It happened one Saturday afternoon; the meat was on the fire, the smoke was in the air, and a father sat his 13-year-old son down for a paternal chat that was to change his life.

The father was billionaire investor Jannie Mouton – known as the ‘Boere Buffett’. The son was Piet Mouton who was to grow up into a multi-million-dollar investor. Billionaire and son have beefed up PSG, the investment holding company worth $4.3 billion (market cap) that has spread to a combined market capitalization of approximately $12.5 billion in just 22 years.

“Growing up in our family, at the age of 13 I already knew what options and futures were… It was a new thing on the JSE and my dad came home and, at a braai on a Saturday, he sat me and my brother down and explained it to us. So here I had some great knowledge that I didn’t know what to do with at school, but I understood the concept of options and futures,” says Piet.

“[PSG] was part of our life growing up, the entire business concept. Being mathematically inclined, [my future idea] wasn’t necessarily to go into business with my father, but it was to go into business.”

This was the incredible inside story told from the two men as FORBES AFRICA sat down at 35 Church Street, Stellenbosch, in the heart of the quaint South African wine farm to hear how one family built an investment giant.

“My wife once told me that was your favorite child, PSG, you never ask anything about Jan or Piet, or Charity. It’s only PSG, PSG. The whole braai [barbeque], the whole evening was talking about PSG. It was very much part and parcel of how we started,” says Jannie.

The choice of the building in Church Street for this interview was a spot-on smart investment.  They call it Ou Kollege and it is as much of a reflection of their humble characters as their life stories. The wooden panels, grey walls, African paintings and sculptures of leopards have that millionaire touch. Jannie bought it with his old friend GT Ferreira, FirstRand founder and also a multimillionaire. The two men decorated it with paint pot and brush in hand.

“We bought this building and we haven’t left.  I remember GT saying to me ‘Jannie, it’s just a structure, you must put stuff in it as well’, so he ended up being the interior decorator here as well,” says Jannie.

“You can see this wood paneling is the same as GT’s office on the third floor which looks very similar to what we’ve got. It had the same interior decorator at the end of the day,” says Piet, as they both laugh.

Africa’s Billionaires

On this day, in the very room where they plotted billions of dollars of investment around the world, Piet and Jannie don matching black suits and white shirts. They are every inch the shrewd businessmen, with a dash of down-to-earth humility.

Thomas Edison, the man famous for the lightbulb, once said opportunity is missed by most people because it is dressed in overalls and looks like work. The Moutons are dressed in suits and look like investment.

Jannie founded the group just 22 years ago after a kick in the gut. He was fired by his partners from his own stock broking firm. To add insult to injury, his name as part of Senekal, Mouton & Kitshoff was on the door. The fact that Mouton will never forget August 5, 1995, shows how deeply it hurt him. At the time, probably the last thing on his mind was that this humiliation was the best thing that ever happened to him.

Jannie Mouton (Photo by Jay Caboz)

“If you were fired in your life, you must have realized you’ve made a mistake. I think it was a good lesson. It’s a team effort and all the team must be happy and must respect their standing credibility and wisdom. I’ve learned a lot about that,” says Jannie.

That lesson hit like a sledgehammer when young Piet was told the news.

“I was in first-year and was 19 years old. The first part started with Jannie being fired. He was so ashamed he got my mother to phone us up and say he’d resigned,” says Piet.

Jannie searched his soul and vowed to own a financial services JSE-listed company. It took three months to get onto the JSE. Jannie, then 48 years old, bought a 51% share of JSE-listed PAG for R3.5 million ($273,000). He sold it two years later for R107 million ($8.35 million).

Then he went home. He settled in Stellenbosch, the town where he studied alongside fellow decorator GT, in the Western Cape.

From these humble beginnings the PSG Group took off like a rocket with annual compound growth in earnings of 50.8% a year.

Their main investments are in bank start-up Capitec, private education firm Curro Holdings, PSG Konsult and agribusiness firm Zeder – with the 31% interest in Capitec constituting roughly 40% of the value of PSG’s portfolio.

