Billionaire Patrice Motsepe has chosen a time of major political and economic uncertainty to buck the trend of plummeting business confidence and list his empowerment investment company, African Rainbow Capital.
Its listing on the JSE this week will be three years ahead of schedule.
Joint CEO Johan van der Merwe says they're under no illusions about the climate.
"We have bought into the long-term future of South Africa, but that doesn't mean it won't be a rocky ride."
By "we" he means himself, Motsepe and joint CEO Johan van Zyl.
The three go back around 14 years to when Motsepe entered into an empowerment deal with Sanlam through Ubuntu-Botho Investments, a broad-based consortium majority owned by his family trust.
The deal paid off spectacularly and, by the time it matured, had earned the consortium about R17-billion after debts had been paid.
Motsepe reinvested R10-billion in ARC and brought in Van Zyl and Van der Merwe, who, as CEOs of Sanlam and Sanlam Investment respectively, had developed a close relationship with him.
When he asked them to lead his empowerment investment company they didn't hesitate. Says Van der Merwe: "We always thought it was a good platform to have — credible empowerment with cash and expertise."
ARC launched 18 months ago — and quickly surpassed even their most optimistic projections. "We were just amazed at the number and breadth of opportunities that came our way. So we decided to list now to take advantage of them."
This may be the worst of times for South Africa, but it's the best of times for them.
"In the long run it's better to be brave when others are fearful," says Van der Merwe. "When business confidence is low it presents opportunities to buy assets at better prices."
Plus, of course, the 20% discounts they're getting as empowerment players.
Their story to investors is that no matter how hostile the environment, all businesses in South Africa need empowerment.
"What we bring is that shareholder element in the scorecard. The reality is they need empowerment partners. It's a business imperative."
The field of hopeful empowerment partners is a crowded one, of course. But not so crowded with those that can actually add value, says Van der Merwe.
"Lots of would-be empowerment partners are putting up their hands and saying: 'Well, here we are, we'll be your empowerment partner. But you'll have to fund it.'"
ARC's listing will give it a market value of around R8.5-billion, and it will have a war chest for purchases of R2-billion in cash.
ARC brings not only money. It brings credibility and expertise.
Van der Merwe, 52, is a chartered accountant from the University of Pretoria with a master's degree in tax and a master's in finance from Cambridge University. He was at Sanlam for 20 years after working in corporate finance at Gencor and Billiton.
"Companies are not only looking for empowerment. They're looking for credible empowerment with partners who can add value in the boardroom."
ARC has "fantastic" people who'll be serving on the boards of the businesses it buys, he says. "That makes us a very attractive partner, at the end of the day."
Not to mention the fact that it brings Motsepe's formidable political connections. Both Deputy President Cyril Ramaphosa and Minister in the Presidency Jeff Radebe are family. Van der Merwe prefers to talk down that aspect.
"Maybe he's got some political connections, but we don't bank on that. We bank on the fact that he's a very well-respected businessman with very sound values. And obviously he's got quite a bit of firepower in terms of money that we can do deals with."
He agrees that what ARC is able to offer gives it and its investors access to opportunities not readily available to others.
Small wonder that investors "really like our story".
But businesses need more than empowerment credentials to grow. They need rule of law, law and order, policy certainty, a reliable tax regime and a measure of social stability. What is the return on investment going to be if the needle keeps moving the other way?
"Look, if we really become a banana republic then it could be really dangerous for us," he says.
Is this what they're telling potential investors?
"We're saying that we believe that even if it does get worse here it will eventually get better. And if it gets worse it just presents us with more opportunities.
"We believe that in the long term things will normalise, and then we will have these assets and the returns will improve."
Anchor investors include the Public Investment Corporation, Sanlam Private Wealth and the government of Singapore through its sovereign wealth fund.
One of the main "building blocks" of its investment strategy is financial services.
ARC is buying a 10% stake of Johannesburg-based lender Tyme, from the Commonwealth Bank of Australia. Van der Merwe hopes the acquisition will lead to a banking licence in the near future.
It will also, subject to regulatory approvals, buy a 29.9% share of CMB International, the listed holding company of independent investment banking and advisory firm Bravura.
Another building block is telecommunications. ARC has made a "substantial" investment in telecoms business Rain.
Van der Merwe says they want ARC to do for black South Africans what Sanlam did for white Afrikaners.
Once it's listed, many whites will pile in too.
An empowerment vehicle benefiting "white monopoly capital"?
Motsepe, through Ubuntu-Botho and ARC, will have 51% in the listed vehicle, he says. All of that is going straight into empowerment.
"If one wants to call the other 49% which we want to make available to the public 'white money', that white money gives us the opportunity to look at more opportunities and larger transactions which are very, very lucrative.
"So in the end the white money is also helping us to get better and more diversified returns for the BEE market.
"If we want our kids to live here in 20, 30 years' time, we have to really make an impact. And that is what we are trying to do."
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