FIFI PETERS: African Rainbow Capital, the funding agency based by Patrice Motsepe, launched its annual outcomes at present. The firm, which has investments in a variety of sectors akin to telecommunications, mining, agriculture and monetary providers, tripled its money within the yr to June to R669 million.
For extra on the numbers I’m joined by the co-CEO of African Rainbow Capital, Johan van der Merwe. Johan, thanks a lot for the time. You are sitting in a more healthy money place than you have been at the moment final yr, and but you’ve chosen to not pay a dividend, suggesting that you simply suppose the cash may be put to raised use elsewhere. Is that the case? And, if that’s the case, the place do you propose on placing this cash to work?
JOHAN VAN DER MERWE: Good night, Fifi. Nice to hitch you and your listeners. Yes, you hit the nail on the top there. I feel for an funding agency to maintain on paying dividends [is] principally admitting defeat which you can’t put that cash to raised use. So we’ve obtained plans for that cash. We’ve obtained sure commitments already within the pipeline.
Obviously after having been listed for 5 years in September now, we’ve reached a degree of maturity the place we’re not solely investing, however we’re additionally divesting.
So over time you will note that we are going to additionally increase money and generate more money by way of gross sales. We are looking out for higher alternatives and good alternatives to deploy that cash elsewhere as nicely. That doesn’t imply that we are going to by no means pay a dividend, however for the second we don’t have any plans to pay dividends.
FIFI PETERS: Like you probably did with Afrimat, the place you bought round R12.4 million price of shares within the interval underneath evaluate, you’ve hinted at the potential of divestments. I suppose the pure query can be: Who’s subsequent or what’s subsequent?
JOHAN VAN DER MERWE: That is vital. So on the mining aspect, we invested in Afrimat. It has a improbable and really competent administration crew.
In reality, the share has finished a lot better than we even anticipated, and promoting Afrimat is nearly, ‘a bit of a punishment’ for a way nicely they’ve finished, which isn’t good to see. But sure, we’ve taken revenue on that aspect.
It turned too a big portion in our personal estimation of the portfolio, particularly being in mining as nicely. We nonetheless have across the R600 million to R650 million price of Afrimat shares. But, as you talked about, we did promote R740 million price of shares within the final yr.
FIFI PETERS: On the opposite of the aspect of that coin, then, when it comes to the place you’re seeing alternative and the place you may be investing, let’s simply begin with the businesses at the moment in your portfolio. You lent a little bit of a hand to the Elandsfontein undertaking.
Could more cash be forthcoming for them, or might more cash be forthcoming to your different investing firms, given the truth that issues are nonetheless fairly robust on the market if we check out the expansion of South Africa’s economic system.
JOHAN VAN DER MERWE: Yes, that’s true Fifi. Some of our bigger investments have been truly all earlier-cycle investments, like Rain, TymeFinancial institution and in addition the mine.
The mine has truly taken more cash than we anticipated, [more] than we needed to spend, however clearly one has to relook at it from a zero base each time. We imagine that the cash that we spent there, we’ll get an excellent return on that. It has taken a bit longer to fee on that aspect. We’re nonetheless having sure issues however not less than we see gentle on the finish of the tunnel there. It’s vital to have a little bit bit of money reserves there.
As you say, we coming into into a really unsure atmosphere with growing rates of interest after which clearly inflation as nicely. And when our investee firms, the prevailing ones, want money, we need to be there for them and to assist them as nicely.
But I feel we’re on this cycle now the place not solely will we make investments, however we additionally divest, and we’ve acquired bids on sure of our firms as nicely.
So I feel you will note extra divestment as nicely within the subsequent few years than you’ve seen prior to now.
Bbecause we have been truly constructing a portfolio till now, whereas now I feel we’re winnowing it, bolt-on acquisitions, however undoubtedly the place we don’t see that we will add extra value and we imagine {that a} sure funding has run its course for us, we will certainly promote as nicely.
FIFI PETERS: Interesting, as a result of we appear to be on this atmosphere of consolidation. You made the purpose proper now that a few of your investee firms are potential takeover targets. Care to share who has caught whose eye at this stage, otherwise you’re not [able] to share that element?
JOHAN VAN DER MERWE: It’s troublesome as a result of we’re solely shareholders in a few of these, and lots of of them produce other shareholders as nicely, and particularly the founding members of these, and so on.
But there’s one very fascinating enterprise that we invested in in South Africa, referred to as PayProp.
They have a platform which actually does the again finish of leases. They accumulate all of the leases after which they provide you a really good method of reporting, and so on. That’s a enterprise that expanded into the UK, they expanded into Canada and in addition the US now.
On that foundation, one of many US massive firms has come out with a bid on that firm, which we’re contemplating at this cut-off date.
If we promote that enterprise within the subsequent whereas, which we imagine we’ll, that can generate money of something between R450 million and R500 million for ARC.
FIFI PETERS: Which might go the place?
JOHAN VAN DER MERWE: That’s a superb query. I feel we undoubtedly need to bolster some acquisitions on the monetary providers aspect.
And the opposite space the place Dr Patrice Motsepe could be very fascinated by us enjoying a little bit of a much bigger position is in some meals safety.
