Striking Gold

By Monique du Toit

We see an article about it every day: technology is advancing at an unprecedented pace. Imagine, for a moment, daily life fifteen years ago. Mobile phones were relatively scarce, while smartphones were a distant dream. Transport was limited to trains, buses, or taxis – in fact, the very notion of getting into a car with a stranger you’ve hailed on an app would have seemed preposterous. Televisions were small, decidedly un-smart, and pixellated at best. Internet connections were shady, with the majority of homes still firmly plugged into dial-up.

Fast forward to 2018, and we have the world at our fingertips. In this climate, investors are scrambling to grab a piece of the next profitable pie. Fintech, or financial technology, if you like, is making a splash in a big way. One of the biggest contenders in the game is online banking. Back in 2016, it was announced that a new bank had been granted a provisional license by the SARB. In September of 2017, the bank was issued an operating licence.

Tyme Digital became the first new South African bank since 1999. But it has been making headlines for more reasons than that.

Tyme (Take your money anywhere) was acquired by CBA (Commonwealth Bank SA) in 2015. A fully digital bank, Tyme will allow users to open bank accounts and make secure transactions within minutes. The bank has signed a 10 year agreement with Pick n Pay, which translates to physical kiosks through which users can register for the service. At the time of receiving its operating license, the bank had already secured more than 200 000 customers for the service.

We’ve looked at proptech before, but it deserves another honourable mention. One of the biggest players in this market is Payprop, an automated property manager. Using a combination of accounting, banking, and portfolio management, the proptech company looks to revolutionise how property owners manage their assets. Established back in 2004, Payprop has managed more than 500 000 leases, and processed more than R38b worth of transactions. The company is part of the Humanstate Group, an international private technology services group. They have subsidiaries in South Africa, Switzerland, the UK, and Canada.  

What links a digital bank and an online property manager? Aside from the obvious technological link, they are both companies that have caught the eye of local master investor, Patrice Motsepe.

A local success story

One of the wealthiest men in Africa, with a net worth of approximately $2.1b, Patrice Motsepe has long been an influencer in the investment world. Born to a Spaza shop-owner father, Motsepe gained early insights into what it took to run a business. This work ethic, combined with degrees from both the University of Swaziland and the University of the Witwatersrand, lead Motsepe to become the first black partner at law firm, Bowman Gilfillan, in 1994.

Taking advantage of the changing political climate and power, Motsepe founded Future Mining. The company focused on providing services to the mining industry. A few years later, he purchased gold mines from AngloGold. In 1999, a firm was established by Motsepe to buy more mines – the source of his eventual wealth. This would eventually become African Rainbow Minerals.

Recognised for his entrepreneurial spirit and business success, Motsepe was awarded the South Africa’s Best Entrepreneur Award in 2002. He went on to become the first black African on the Forbes list in 2008.

Possibly best known for his company, African Rainbow Minerals, there’s more to the man than mining. Earning his LLB from Wits in 1988, Motsepe started work at one of the largest law firms in the country, Bowman Gilfillan. In 1991, as visiting attorney to a law firm in Virginia, USA, he was exposed to several mining organisations, sparking an long-idling interest in the business. As a child, Motsepe would have daily exposure to clients of his father’s shop, most of them miners. He decided to specialise in mining and business law.

Future Mining was built on the principle that successful mines aren’t always the largest ones, but rather the best run. This, coupled with a dash of luck, eventually lead to what became known as African Rainbow Minerals.

In 1997, with the price of gold plummeting, AngloGold was looking to offload some of its low-performing shafts. Motsepe, always one to seize a good opportunity, jumped at the chance to buy them. There was only one problem. At $8.2m, the price tag proved to be too high for a black South African unable to get a loan from any banks. CEO of AngloGold at the time, Bobby Godsell, had played witness to Motsepe’s business smarts and passion for the industry, and he took note. It was agreed that Motsepe, through African Rainbow Minerals, would be allowed to repay the price through the company’s profits.

