… Tim Richman steps into his office to discuss Twitter, cryptocurrency and how to future-proof your children [This is an extended version of the interview that appears in Issue 1 of The Old Diocesan magazine]
Simon Peile (1979F)
is, though he may be reluctant to admit it, one half of one of the most influential couples in South Africa.
His wife Magda Wierzycka at first made her reputation as the no-nonsense face of the Sygnia Group, the JSE-listed fintech company that has disrupted the South African investment landscape with some flair; now she brandishes that reputation as a weapon to fight political corruption and corporate maladministration. If you’ve followed Magda on Twitter you may have seen her, for example, challenging Mmusi Maimane about the DA’s mismanagement of desalination tenders in Cape Town, or (more likely) taking Zuma’s henchmen to task for their usual trough-guzzling and racketeering. When the Guptas went on the run she tweeted offers totalling almost R1 million for information leading to their arrests.
Simon, an actuary by training, is the lower-profile deep-thinking ballast in the ship. Or, as he puts it, the brake to his wife’s accelerator.
In early 2017 Simon stepped down as head of investments at Sygnia, and he’s been in supposed semi-retirement ever since – but when you’re head of the Bishops Council and you’re doing your best to help save South Africa, this doesn’t translate to working less. While in Cape Town, he hasn’t taken an afternoon off in that time.
We meet at Sygnia’s Green Point office the day after Malusi Gigaba has delivered his (first and last) budget. Turns out Sygnia assisted the Finance Ministry in its preparation (with the definitions of crypto currencies); and that Simon and Magda are on first-name terms with Pravin and other heavyweights; and that they spend a fair deal on bodyguards – the price of their vocal position against the other face of government. (The push and pull of our oppugnant government can hardly be better illustrated.)
The facebrick Sygnia headquarters are contemporary and airy, adorned with bright modern art and eye-catching installations. In Simon’s office I spot a one-of-a-kind illustration, not yet hung: a collaboration of several dozen of the world’s great cartoonists – there’s Hagar the Horrible, Dagwood, the Wizard of Id. Behind his desk is a small Banksy, which Simon points out to me: it depicts a heart, a greater-than sign and a dollar symbol.
The view from the window to the MyCiTi bus depot includes buses adorned with Sygnia advertising – good for staff morale. I haven’t yet started the interview, but signs are good that Bishops has chosen an effective, thoughtful Chairman of Council. Sygnia, with your wife Magda at the fore, has played a very vocal corporate-activism role in recent times. Is this a calculated strategy?
No, it’s not. Magda’s never been shy, and she’s been vocal on issues all through her working career. So her critics and people who are envious of what she’s achieved will claim it’s just a way of achieving publicity, and she says to them, well, there’s a very big stage here, there’s room on the stage for everyone who wants to be involved. There may well have been some positive spin-offs for the business, but this is driven from the heart. It’s her personality, and it’s my influence as well. These are our values. Do you sometimes wake up in the morning, look at Twitter and think, did you just say that?
Yes! Well, no… When Magda first started on Twitter, I suggested we take a step back and think about how Twitter should be used. Effectively, it is marketing for the company. So, as a duo, we had a chat about that, and I think she’s done an excellent job in managing her profile. Every now and then we can see we might not want to go in a certain direction, so we leave that area alone.
It’s all basically about governance and corruption. We see the damage that has been done by corruption, but we realised that people weren’t doing anything about it, they weren’t speaking up. A lot of corporates were conflicted because of their government contracts and the risks involved. Sygnia might be a publicly listed company, but Magda and I are the majority shareholders, and the story to investors has always been, we’ll run this business as well as we can and we’ll hopefully grow it and we’ve got provisions for it, but if you don’t like what we’re doing, take the money elsewhere. Because we will ruffle a few feathers. That’s the deal. I don’t think it’s ever been expressed that way but it is implied. To touch on the actual politics, what do you think was the tipping point for the Zuma administration?
The Big Four banks pulling out
was very important but, on a slightly more personal level, I’d
say it was, very significantly, the leaked emails. Do you have safety concerns as a result of your public positions?