Here’s how rapidly PSG has grown: An investment of R100,000 ($78,000), on its first day in business, would be worth approximately R390 million ($30.5 million) today if all dividends were reinvested. No other company in the world matches this, according to the Moutons and researchers at the Top Performing Companies & Public Sector.

Jannie is Afrikaans with a capital A. When you speak to him you can see he thinks in Afrikaans and speaks in English. Yet when it comes to business he knows, whenever he speaks, English is king. So when it came to sending his sons to school he bent the rules to claim he was English-speaking so they could grow up learning the world language.

“My wife was a bit smarter than me. She was in an English school her whole life at Rustenburg Girls’ High. She realized how important English was in life and in business… To send your children from an Afrikaans background to an English school, you had to apply officially. Otherwise they wouldn’t do it. I still have the little document that says I am English-speaking. That was to protect Afrikaans, they didn’t want Afrikaans schools and English schools to mix.”

With parental guidance, and the English language, Piet took to business like a duck to water in his first year at Stellenbosch University where he studied actuarial science.

“Remember, this was at a time when we were coming into a new democracy. We were at university, there was massive growth in the PSG share price, I think it went up from 36c and peaked at about R18 which was my last year at university. Students do take interest in what happens in the world and it’s a phenomenal story, so everybody knew who Jannie was, and obviously Jannie and GT were Simonsberg Old Boys, which was the residence where I went to,” says Piet.

With seven years as CEO of PSG, Piet is the new generation injecting adrenalin into the beating heart of this $4.3-billion company. There were no short cuts for the young Piet, according to Jannie, he had to work his way up the corporate ladder.

Piet Mouton (Photo by Jay Caboz)

“Piet had started in the group in 2004 with a company called Arch Equity. It was actually a tough day in our lives, because his mother and my wife passed away on 11th of May. On the 17th we launched Arch Equity. We never discussed him becoming CEO,” says Jannie.

“Piet was a candidate and I stood back. His colleagues selected him. Here, in private and in public, Piet was the best candidate, I couldn’t get involved. I would never do that in my life, misuse my title and it was the shareholders decision to appoint him head of the board… For us, it’s the best CEO who must be in charge.”

Despite this, you can only imagine the pressure that Piet feels. Not only does he juggle billions in other people’s money, the chairperson is also your father, the person who started to build it.

“[Jannie’s] entire business philosophy is a lesson. The biggest one is don’t give me problems, give me solutions. Jannie always says ‘it’s easier to tell a guy something won’t work, it’s a lot more difficult to sit with an idea and think of a way of doing it differently’,” says Piet.

A cornerstone of PSG’s success is a 30.7% stake in Capitec Bank. In 2002, Capitec’s individual shares listings were worth less than a rand and now they are worth R531 ($41.50). The guiding spirit of Capitec is Michiel le Roux, who disrupted South Africa’s once cozy banking market by bringing in an aggressive strategy in search of deposits from low-income earners.

“The Moutons, as the main drivers behind PSG, have built a company that created wealth for many. Their active involvement in the beginning years to get the Capitec dream off the ground was crucial to our success,” says Le Roux.

Capitec was built on 300 micro-lending branches. It shook up the banking sector with new ideas, like the no-brainer of opening on Sundays.

“The five big banks, prior to Capitec, sat back and they had a nice little oligopoly. Capitec came around and they were allowed to build a great business. By the time the competition realized this is a real player, it was too late. Now Capitec is a serious competitor,” says Piet.

‘A Terrible Time to List A Bank’

PSG has proven time and again that opportunities can be found in the pessimism of others. These are tough times for South Africa, one of Africa’s most developed economies. It has suffered a string of downgrades, political uncertainty and questions about corruption and fiscal mismanagement.

“Everybody is always outwardly focused in South Africa… But it means you can actually operate in a very uncompetitive environment. You would not have been able to start a Capitec in London,” says Piet.

Now technology is also a factor.

