A history of Volkskas and the Absa Banking group

Volkskas was one of the four largest banking conglomerates in South Africa, and one of the three biggest Afrikaner monopolies. It was established to harness Afrikaner economic power at a time when the economy was dominated by English capital. It was the result of a concerted push by Afrikaner leaders to transform Afrikanerdom into an economic force.

Volkskas began as a cooperative bank and became a commercial bank in the 1940s which grew especially after the National Party came to power and patronised the bank. It began to diversify in the 1960s, setting up industrial and other enterprises, so that by 1981 more than half of its profits were derived from industrial activity, the first SA bank to do so.

In 1992 Volkskas merged with other banks to become Absa, now the largest bank in South Africa.

The Origins of Volkskas

At the Economic Volkskongress held in Kimberley in October 1934, the participants agreed that Afrikaners would not achieve independence and self-sufficiency unless they acquired economic power, and Volkskas was from the beginning motivated by a purely nationalistic set of concerns.

The idea of establishing an Afrikaner bank was mooted by Joseph Jacobus Bosman. He had been turning the idea around in his mind from 1921 before he approached the Afrikaner Broederbond to put his idea in motion.

Before the congress, on 12 August 1933, the Broederbond decided to appoint a committee to explore the notion of establishing a savings bank, and Bosman was appointed to head the committee.

The committee made its report to the Broederbond on 3 March 1934, deciding in favour of establishing a people’s savings bank, a cooperative.

According to Grietjie Verhoef,: ‘The reason for this strategy was that a financial institution was needed to help individuals, especially Afrikaners, who could not be accommodated at existing banks or financial institutions. The underlying philosophy for a cooperative people's bank was that an institution of that nature, functioning countrywide, would be invaluable to the resolution of the poor white problem, since cooperative institutions would help people to stand on their

own legs and help themselves.’

Documents for the registration of the institution were sent to the Registrar of Cooperative Associations. The Volkskas board of directors was informed by the Minister of Finance that permission for the registration of the bank would be given once members had subscribed for 5,000 shares. This condition was met by the end of June 1934, and on 9 July 1934 Volkskas (Cooperative) Ltd was listed in the Register of Cooperative Associations.

The Volkskas board consisted of university professors, teachers and Afrikaner cultural leaders, all linked to the Afrikaner Broederbond. Professor JC van Rooy, from the University of Potchefstroom for Higher Christian Education, became the first chairman, but he resigned soon after he was appointed and was succeeded by Professor LJ du Plessis, a Classics Professor from Potchefstroom University, Secretary of the Calvinist Bond and an immediate past Broederbond Chairman. JJ Bosman was the secretary of the Cooperative, but became Manager at head office from 1935. 

According to Grietjie Verhoef,: ‘The logo of the bank was a plough driven through the soil, with the motto “industriousness” (arbeidsaamheid) and when Bosman approached potential shareholders he referred to “our own bank”, “born out of the people to serve the people”.

Volkskas becomes operative

Volkskas opened the doors of its Pretoria branch on 1 February 1935. It presented itself in Afrikaans advertisements as ‘your own bank’, ‘where you feel at home’. It accepted deposits into savings and deposit accounts, making up funds from which loans were given.

By the end of June 1935 it received £3,794 in deposits and £17,880 in fixed deposits, and granted loans of £23,583.

At that time, there were four other small banks, as well as the Imperial banks (Standard and Barclays) and the Netherlands bank, which later became Nedbank.

Volkskas opened its first Johannesburg branch on 1 August 1935, in Market Street. Over the next 12 years it opened 53 branches – in comparison, the Netherlands Bank had a total of 22 branches in 1945. 

By  1938 Volkskas was taking funds in investment certificates and offering estate administration.

By 1939, its capital hit £30,000, the level at which the Registrar of Banks would grant the status of a commercial bank. Its subscribed capital grew from £600 in 1934 to £1,142,910 in March 1947. This phenomenal growth made it possible for Volkskas to expand and grow its functions.

From August 1939 it started offering current accounts, and it began issuing cheques from 1 March 1941. By 1945 it had 2.32% of total deposits, while Netherlands Bank held 2.93%. Two years later it held almost as much of the total as the Netherlands Bank. It began to become a competitor of the bigger banks, especially after its decision to move into commercial banking.

Verhoef writes: ‘Immense support for Volkskas followed from the upsurge of Afrikaner nationalism in 1938 with the centenary festivities commemorating the Great Trek of the Voortrekkers, and from the 1939 Ekonomiese Volkskongress (People's Economic Congress), which gave birth to the Afrikaanse Handelsinstituut (AHI) and the Reddingsdaadbond (RDB, Organisation to help Afrikaners in poverty).’