You have to. With the change in tide in December, we’re a little more comfortable, but last year Magda would have up to four bodyguards at a time, and our children wouldn’t be without them. So we’ve got government corruption on one side, and we have Steinhoff on another – was it also corruption?
I’m pretty sure it was. But there’s a difference between private-sector and public-sector corruption, and this isn’t an excuse to the people who say you only criticise the government, you don’t criticise business. Of course we criticise business, but state capture and government corruption was structural, it was pervasive throughout, it was carefully planned as a strategy, whereas Steinhoff is a unique situation. It’s isolated. That’s not to say there aren’t other Steinhoffs out there, but it’s not necessarily reflective of the private sector as a whole.
The other side of it is that we are a lot more confident that the wheels of justice will turn at a reasonable rate for private-sector corruption than for public-sector corruption. Where there are people who must go to jail, they go to jail. Let’s talk about a more reputable business. Sygnia built its reputation as a fintech disruptor specialising in passive investment. How do you define fintech?
Well, it’s the convergence of the finance industry and technology. What’s interesting for Sygnia is that as an asset-management company we employ more systems developers than we do people in the investment team. We’ve always built our own systems so that we can control the process, and the timing of when we started the company, in the early 2000s, was ideal. We started in that sweet spot of new technologies. We didn’t have legacy problems that others had with old systems.
Ultimately, we are trying to use technology to provide products that are more efficient, lower cost, more accessible, easier to use, easier to access. We are innovative and we can do things quickly. Part of your success has been shifting emphasis away from active investment to passive investment; for example, offering index trackers with low management costs that follow the market. Was this a gap in the investment market?
To a degree, yes. There should be a symbiosis between active and passive. In South Africa the equilibrium is wrong: there’s probably not enough passive and too much active.
Your active managers will argue that they do the hard yards, they analyse companies and, through their research, skill and hard work, they find the right stocks to put in their portfolios. And that passive investors are parasites who sit on the back of that. But you also need to remember that every trade done by an active investment manager is typically with another active manager. So one of them is saying this thing is too expensive, the other one is saying it’s too cheap. So almost by definition, one of them is always wrong. Ultimately, if there are only active managers in the market, investors will, on average, get the average market return less cost of these active managers. Passive management is more consistent, and the main advantage is the lower costs.
The other side of that equation is that active managers go through ups and downs. What typically happens to the average investor is they fire the guy who has been doing badly and they hire the guy who has just done well, when the two graphs are going in the wrong directions. So they’re paying higher fees and getting their timing wrong. I’ve spent most of my career trying to pick managers, and it’s a very difficult game.
That said, we try to get the active-passive mix right at Sygnia. We’ll challenge active management – it’s part of us being disruptors – but we’ll also try and find you active management if that’s what you need. Tell us about some specific innovative products Sygnia offers.
About a year and a half ago we launched a passive fund called the Sygnia 4th
Industrial Revolution Fund. It’s passive because it tracks an index, but it’s an attractive index for several reasons. It's constructed by a Big Data company in the US, and it includes over 200 US-listed companies, all of which are exposed to tech – the 4th
Industrial Revolution. It’s an offshore fund, it’s an equity fund, it’s a US domiciled fun – those are some of the decision-making layers. Then the final one is: it’s exposed to broadly diversified new technologies. It’s an innovative product, and no-one else in South Africa is doing this sort of thing.
And then the hot-off-the-press news is we’re launching an Exchange-Traded Fund, the first in the world, linked to Bitcoin. On to Bitcoin… What’s your take on cryptocurrency?
I have a slightly different take to my wife’s… There is obviously convergence but I’m a little old-school on a lot of things. Are you worried that there’s no inherent value in it?
I am worried to an extent, but then you’ve got to say, where’s the value in gold? That’s the analogy you need to use. Bitcoin in particular has become more of a commodity than a currency, so it’s an asset that’s held as a store of value. It’s still an immature market so it’s very volatile, but I think the price volatility will stabilise over time. It’s going to go through a few more years of high-level volatility, very newsflow-driven; for example, when there is talk of a country either wanting to regulate or ban cryptocurrencies. I’m also wary of speculation. The prices are just too volatile, and there’s a lot of talking up the market by the crypto-evangelists when prices rise and then a lot of schadenfreude from detractors when prices crash. So the market needs to mature. There are too many cryptocurrencies. A few will come to the top, probably the original ones, particularly Ether and Bitcoin.
