The office buildings in Stellenbosch are particularly unassuming. Going into 43 Plein Street there isn’t even a reception downstairs. Not like going into a Sandton banking head office, in which a liveried footman accompanies visitors to the CEO’s office. But an awful lot of important decisions are made here, according to one of the numerous lurid airport paperbacks about the “Stellenbosch Mafia”.
There are a lot of logos in this street for the powerful Afrikaans financial services brands. The solitary Investec sign seems as out of place as, well, I am.
The last time I was in Stellenbosch it was before the Covid-19 pandemic to interview banker-turned-venture-capitalist Michael Jordaan, hailed on the cover of the Financial Mail (though I did not write the headline) as “SA’s Steve Jobs.” It was one of those days that the Irish refer to laconically as “a nice, soft day”. British Isles weather, and it was an encore last week.
I had come down to see a reclusive former fund manager — who I won’t name — at one of the harder-to-reach wine farms. As it coincided with the African Rainbow Capital (ARC) results, I thought I would look in on Johan van der Merwe and Johan van Zyl the co-CEOs, who I knew in their previous roles at Sanlam.
Van Zyl reminded me that in a cover story in 2003, I was one of the first people to call the turnaround at Sanlam, before the sellside herd, and even before some astute buyside houses such as Allan Gray. I might be looking forward to a nicer retirement if I had followed my own hunch. But I believe strongly that financial journalists shouldn’t play the market, as the conflicts of interest are too great.
The two Johans seem to be having a lot more fun now that they no longer run the mammoth Sanlam machine. The modest ARC offices are also known in honour of its ubiquitous chair Patrice Motsepe as the “Patricerie”. It is always interesting to find out what is being baked there — I hesitate to say being cooked up there.
ARC’s listing has not been a success, despite the star power of its chair and CEOs. It trades at a discount of 70% to its net asset value. The free float is barely 10% and the two CEOs have bought another chunk of shares on the market.
When I asked the inevitable question “what’s the point of the listing?”, the body language of the two Johans said it all — there really isn’t one. In face-to-face meetings, unlike on Teams, it’s hard to conceal these sentiments.
Which is not to say that ARC isn’t a strong portfolio of assets. Its largest investment, the Rain cellphone network — in which it co-invests with Jordaan and RMB co-founder Paul Harris had earnings before interest, tax, depreciation and amortisation (ebitda) of R2.5bn in the year to February. It is launching a 4G network rather quaintly named RainGo, presumably in honour of the furniture tycoon Winky Ringo.
Rain has the potential to be a substantial listing one day.
Another large investment, TymeBank, broke even in December. It has 9.5-million customers, many of which are just people who downloaded a card from the machines at Pick n Pay.
But TymeBank has gained a new lease on life since the sudden recent divorce between Sanlam and Capitec. Sanlam, unlike its historic competitor Old Mutual, has no plans to set up its own bank. TymeBank is the obvious choice to distribute Sanlam’s low cost funeral and life products, which can’t be distributed efficiently through the anachronistic agency force model.
TymeBank’s strategic advantage is its huge network of cash-in, cash-out points through Pick n Pay, Boxer and TFG, at a time when traditional banks are not only closing branches but decommissioning ATMs.
ARC is also the largest shareholder in Alexforbes and has engineered the merger of a number of its activities with Sanlam. Forbes sold its linked product platform to Glacier by Sanlam while Sanlam Corporate has exited stand-alone retirement administration and now offers admin almost entirely through its umbrella fund.
Fund trustees could have moved their fund admin anywhere they wanted, but it was “strongly suggested” that they move their fund administration to Forbes, if they did not want to join the Sanlam umbrella.
Like all conglomerates, ARC has some quirky holdings. Why is it invested in Val de Vie, for example, which is an upmarket retirement village close to the head office?
• Cranston is a former associate editor of the Financial Mail.
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