From Co-operative to Commercial Bank

In July 1940 Volkskas was granted the status of a commercial bank. 

Verhoef writes: ‘Volkskas started business as a cooperative association, because it needed to mobilise the support of the majority Afrikaners who individually did not have much economic power. Once that capital had been mobilised, Volkskas would be able to proceed towards commercial banking. This was the aim of Bosman and various other Board members right from the start. The other aim was to offer a service to relatively poor Afrikaners without putting too much emphasis on paying out big dividends to shareholders.’

By 1944 Volkskas had outgrown its co-operative form, and it had to abandon its co-operative structure to compete with the other commercial banks. At an AGM in 1944, the change was approved. The move drew criticism of Volkskas, which was accused of becoming a capitalist exploiter, a ‘Hoggenheimer’.

Volkskas thus became a privately owned bank in 1944, the owners all being members of the Broederbond.

According to Verhoef, ‘The postwar period after 1945 offered the commercial banks, and various other financial intermediaries, enormous scope for expansion as a result of the economic boom that lasted into the 1960s.’

Volkskas’s clients were faithful to it, especially those in the rural areas, where the other banks had less coverage, and where Volkskas, initially acting as a cooperative, offered cheaper banking. Its clients grew along with the bank, and when these clients moved to current accounts, they stuck to Volkskas.

The larger banks tried to force Volkskas to revert to being a cooperative bank by charging it high fees for its cheques and refusing it membership of the Clearing House of Commercial Banks. 

According to Dan O’Meara: ‘The Big Three established commercial banks – Barclays, Standard Bank and the Netherlands Bank – would neither admit Volkskas to the Bankers Organisation, nor, for some time, accept its cheques. Given Volkskas’s cooperative structure, the big banks further threatened to bring a complaint under the Usury Act. These particular difficulties were partially overcome through nationalist agitation.  Eventually, so many Afrikaners transferred their accounts to Volkskas, the other banks were forced to recognise it.’

Volkskas became an officially registered commercial bank in 1947 after fully complying with the Banks Act of 1942. It then joined ROCO, the Register of Cooperatives among Commercial Banks in 1947, which allowed other banks to influence its decisions.

Volkskas and the Apartheid state

When the Nationalist Party won the 1948 election Afrikaners acceded to state power, and they used their new capacity to channel state money and contracts to Afrikaner businesses. 

Volkskas was patronised by the apartheid government, with state accounts moving to the Afrikaner bank. Increasingly affluent Afrikaner workers, with jobs at parastatals such as Iscor and Escom, opened accounts at Volkskas.

The bank’s assets rose from £7 million to £50 million between 1944 and 1955. Volkskas increased its control over all savings nine-fold between 1942 and 1952.

According to Davies et al: ‘…as in the case of Sanlam, the spectacular growth of Volkskas dates from the assumption of power by the Nationalist Party in 1948.’

By the 1980s, Volkskas was no longer that dependent on state patronage. According to Pieter Morkel, managing director of Volkskas in the early 1980s, state business was by then an insignificant proportion of the overall business of Volkskas.

According to Sheila Patterson, ‘Volkskas has achieved its phenomenal growth by exploiting Afrikaner sentiment with its claim to be the only real South African bank, and by aggressive and somewhat less conservative methods of doing business than the two great old-established banks, Barclays and the Standard Bank.

Diversification and expansion into mining and industry

Volkkas embarked on massive expansion and diversification programmes in the 1960s. 

Verhoef writes: ‘When restrictive monetary and fiscal policies, combined witb a sbarp rise in costs arose during the late fifties and early sixties, Volkskas had to make sharp adjustments. The first aspect the bank had to address was its exposure to agriculture.’ 

Now Volkskas began to move into other sectors. In 1959 it established a building society in Pretoria, the Nasionale Bouvereniging (National Building Society), with Professor AI Malan as its chair and Albert Marais, assistant manager of Volkskas in Johannesburg, as its managing director.

The building society raised £500,000 in just two months, and by 1966 its assets totalled more than R45-million. Marais moved to merge his institution with the other Afrikaner building society, Saambou, to form Saambou Nasionale Building Society, which in April 1970 had assets of over R270-million. By 1981 its assets exceeded R1-billion.

By 1965 Volkskas had 210 branches, of which 174 (83%) were on the platteland and 36 (17%) in urban areas.