What we’re offering as an ETF is just a safer way of accessing, in this case, Bitcoin. When you have what is effectively a unit trust, you don’t need to have wallets and encryptions – all that sort of stuff is looked after from our side. Bitcoin is, of course, a favourite topic of ODs everywhere, which brings us neatly back to Bishops and your new position as Council chairman. Did you take a step back at Sygnia because you were asked to fill the position?
No, the timing coincided. I decided I wanted a more plural lifestyle. And I knew Magda was on this trajectory to drive Sygnia to a new level. The invitation to chair Council is not something you accept lightly. It’s a great opportunity to give back to the community, and I think you can make a significant difference. The funny thing is, when I left school in ’79, I didn't have particularly favourable feelings for the school. I wasn’t a house prefect and I wasn’t involved with any major sports. I was more the academic, which wasn’t considered cool in those days. In the lingo of the time, the dreaded term “conch” would have applied to me. I spent a number of years away from South Africa, travelling extensively, so missed the earlier class reunions that were held. I first returned to the school for our 20th anniversary reunion. It was only once I became a parent and sent my own sons to the school that I started coming back and became involved again. Times have changed. Bishops seems to put less emphasis on sporting or even academic success and is more about encouraging boys to find their niche – their spike that they can focus on. Do you agree?
It’s interesting talking about spikes. My oldest son got in to Columbia University, where he Intends to major in creative writing and computer science, and when he was being advised about the application process to Ivy League universities, the advice was, you’ve got to find your spike and demonstrate that spike to the admissions board.
If you ask me, my vision and intention as chairman is to build on this evolution at Bishops, and make sure there is room for each boy’s spike to be identified and nurtured, so that in addition to being well-educated and well-rounded young men, they come out of the school with that self-confidence that comes from having a skill that’s acknowledged, and not feeling average at everything. An average boy leaving Bishops is actually way above average in society, but he feels average. You want each boy to come through and find something that they did really well, a skill that was recognised and that was grown.
The world is changing rapidly, and we need to ensure that our children are properly equipped, with the right skills to deal with the post 4th Industrial Revolution world. How do you see the role of Council?
It’s very important to understand that the school is run by the executive – the headmaster and his team – and they do an absolutely brilliant job. The role of the council generally is a governance and oversight role. It’s to provide guidance where necessary. There are also a lot of functions that go into the running of the school that are of a specialist nature for which the skills are not in the executive. Those are typically dealt with in the council sub-committees, and the members of the sub-committees are more important than the council at some level because a lot of the work is done in the sub-committees and there’s a lot of expertise in there. A critical sub-committee is Finance, and we’re privileged to draw on parents and old boys with significant experience in that area. Buildings and grounds is another important aspect, where we can draw on architects and building experts from our parents and old boys. The amount of goodwill contributed by experts, often from competing businesses, coming together for the good of the school is amazing. This sounds like the way the Bishops network should work, and perhaps the OD Union hasn’t used it to its fullest advantage in the past. Would you agree with that?
I was on the OD committee for several years before giving up my spot when I became Council chairman, so I have some experience, and yes, I feel the traditional old-school network of the past failed in many ways. But when you take the same concept and just reimagine it, you realise how powerful it can be. A lot of alumni of other schools and associations have seen this, and the ODU has made, and is now making, massive steps in that direction. The mentoring initiative, I think, is such a powerful one. I was asked to mentor a couple of guys and in both cases it was only one or two meetings but I was able, in that short period of time, to hopefully give them some good advice. In one instance, it needed a ten-minute conversation to help an OD at a crossroads in his career – he’s in his late 20s – to make a key decision. And it worked. He got what he was after. You’ve been head of the Council since January. What’s your assessment of the state of Bishops?