“Each and every week, we at PSG level encourage our subsidiaries to look at the changes. It’s a fact of life. From the start [Capitec] was a bit of an IT business but now it’s becoming more and more an IT business. Just look back 10 years; it’s unbelievable how business has changed. I’ve also realized my generation has to step back, because we don’t keep pace with this generation,” says Jannie.

“It’s going to continue changing in the years ahead. It’s a big thing at all the companies at the moment. You have to sit down and look at your business model and say ‘can it be interrupted?’ There are businesses that are just not there, take for example Kodak,” says Piet.

“Now you sit at the Capitec level and you say we mustn’t be caught with our pants down, because there are guys sitting in garages developing FinTech stuff. At least we at Capitec acknowledge – we don’t know where the problem is going to come from, we’ve got to constantly be smart about it,” says Piet.

“There are 150 people working on innovation and it’s costing us R200 million ($15.6 million) a year, to constantly scan and see if we can implement some of this new innovation.”

A recent purchase of an online lender in Poland is a Capitec move toward technology.

“The model is slightly different here. Whereas here in South Africa we are backed by bricks and mortar with 800 branches with a massive 300 ATM network, there it will be an online operation. Michiel coined a great phrase, shortly after I came back from the UK: it was either going to be a small failure or a big success. Now, where a lot of corporates go overseas and make massive acquisitions and then try implement them, Capitec actually tackled a very small business that has the potential to expand and they can contribute capital if it grows… It’s a longer path but it’s a sure way of hitting success at the end of the day. If it’s a failure it’s a small failure,” says Piet.

Another of PSG’s success stories is Chris van der Merwe’s Curro Holdings that develops, acquires and manages private schools in South Africa. What started off as a school of 28 learners in the hall of a church in Durbanville, Cape Town, now has a market cap of $1.4 billion.

“Chris van der Merwe is a unique person. Education and doing something great for the company is his passion. He tells you to your face he doesn’t understand accounts or profits. He is one of the people I admire in life, he isn’t fanatically orientated but he has a big thing about education,” says Jannie.

“Chris was a primary school teacher who knew he was also phenomenal businessman. He built the school himself, with his own hands. He took his early pension, started with 28 kids in a class, now it’s up to 50,000,” says Piet.

In May, Curro Holdings announced it would buy the South African School of Motion Picture Medium and Live Performance (AFDA) – a film, television and live performance higher education institution. Step one of an expansion into the tertiary education system under the soon-to-be JSE-listed company Stadio. In six years, the share price has increased more than 300% to R44.70, with pupil numbers rising 14% to 47,589 in 2016, reports CNBC AFRICA.

“A typical school class has about 45 students. At varsity, a class could be 100, and the fees are even a bit more than school. It could be a fantastic model,” says Jannie.

Outbuffetting Buffett

Asked if this decision had any particular influence from recent education crisis events, like FeesMustFall, the campaign that saw South African universities come to a standstill amid violence over tuition fees, the Moutons were open.

“See, there you have almost hit the nail on the head of investments. Big macro themes, if you can get it right, you shouldn’t be limited to growth. Take the whole education sector as a whole, primary and core, if you can get it right, there is actually a massive scope for growth. You are right about the FeesMustFall, because people are becoming disillusioned [with education].”

Another company Jannie believes could surprise investors is PSG Konsult. With 270 branches and 800 advisors, each branch is its own company, 70%-owned by the individuals who run it – what Jannie calls ultimate empowerment.

“You should attract very good people alongside you and you must make them co-workers inside the business. You must trust them implicitly and give them the space to grow. That has worked significantly for our group, because they act like shareholders and look after the company,” says Piet.

Back in the boardroom, the conversation shifts toward the lighter side of life, something the pair can’t agree on – rugby.

“It’s one of the points we don’t see eye to eye on. Jannie is a Stormers supporter whereas I am a strong Lions supporter. Literally, Saturdays would be a fight to behold.”

Imagine if the idea to invest in the Stormers or Lions was raised in this Stellenbosch boardroom.