“Refocusing the business,” they say. “Unlocking value through a return to our core DNA” — bet you’ve heard that one before. The market is riddled with companies that are trying to undo the sins of the past and focus on the operations where they have a “right to win” — a corporate buzz phrase that you actually want to hear from management.
Today’s announcement about “an exciting expansion into new verticals” is often the precursor to an enormous headache that the next management team will be dealing with five years hence.
And have you noticed that there’s never a clawback of the bonuses paid to the guilty management team along the way? If you’re a shareholder expecting independent nonexecutive directors to go in to bat for you by keeping a tight leash on management and preventing a misalignment of interests, then you’ve been reading too many books and paying too little attention to the market.
Tiger Brands is one recent example of a management team that is taking the group back to its roots. And yes, the “right to win” concept is front and centre in that story: identifying areas where it has actual competitive advantages in the form of brand strength, pricing power and manufacturing capability. It sounds so logical, yet logic is often a casualty in the pursuit of high revenue growth.
Animals are designed to grow rapidly at first before the growth curve slows and eventually stops as they reach optimal height. But for some reason, we expect companies to keep growing ahead of inflation forever.
The valuation is usually to blame. Executives of a company trading at a demanding multiple simply cannot announce to the market that they’ve reached the end of the growth runway. The share price will be obliterated and they will lose their jobs instantly, replaced by new execs who are willing to tell a far more optimistic story — whether grounded in reality or not.
Executives of a company trading at a demanding multiple simply cannot announce to the market that they’ve reached the end of the growth runway
The market is powered by hope, especially in the current environment.
This is where unlisted companies have a natural advantage. With a tight group of shareholders, they can make sensible decisions that avoid injecting unnecessary risk into the business in pursuit of growth. There aren’t many businesses that can survive without any innovation at all, but there’s a big difference between incremental progress and betting the farm on a large transaction or a new business unit.
It almost always comes down to alignment. Executives who will achieve wealth only through bonuses are incentivised to swing for the fences. If they succeed, they are paid a fortune, without having risked any of their own capital. If they fail, they do so with Other People’s Money — a concept that bankers know well — and are paid a fat salary along the way. But in founder-led and private companies, the decision-makers are inevitably deeply invested as well. They are looking to protect wealth, not risk it on 50/50 opportunities.
Occasionally, you find companies that offer the holy grail: an aligned management team and a long growth runway for a product in which their “right to win” has already been established. This allows management to focus on execution rather than innovation, which means a wider moat over time that makes it increasingly difficult for anyone else to get a slice of the action.
The obvious example is Capitec. It went after the lucrative banking economic pool and won a huge slice of it in a country that isn’t famous for economic growth. You don’t need a rising tide that lifts all boats if you can fight for a prime spot in the harbour and displace the other boats that weren’t paying attention. Capitec’s market cap of R540bn is now ahead of FirstRand (R533bn) and Standard Bank (R522bn). In case you’re wondering, Absa sits at R234bn and Nedbank is only R134bn.
How did Capitec get here? Certainly not through offering a wide range of services, or by trying to appeal to every customer in the market. It doesn’t have a private banking suite that is little more than a marketing veneer on a basic offering. It isn’t trying to win investment banking deals or build lending franchises throughout Africa. No, Capitec understands that it needs to maintain its core DNA of simplicity and then execute accordingly across a narrow range of businesses.
With headline earnings for the year ending February 2026 expected to rise between 20% and 25%, the cocktail of focus, growth runway and management alignment continues to deliver.
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