Between 1997 and 2000 five of SA’s largest companies moved their headquarters and primary listings to London.
Gencor/Billiton started the trend in mid-1997, followed by SA Breweries (SAB), Anglo American and Old Mutual in 1999, and Dimension Data in 2000. Three of those London five have since been swallowed up by larger global groups. Old Mutual came home again in 2018, and only Anglo remained in London, though it is much changed.
Former Anglo American and De Beers’ chair Julian Ogilvie Thompson’s death this week was a reminder of that migration by the London five. JOT claimed Anglo’s move to London as his crowning achievement, according to Michael Cardo’s biography of the late Harry Oppenheimer — even though he’d originally opposed the form it took, which involved a merger of Anglo with its offshore arm, Minorco.
Another reminder comes from AngloGold Ashanti, whose shareholders vote on Friday on its move to New York. That it chose New York rather than London is a measure of the shift in global mining finance over the past two decades. But AngloGold, which sold the last of its SA assets in 2020, makes similar arguments to those the London five used back then, arguing the move will give it access to a far larger pool of capital than is available to it from a Johannesburg base, without the SA discount on its shares.
With hindsight, some rue that late ’90s London migration. Iconic SA names ended up disappearing. In some cases, much value was lost on bad acquisitions, often made under pressure from new foreign shareholders who wanted the companies to internationalise rapidly. It also shifted the companies’ centre of gravity away from SA, and some analysts believe that was bad for the economy. Former Anglo and AngloGold executive Bobby Godsell has argued in these pages that the group’s move reduced the role it was able to play in the critical decades after 1994.
But the decisions that were made, by the companies and government, were products of their time. They reflect some of the challenges of that period of rapid economic transition in the early days of democracy. SA was opening up to the world. They were never going to stay home, nor did the government even want them to. These companies had become behemoths in SA when their cash was trapped under apartheid.
Anglo, SAB and Old Mutual were in every sector of the economy. They controlled more than half the companies listed on the JSE. They were seen as too big and too dominant by a government that wanted to open up the economy to new entrants. They wanted to spread their wings abroad and diversify their risk.
That seemed possible only to some extent from an SA base. The government had started to liberalise exchange controls, but the remnants were still in place. That meant SA-based companies couldn’t be as agile as global competitors when they wanted to make acquisitions, nor was it easy to pay in shares listed on the JSE. Even more fundamentally, the pool of capital in SA was small compared with the far larger pool they could access as London-domiciled, LSE-listed Plcs.
The government had its reasons too. It was well aware that if it wanted lots of foreign money to flow in it also needed to let money flow out. There was some pride in the fact that SA had world-class companies that could go out there and expand, and also the expectation that if they did that successfully, the dividends would flow back to SA.
And apart from all that, SA simply needed the money. The Reserve Bank had run up huge foreign exchange losses trying to defend the rand in the late 1990s. SA had negative international reserves. Old Mutual raised more than $400m of capital when it demutualised and listed in London, which came back to bolster SA’s balance of payments. Almost $3bn more flowed in a couple of years later when a now “foreign” Anglo and the Oppenheimer family took De Beers private. By 2003 SA’s international reserves were in the black.
However, the government started to realise quite quickly that it might have been too quick to let go completely. By the time it came to the sixth request to move to London — Investec — it gave permission for a dual listing instead. It did the same when Mondi was unbundled from Anglo.
Of the London five, SAB was arguably the most successful. Without the flexibility and access to capital its London base allowed, it might not have expanded to become the world’s second-largest brewing company — before it was taken out by AB InBev in a 2016 mega-deal. By contrast, Old Mutual was arguably the least successful, raising a lot of capital it ended up investing poorly before finally heading back home.
That three of SA’s iconic companies ended up disappearing into larger global entities doesn’t in itself make the migration to London a failure. Arguably it was simply part of the natural evolution of companies as they go global, even a measure of their success in building attractive businesses.
But it still raises many questions: could they have internationalised without moving to London? SA certainly should have considered the dual listing route that Australia’s government insisted on when its iconic miners, such as BHP (which bought out Gencor/Billiton), wanted to go global. The government might also have done more to liberalise capital controls faster in the early days, and perhaps lessened the need for companies to relocate.
How much difference it would have made to the outcome is not clear. SA companies have since taken many different routes to expand abroad, with varying degrees of success. Bidcorp has done so successfully from a Johannesburg base; it considered a London listing at one stage but decided against it. Aspen has pursued a successful international strategy without moving out of Durban, never mind out of SA.
The tragedy is not so much that SA let the London five leave but rather that it didn’t succeed in attracting the new foreign investment that should have come in to invigorate the economy as the locals built their foreign presence. Nor did it support the creation at home of the new entrepreneurial smaller businesses that should have come in to compete as their dominance reduced.
Would SA’s economy have done any better if the government had made those companies stay home? That would have required a government that continued on the path of reform it began in the 1990s to make the economy ever more attractive for doing business, rather than going the opposite way.
• Joffe is editor at large.
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