Within a few years, Motsepe delivered on the promise. After three years, he had managed to turn the struggling mines around, delivering a profit after only 12 months. Armed with a healthy track record, the businessman entered into a partnership with Anglo Platinum, delivering similarly stellar results. Fast forward to present time, and Motsepe is at the head of one of the largest mining companies on the continent, with revenues exceeding $2b and employing more than 10 000 workers.

Putting it to good use

In 2004, Motsepe founded Ubunto-Botho Investments. The aim was to build black controlled capital by being Sanlam’s empowerment partner. The company’s vision was two-fold. The first phase consisted of accumulating capital, while the second involves partially investing said capital in African Rainbow Capital.

ARC listed on the JSE in September of 2017. ARC and, by definition, Ubuntu-Botho Investments, consists of a 20% stake held by broad based BEE groups, including women’s groups, unions, and youth trusts. The remainder is held by the Sanlam Ubuntu-Botho Community Development Trust and the Motsepe Family Trust.

The initial goal is far from forgotten. More than 400 000 people have directly benefitted from annual disbursement from funds, while half the profits realised by the company will be redistributed to the community through several foundations. ARC Investments holds a portfolio valued at R4.5b, with a diverse range of investments. The majority of investments, by value, fall within the IT and telecommunications sector, with Financial Services and Agriculture and Food Production rounding out the top three.

 

Notable investments

ooba

Ooba, formerly MortgageSA, pioneered mortgage origination in South Africa and now offers a range of solutions to homebuyers. As South Africa’s leading home loan originator, they can help you to not only finance your home with ease, but also see that you’re well insured. The homebuyer solutions comprise of two core offerings: oobabond and oobainsure.

Rain

Rain is intended to be a “full service” Mobile Network Operator, focusing on data as a primary offering. The major assets constitute spectrum licenses and Rain has made significant progress in building a dedicated national LTE Advanced network in the valuable under-utilised frequencies.

Majik Holdings

Squarestone Growth LLP is a high yield regional commercial property portfolio managed by Squarestone, an experienced asset manager with offices in London and Edinburgh. The core investment strategy is to acquire well located modern properties at a discount to replacement build cost with demonstrable potential to enhance rental and capital growth through active asset management.

Val de Vie

Voted Safest Estate in Africa at the International Property Awards, the Val de Vie development of 917 hectares offers buyers a range of small farms, large stands, plot and plan options and luxury apartments.

ARC Real Estate

A joint venture between ARC and Signature Investment Holdings, ARC RE  has a specific investment mandate relating to empowerment-linked property transactions. As a well-capitalised and majority Black-owned property fund, ARC RE’s objective is to partner with leading South African corporates in leveraging the opportunities created through the various Broad-Based Black Economic Codes of Good Practice (“BEE Codes”), in respect of property-linked transactions and exposures.

 

In March of this year, ARC partnered with Barloworld and Atterbury in the redevelopment of the Barlow Park Campus, in Sandton. Each party holds one-third of the landmark site, with investment value expected to climb to well over R3b as the full development is rolled out. Upon completion, it is set to be a 130 000sqm mixed use precinct.

The site is in the process of being rezoned, a process that could take up to a year. Subject to this, the site development will include approximately 55 000sqm of offices, nearly 800 residential units, a community retail centre coming in at around 10 000sqm, along with a hotel and gym. Once zoning approval is obtained, the development is expected to follow a 6 to 8 year development timeline, being phased out according to market demand.

With investments in all the key sectors of the economy, Motsepe seems to embody what it means to have one’s finger on the pulse of innovation. In a rapidly evolving world, and an uncertain local landscape, knowing when to pounce is what sets the masters apart from the rest.

Sources: Forbes, Bloomberg, Startup Tips, African Rainbow Minerals, African Rainbow Capital, PayProp, Tyme, Val de Vie, ooba,

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