In 1964 Volkskas, together with General Mining and Finance Corporation Ltd, went into sugar production in the Eastern Transvaal. In 1971 it bought out General Mining and the Transvaal Sugar Corporation, which grew sugar cane, citrus and sub-tropical fruit. This was Volkskas’s first move into non-banking businesses. In December 1971 it bought 5.4% of Sanlam’s Bonuskor, an industrial and agricultural corporation.

By 1981 the TSC produced 170.7 tons of sugar per year and the consolidated profit (after tax) was RlO.4 million. 

It acquired control of the Trans-Oranje Finance and Investment Corporation, a registered deposit receiving institution specialising in hire purcbase finance. The move enabled  Volkskas to gain not only more branches and deposits but also hire purchase facilities for its country clients.

The move into industrial and other non-banking businesses was part of a strategy used by German and Swiss banks, and was seen as bringing greater returns than banking.

When Senbank’s owner took over Trust Bank in 1977, Volkskas sold off of its shares in Bankorp to Sanlam, reducing its total shareholding in the merchant bank. Volkskas then went in search of another merchant bank, buying the Bank of the Orange Free State (Bank OFS) for this purpose.

It established the Volkskas Industrial Bank and the Volkskas Merchant Bank, moving into leasing and hire purchase activities: It renamed its Trans-Oranje Finance and Development Corporation the Volkskas Industrial Bank (VIB). It acquired majority shares in OFS Bank and changed the latter’s name to Volkskas Merchant Bank. VIB’s assets increased from R13 million in March 1978 to R238 million in March 1981.

In 1979, in conjunction with Mastercard and Visa, it issued its own credit card. Volkskas also entered into insurance, courtesy cards, the Diners Club card and trust and investment management. 

South African commercial banking’s diversification led commercial banks to reorganise their activities into holding companies, writes Verhoef. Volkskas told its shareholders in August 1978 that the Board proposed to change the bank's structure by creating a holding company, the Volkskas Group Ltd, thus separating its banking and non-banking interests, a move it completed on 1 October 1978.

Besides the holding company Volkskas Group Ltd, which held the registered commercial bank, the group now had VMB, a registered merchant bank; VIB, a registered hire purchase bank; Volkskas Industries Ltd, which controlled Volkskas' industrial interests, and Volkskas Commercial Properties Ltd, a real estate investment division.  The holding company acquired all the shares in all the subsidiaries.

In 1980 it established Volkskas Savings Bank, its last full subsidiary, and a vehicle to accept deposits on longer terms and at higher rates of interest than had been usual for commercial banks

Volkskas in the 1980s

Volkskas’s phenomenal growth can be explained by various factors: its successful diversification, and move into non-banking and industrial enterprises, its relationship with the state, especially business from parastatals Escom (now Eskom), Sasol and Iscor, and by greater Afrikaner control of the economy.

At least until the late 1980s, Volkskas’s board was under the control of the Broederbond, a fact acknowledged in the first official account of the Brooederbond published in 1979.

By 1981 the total assets of Volkskas were listed as standing at just over R5-billion, and in the 1980/1 financial year it became the first bank in SA to derive more than half of its profits from industry.

In1981, of the group’s 282 branches, only 25 per cent (71) were in the urban areas and 75 per cent (211) on the platteland in the North. By the later 1980s Volkskas' business was divided fairly equally between its urban and rural customers.

Volkskas had by 1982 become the third largest of the five commercial banks. With two of its main industrial subsidiaries, Bonuskor and Transvaal Suikerkorporasie, the group by now had interests in engineering, construction, and mining equipment, motorcycle distribution, earthmoving, forestry, sawmilling, farming and property.

In the late 1980s Volkskas issued shares, of which 12.7 million were given to UBS, the holding company of the new UBS Group. UBS Holdings thus acquired a 30 per cent share in the enlarged Volkskas share capital. Volkskas in turn received a 10 per cent interest in UBS Holdings. The link-up enabled Volkskas to tap into UBS’s client base, the largest in the building society industry, as well as helping it to enter the property and home-loan market.

Sanlam, Rembrandt and other tie-ups

Volkskas and Sanlam were the two giants of Afrikaner capitalism that emerged from the Afrikaner economic movement. Volkskas was based in the North, on the Transvaal, while Sanlam was based in the Cape. Each was also aligned to different factions, Volkskas to the Broederbond and Sanlam to the Cape National Party. Volkskas was regarded as more ‘nationalistically pure’ than Sanlam, according to O’Meara, and remained under Broederbond control. 

But the two groups were not entirely separate organisations, and during various periods had stakes in each other’s businesses. But the relationship was a difficult one.

Volkskas owned 10 percent of Sanlam’s Federale Maynbou (which owned Gencor, the second largest mining conglomerate).