So you’ll undoubtedly see that we not less than take into account the agri aspect a little bit extra as nicely. But, as you recognize, agri can be going by way of cycles – whether or not you’ve droughts or hail storms or issues with that – however that’s an space the place he undoubtedly needs to make an affect as nicely. So you’ll see that we, maybe over the following whereas, take a look at a few of these alternatives too.
FIFI PETERS: Well, we’ll be watching this area intently. Just on TymeFinancial institution then, the monetary providers firm you’ve there, or the financial institution, in essence. The final time we spoke to the financial institution on SAfm, the CEO was speaking concerning the first account being opened within the Philippines, or was stated to be opened within the Philippines. How are issues going there for TymeFinancial institution in that a part of the world?
JOHAN VAN DER MERWE: It goes nicely. They’ve obtained a financial institution there. They name it GoTyme.
As you recognize, ‘Tyme’ stands for ‘take your money everywhere’. That’s why it’s a digital financial institution.
Obviously South Africa is offering the blueprint to a really giant extent. It took us a little bit bit longer to roll out the financial institution right here. We’ve obtained over 5 million prospects now. But in all of the learnings that we’ve had, we imagine [where] the Philippines are actually now, the rollout of the financial institution goes to be a lot shorter when it comes to the learnings that we’ve had.
As you will have seen, we additionally gained a banking licence in Pakistan. So we’ll be rolling out in Pakistan as nicely. In these exterior jurisdictions [it is] crucial for us to get an excellent companion, and we imagine that we’ve obtained a superb companion within the Philippines, and we’re speaking to fairly various folks in Pakistan as nicely.
We need these companions to have good distribution, firstly, and secondly you want them to have deep pockets as nicely, as a result of to begin a financial institution isn’t a small feat.
FIFI PETERS: In phrases of South Africa, you stated that TymeFinancial institution has round 5 million prospects. So the Shoprite Money Market account has been touted as probably being an enormous challenger for TymeFinancial institution’s development. Would you agree?
JOHAN VAN DER MERWE: Yes, I feel so. If you take a look at the retailers, even the cell community operators, they’re all going to monetary providers to a sure extent. We imagine that over time it’s going to be crucial to have the proper kind of merchandise, simply to have a financial savings account or so is simply probably not sufficient. You have to supply a spread of providers too. And in lots of of those instances – and I don’t say we’ve finished that but – we’d wish to take fingers with retailers, with cell community operators, to see how we will truly arrange partnerships in these areas to do what’s greatest and good for the shoppers on the market.
FIFI PETERS: On cell networks and cell telecoms gamers, you and I spoke a little bit earlier about the entire MTN/Telkom/Rain potential debacle – or maybe it’s not even a debacle, as a result of that’s extra of a destructive phrase. But the fascinating exercise occurring between you three proper now, finally the prize being Telkom, which MTN initially expressed curiosity for. For the curiosity of the SAfm listener, why do you suppose a Rain/Telkom union is probably higher than an MTN/Telkom union? And, if a Rain/Telkom union doesn’t occur, what does Rain seem like after that?
JOHAN VAN DER MERWE: I feel an excellent query, Fifi, and clearly, as I stated earlier, we’re solely a 20% shareholder in Rain, so it’s for Rain’s administration and board to try this, however we’ve obtained folks on the board there, so I do have a little bit of perception on that in any occasion.
So for us it’s vital to be on the desk when a prized asset like Telkom is up for grabs. We imagine {that a} mixture of Rain and Telkom might serve the general public very nicely.
We are involved that if MTN takes over Telkom in its entirety, then competitors shall be much less as a result of there shall be two massive gorillas – with Vodacom and MTN/Telkom on the one aspect, after which a distant third shall be ourselves and possibly among the different cell community operators.
So I can’t actually see that the competitors authorities, which often do an excellent job in South Africa, would permit a complete takeover of Telkom by MTN. I feel there shall be extra a merger. I wish to imagine a merger of kind of equals. There’s rather a lot that we will deliver to the desk. There’s rather a lot that they’ve. And together, not less than there might be a 3rd superb cell community operator in South Africa and knowledge supplier.
Then you’ve obtained the likes of Vodacom, MTN, and a Rain/Telkom, which I feel will serve the shoppers and the general public on the market a lot better, as a result of there shall be extra competitors.
FIFI PETERS: Right. Cell C – do you’ve an opinion on these belongings?
JOHAN VAN DER MERWE: No, we don’t. We know that they’ve gone by way of their points as nicely. I feel they’re sorting them out in a sure method and so forth, however we haven’t actually checked out that now.
I feel the market, as a result of we don’t give the market sufficient data on Rain as a result of Rain is a unlisted enterprise and since, as an funding holding firm that’s obtained solely 20% of Rain, the market needs plenty of in data on Rain, but it surely’s troublesome as a result of they see it as a aggressive benefit that they’re not listed and so they don’t need to [share] all their methods and plans and numbers.
Obviously there’s a sure minimal that we’ve got to get, but it surely’s the identical with Cell C. That data isn’t all the time available, however I imagine it’ll be a greater service for the general public if there might be stronger cell community operators on the market, moderately than simply two gorillas and the remainder.
FIFI PETERS: Well, time will inform how that story ends. Johan, thanks a lot for becoming a member of the present proper now. Johan van der Merwe is the co-CEO at African Rainbow Capital.
