Investing in bitcoin is "just gambling", says Laurie Dippenaar, the elder statesman of SA banking. Dippenaar knows about money — he is the co-founder of Africa’s largest bank by market value, FirstRand (value: R320bn), along with GT Ferreira and Paul Harris.
But even he admits his knowledge on the cryptocurrency is lacking. Speaking to the Financial Mail, Dippenaar recalls a "very liquid lunch" attended by, among others, Ferreira, Harris and PSG’s Jannie Mouton.
Dippenaar has been known for his value-based approach — things are either right or not right at all
"We pooled our collective knowledge of bitcoin and there were lots of areas of vagueness," he says. "The only firm anchor in the ground was the meteoric rise in the price. Anyone who buys bitcoin is buying it for that reason only."
He’s not the only banker who feels that way. JPMorgan CEO Jamie Dimon has described it as a fraud, saying he’d fire any employee who traded it for being "stupid".
Bitcoin’s gravity-defying value uplift — 1,430% over the past year — has many feeling it’s a bubble just itching to burst, notwithstanding the potential of digital currencies.
Believers describe it as a useful store of value, akin to digital gold. And institutional asset managers are finding it increasingly difficult to ignore.
UK-based Old Mutual Global Investors revealed last month that its gold and silver fund had made a small allocation to bitcoin since April. "Bitcoin and gold are complementary assets; after all, bitcoin was explicitly designed to be digital gold," says the fund’s manager, Ned Naylor-Leyland.
Dippenaar (69) is sceptical. "Stores of value are much more stable in their price. [They] don’t rocket for no explicable reason," he says. So while that might be a reason to buy it in the long-term, in the short-term "the price is rising because people are buying it".
That may seem overly simplistic, but you can hardly argue with a man whose 1.7% share in FirstRand is today worth about R5.4bn. And that’s before you even talk about Dippenaar’s instrumental role in playing midwife to companies that are now giants: Discovery, MMI and Outsurance are clear examples.
It all started 40 years ago when Ferreira, Harris and Dippenaar founded Rand Consolidated Investments, the forerunner to Rand Merchant Bank Holdings (RMH). Ten years later, RMBH Group was formed. It listed on the JSE in 1993, after the acquisition of Momentum and the launch of Discovery a year earlier.
The modern FirstRand was formed in 1998 when RMBH and Anglo American merged financial interests. In 2011, it split its insurance operations into Rand Merchant Investment Holdings (RMI). Today, RMI holds 25% of MMI and Discovery, 88% of Outsurance, 30% of UK short-term insurer Hastings and stakes in new-age financial services businesses through fintech arm AlphaCode.
Dippenaar is leaving as FirstRand chairman (to be replaced by Primedia CEO Roger Jardine), but he plans to remain on RMH and RMI’s boards because, as he puts it, "I’ve still got a large investment in the group."
Ferreira and Harris are also still on both boards.
Herman Bosman, CEO and financial director of RMH and RMI, says the three entrepreneurs have always been "active managers".
"[Dippenaar] has made an amazing contribution," says Bosman, describing him as "one of the cultural champions of the group".
The CEO of FirstRand from 1998 to
2005, Dippenaar went on to become chairman, where he was "very involved in decisions and in the design of the business",
says Bosman.
When Dippenaar took on the chairman’s role, he told Bosman it wouldn’t be such a change from being CEO, only that he would get to the office "later" — by 8am.
"He’s been much more than a nonexecutive chairman," says Bosman. "We will miss him from a cultural point of view and from an insight and a wisdom point of view."
Bosman has no qualms about Jardine’s appointment. He says: "If the founder of a business leaves, there will of course be a gap that needs to be filled over time. But we have confidence that a business of the sophistication and depth of FirstRand will be able to fill that gap."
How exactly does Dippenaar embody FirstRand’s culture?
He’s a hard worker, a rational thinker and he always does the right thing, says Bosman. He does the "hard yards" in analysing and understanding data, reducing it to a few simple but important commercial insights and then sticking to a plan of action.
"[Dippenaar] is hard to convince, but once he’s convinced, he is the strongest champion of the idea."
Those who know Dippenaar will agree with Bosman’s view that he isn’t someone who "plays in the grey area".
"For him, things are quite absolute: they are either right or not right at all."
It’s this trait that is evident in Dippenaar’s heart-on-the-sleeve sentiments on state capture. This week, he said FirstRand would blacklist firms complicit in state capture.
Values, he says, are more important than rules. The global drive towards a rules-based dispensation (think most governance codes) simply allows people to tick a box, rather than actually do what is ethically sound.
Dippenaar believes Jardine is the right man to preserve FirstRand’s organisational culture.
He does admit, however, that it is tough to run a bank in this economy. "A bank is affected by everything that buffets the economy. Obviously when you have lower growth, people swipe their cards less, there is pressure on employment; all those things slow down our growth rate," he says.
But "even in heavy wind, the trick is still to beat the opposition, though you’re unlikely to shoot the same scores as in fair weather", says Dippenaar, using a golfing analogy.
Now that he’s retired, he wants to play the odd mid-week game, "which I’ve never got right and always had on my bucket list".
Travel also features on Dippenaar’s list — he and his wife have not yet been to Greenland or Iceland. "Then I’ll spend a lot of time looking at my own investments for a change, instead of other people’s investments."
So where does he see value in the market? Though not willing to name his stock picks, Dippenaar says he has been eyeing shares that "are not rand-hedge shares".
"What makes our market look expensive are the rand-hedge shares, obviously the big one being Naspers. I’m quite fond of decent dividend yields, on the assumption that the dividend yield will grow, and on that basis there are pockets of value in the local market," he says.
It’s also possible to invest in a much bigger universe of interesting shares offshore, he says. But he warns: "Overall, overseas markets are quite fully priced and I’m starting to see a little bit of irrational exuberance in overseas markets."
FirstRand is in the throes of completing a rather large deal overseas — the £1.1bn acquisition of UK challenger bank Aldermore. The deal will increase FirstRand’s UK exposure from 5% to 12% — and it’s primarily geared at clinching a deposit franchise to fund MotoNovo, its vehicle finance business in that country.
"It’s an earnings-enhancing deal, not a destiny-changing deal. It will create incremental value," says Dippenaar. "It looks big, but it’s not that big. It’s R20bn — it’s not 10% of our market cap."
On Friday Aldermore shareholders will vote on the offer. But it looks a shoo-in after its board recommended it and it was welcomed by AnaCap Financial Partners, a private equity firm with a 25.1% stake. This is no big surprise: FirstRand’s 313p/share offer is a 38% premium to Aldermore’s average share price on the London Stock Exchange in recent months.
Despite his concerns over SA’s current trajectory, Dippenaar is not going anywhere. He reckons most of the country’s current problems are "own goals" that could be fairly easily resolved. "We all want to live [in SA]," Dippenaar says of his family.
He and his wife live in Johannesburg, a city he loves. "Everybody seems to think I’m based in Cape Town," Dippenaar jokes. Contrary to popular belief, he is not part of the so-called Stellenbosch mafia and, he says, "I haven’t been invited, either".
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