I’ve put two sons through the school, and the younger one is in matric now, so it’s my 15th year of being a parent – so that probably informs my view of the state of the school more than anything else. And I think it’s in a very good place in terms of it’s leadership. The next challenge is that the principal, who’s been an excellent leader for the school, will retired in the next year or two and we must find someone equally as good. The school is a robust place. It’s facing a lot of challenges, whether it’s transformation initiatives, or the water situation, or specific instances such as the current waterpolo incident with Rondebosch – but it’s facing them head on. It is a large and vibrant community with many stakeholders, so there will always be challenges. How do you run an elite school like Bishops in an unequal society such as South Africa’s?
The first thing that’s important to me is that Bishops might be an elite school but it must not be an elitist school. We set very high standards and have a very good education product. We produce well-rounded graduates who have a whole range of skills and social confidence and an understanding of their responsibilities to society as they go out into the world.
Beyond that, resolving South Africa’s problems, particularly inequality, is not about moving down to the lowest common denominator. That’s a very important concept in my mind. It’s rather about saying how one can uplift the standards for the marginalised and less advantaged people in the community. It’s very easy in a socialist rhetoric to cut the tall poppies down, but that achieves nothing. Gini coefficients and other measures of relative wealth are useful, but at the end of the day absolute wealth is a very important concept. Ultimately, poor people don’t eat relative wealth, they eat absolute wealth. We know that unequal societies are very divisive and lead to all sorts of social tensions, but uplifting the bottom end does a lot more good for society than dropping the top end. So would you say to the average OD that he has some obligation to be involved in uplifting our society?
Oh yes, absolutely. Naturally people want to succeed on a personal level, financially, look after their families and the like, but I think the social contract of living in South Africa means that when you’ve got to a certain level of security then more money in the bank is not going to make you happier. It’s also not going to make you more secure. If you invest that back into the community, that’s where it’s going to work. You know money. A lot of the old boys look at the school, and think, where does all the money go?
This is a very important topic, one I feel strongly about, as I’m also a trustee of the Bishops Trust. Our school fees by Cape Town standards are very high, but by international standards they’re low. And we’re graduating boys at an international standard. We could raise the fees significantly, and still easily fill the school, and then afford all the projects we want to do. But then we’d have a more homogenous group of learners at the school, whereas the diverse student community that we have is what we want – it’s what we need to thrive. We recognise that for some parents the school fees aren’t that much but there is a significant group who are making huge personal sacrifices to send their kids to Bishops. And so we’ve got to set the fees at a level where, with bursaries and scholarships, we can get that spectrum of talented pupils into the school.
This all means that our school operates on a breakeven basis from a fees point of view. There’s a bit left over for maintenance, but there’s nothing for future building. And so we need to raise money from the Bishops community, from people who believe in the Bishops story. Which is where the Bishops Trust and the 175 goals come in. We know that glossy brochures with pictures of new buildings don’t work. We need to inspire people to give to something meaningful, with real legacy. And hopefully that’s the message that we’re getting across.
I can assure you, as a parent of boy now studying in the US, the major US institutions are far more aggressive at canvassing for donations and testimonials. An important point to finish on – you like birds…
Yes! And it’s important to get the terminology right. I’m not an ornithologist, which is a scientist, or a twitcher, which is a box ticker. I’m a birder, which is about getting out there and getting dirty and seeking out the birds you want to see. I ran adventure trips in my twenties so I’m very happy roughing it, sleeping out, crawling through the jungle of Panama or wherever.
So, birding is really an excuse to visit strange parts of the world, where few other people go, because birds are everywhere. It also satisfies my hunting (only to see or photograph) and collecting instinct as I can spend many days focusing on finding a single tricky or iconic species. One family of birds I actively seek out is the pittas, found mostly in south-east Asia. Pittas are colourful birds mostly found on the forest floor. Despite being extremely colourful they are masters of disguise. Only another birder would understand the sheer delight that I experienced earlier this year when I managed a half-second sighting of a Sulawesi Pitta after three days of looking for it. It was nesting season and the birds were not calling, but on the third day one did call and we scrambled through the rain forest trying to locate it from its call. Eventually, it popped out from behind a fallen tree, looked at me and disappeared. Success! Tim Richman is a publisher and author, and editor of The Old Diocesan.