In turn, Sanlam owned 10 percent of Volkskas, while Rembrandt owned 20 percent of Volkskas.

Bankorp, jointly controlled by Volkskas and Sanlam, held a 17.2 percent interest in Volkskas; but by the end of 1976 Trust Bank ran into difficulties and Sanlam, having a 30 per cent interest in Trust Bank, wanted Bankorp to take over Trust Bank. 

In  1987 Volkskas sold a quarter of its interest in Bonuskor to the Rembrandt Group and 50 per cent of its interest in Transvaal Sugar to Bonuskor.

According to Verhoef: ‘Volkskas' character differed fundamentally from the Trust Bank approach to banking and it was regarded as unacceptable that Sanlam should effectively control Trust Bank, and retain an interest in Volkskas. Volkskas could not accept that its partner, Sanlam, should control one of its competitors, Trust Bank. This lead Volkskas to break its ties with Sanlam: Volkskas sold its shares in Bankorp to Sanlam and simultaneously bought out the Sanlam holding in Bonuskor, thereby gaining a majority shareholding in Bonuskor. The Rembrandt Tobacco Group acquired Sanlam’s shares in Volkskas, giving it a 20 percent interest in Volkskas, while Sanlam’s reduced shareholding fell to 7.3 per cent.’

Politics and Total Strategy

During the 1980s, President PW Botha initiated what he termed the ‘Total Strategy’, in response to the supposed ‘total onslaught’ waged by revolutionary forces in league with the Soviet Union. 

Botha used the supposed threat to justify draconian measures against the forces of liberation, including detention, torture, assassinations, heightened oppression and crackdowns on any activity classed as subversive.

But Total Strategy was also an attempt at piecemeal political reform. Botha tried to divide the forces against apartheid by wooing the Indian and Coloured population. The Tricameral Parliament was meant to bring Coloureds and Indians into the system while leaving Black Africans out in the cold. 

Conservative and inadequate though these measures were regarding reform, some National Party members were outraged by these apparent concessions, hankering for 1960s old-style apartheid.  They broke away to form the Conservative Party under Andries Treurnicht, causing a split within Afrikanerdom and the NP.

Sanlam was seen as closer to the Conservative Party than to the NP, and was thought to have been behind the shift of the Afrikaanse Handelsinsituut (AHI) moving its account from Volkskas to Sanlam’s Bankorp subsidiary, Trust Bank.

According to Craig Charney: ‘The Sanlam- dominated Afrikaans Commercial Institute (AHI) was urging Afrikaner businesses to shift their accounts from Volkskas to Sanlam's Trust Bank. After the split, the NP needed R3 million for its counter-offensive, which compelled it to launch an unprecedented drive for funds among English businessmen as well as Afrikaners.  The 'beat-Treurnicht' campaign made inroads, particularly among New Republic Party supporters.’ 

Charney also writes that ‘Volkskas struck up an alliance of convenience with verligte Anton Rupert's Rembrandt Group to challenge Sanlam's control of General Mining, the second-largest mining house.

Absa and the transition to democracy

The changing political situation in South Africa saw Afrikaner organisations begin to prepare for majority rule, and as part of a move to delink Volkskas from its beginnings as an Afrikaner bank, it changed its slogan to 'Service excellence'.

In 1991 Volskas merged with Allied Building Society and United Building Society to form Absa (Amalgamated Banks of South Africa). In 1992 Absa took over Bankorp, previously a competitor of Volkskas, thereby also acquiring Trust Bank, Senbank and Bankfin. It thus  became the largest banking and financial services entity of its kind in Africa.

The group’s total assets in 1992  amounted to R80-billion. Ten years later, in 2002, its assets totalled R213 billion. At the time, it had 794 outlets, more than 2,683 ATMs and South Africa’s largest internet and telephone banking client base. In January 2002, Absa had a market capitalisation of R18,5-billion.

In May 2005 Barclays Bank of the United Kingdom bought a 56.4 percent stake in Absa, a move criticised in 2007 by then SA Reserve Bank governor Tito Mboweni, who said he saw no benefits accruing to South Africa from the transaction.

Conclusion

Volkskas was the first bank formed by Afrikaner nationalists and it grew by using Afrikaner nationalism to mobilise Afrikaner economic power. The bank grew enormously after a decade of existence and when the Nationalists took power in 1948, it benefitted from state business. It branched out into industrial sectors in the 1960s and multiplied its earnings. By the 1980s it was one of the largest banks in South Africa, and by the time democracy arrived it shed its Afrikaner image to become Absa, the largest banking group in the country.