Everybody remembers Nick Leeson, the young trader who broke Barings Bank—where the Queen was a customer—but few recall the African connection.
It was the last couple of pages of a report written by the board of banking supervision issued on behalf of the Bank of England, alleged that Leeson had a number of assets in South Africa.
This document was issued six months after the collapse of Barings Bank in 1995, when Leeson lost it GBP 862 million pounds ($1.4 billion) through unauthorized trading.
“I’d never been to South Africa at that stage. The only connection I can draw is that we did have a couple of South African clients that we transacted futures for…but that’s the only South African connection,” says Leeson.
The 46-year-old was in Johannesburg for a few days speaking about risk management, compliance and corporate responsibility laced with his remarkable story.
Barings Bank was the oldest merchant bank in London and had funded the Napoleonic wars. Leeson, the son of a plasterer from Watford, was seen as the whizzkid in the Singapore office.
He made huge profits for the bank and was very successful in speculative trades, but lost his midas touch when he tried to hide losses from bad trades in an error account called 88888. It had been set up to cover up a mistake made by an inexperienced trader. Instead of taking a loss, Leeson played the odds in an attempt to recover money.
It all fell apart when Leeson placed a short straddle—a risky strategy an investor uses when he or she believes that a stock&#8217;s price will not move up or down significantly—on the Nikkei, banking on the exchange remaining stable overnight. Leeson should have been safe in such a position, but the Japanese earthquake on January 17, 1995, in Kobe caused the Nikkei to go into free-fall.
Facing huge losses with Asian markets in panic, he tried to recover the losses with short-term gambles based on the recovery of the Nikkei. Unfortunately, the earthquake dashed these hopes.
Back in London, the Bank of England rejected a bailout days before Barings declared bankruptcy. The Bank almost went bust in the 1890s over investments on Latin American bonds, this time there was no reprieve.
Feeling helpless, Leeson fled the country leaving a scribbled note saying “I’m sorry”. He was arrested in Germany, and nine months later was extradited to Singapore where he was sentenced to more than six years in prison.
Leeson was the only Englishman in a prison full of triad gangs. He was locked up in a tiny cell with two others for 23 three hours a day.
In prison, Leeson was diagnosed with colon cancer and lost weight and most of his hair from chemotherapy. The Singapore authorities were determined not to allow their high profile prisoner to die behind bars and assigned him the doctor of former Singapore president, Lee Kuan Yew. In prison, Leeson wrote his autobiography, while back in London Sir David Frost was producing a film about his life.
“The film came out before I did,” he chuckled.
Writer and director of the film, James Dearden, pretending to be Leeson’s uncle, flew to Singapore to discuss the plans with him, but little passed between the two.
“That’s the only input I had in the movie. It was a standard 15-minute visit. The questions he was asking weren’t specifically about what was going on. It was more like how are you, have you seen your aunt? He only asked a few questions concerning the movie,” says Leeson.
Then Leeson was released after four and a half years on the grounds of his health and good behaviour. He has now recovered fully from cancer and lives in Galway, Ireland with his second wife and three children.
In 2006, he became CEO of Galway United, a professional football club. He resigned in 2011, but remains a shareholder. While working at the football club Leeson published his second book, Back from the Brink, Coping with Stress.
Leeson has tried his hand at online poker and is now a speaker for conferences and dinner’s around the world, getting paid to talk about risk and corporate responsibility—even though he’s the face of catastrophic failure in both fields.
Thirteen years after his release from prison, Leeson was appointed as an alternative insolvency practitioner at GDP Partnership, a financial firm, in Ireland, in April. He is assisting over-indebted borrowers negotiate deals with their banks. Whatever he does in life, he will be labelled with two words—rogue trader.
“When stuff was written in the paper it was always painful to read. Sometimes it still is now. My name is always prefaced with ‘rogue trader’ which is okay, the book is called that. Sometimes you get ‘disgraced banker’ or ‘fraudster’, a couple of those words still anger me, but you kind of have to take it on the chin.”
Leeson took the losses that took him to prison on the chin and maintains that he never profited from his unauthorised trading.

Did Rogue  Trader Millions End Up In Africa?

Robert Friedland was ranked 347 on last year’s FORBES’ ‘400 Richest Americans’ list with his net worth of $1.3 billion. What’s more, Friedland is looking at developing a platinum group metals (pgm) project on the northern limb of the Bushveld Complex—the geological formation, which hosts the world’s greatest known pgm resources.
This investment may be good news for South Africa but some industry watchers may wonder what Friedland has been smoking. Not only are the platinum mines the battleground for the on-going industrial relations confrontations in the mining industry but platinum market and business fundamentals have been hammered.
Further, the platinum-bearing Platreef of the northern limb is geologically very different to those of the western and eastern limbs of the Bushveld Complex, where nearly all the operating platinum mines are situated.
So far, only one mine has been successfully established on the northern limb and that’s Anglo American Platinum’s (Amplats) Mogalakwena open-cast operation. That mine is situated on the highest grade section of the Platreef, on ground that Anglo acquired back in the 1920s.
Friedland’s new company, Ivanplats, which was listed on the Toronto Stock Exchange in October through an initial public offering (IPO) was valued at around C$2.5 billion.
The IPO prospectus noted that: “Two large urban communities and additional smaller communities inhabit portions of the Platreef project… a significant relocation of communities would be required at the company’s expense to enable open-pit mining of the ATS and AMK deposits, which could be prohibitively expensive.”
The prospectus added that certain members of these communities have in the past and may in the future unlawfully and illegally disrupt prospecting or mining operations, as Amplats discovered last year. Further, on instruction from the Department of Mineral Resources (DMR), Ivanplats has agreed to stop making payments under the agreements effective November 1. Ivanplats is currently in negotiations with the community leaders to amend these agreements in accordance with recommendations made by the DMR.
There is a risk of further disruptions from the communities and, while any such disruption would likely be unlawful and entitle the company to seek legal remedies, it may cause delays, which could have a material adverse effect on Ivanplats business, financial condition, results of operations or prospects. Replying to emailed questions, an Ivanplats spokesman tells FORBES AFRICA that the company is now planning an underground mining development and the area of the deposit, that is to be mined, is largely free of development.
“The planned mine would be a highly-mechanized, underground operation accessed through shafts in open ground, designed to have minimal impact on nearby communities.
“Although the Platreef Project still is in the pre-feasibility stage, Ivanplats already has established a presence in communities in the vicinity of its Platreef project through the establishment of community liason offices.”
The Platreef project is one of two big possible developments Ivanplats is considering. The other being the Kamoa Copper Project in the Democratic Republic of Congo (DRC).
Both are at the resource delineation and upgrading stage and there’s no decision yet on which could get the go-ahead first, although the spokesman says that each is being advanced independent of the other.
Regarding the Platreef, the spokesman says Ivanplats plans to apply for a mining right, conduct additional drilling and, subject to approvals, sink an exploration shaft into the deposit this year.
Asked why Ivanplats was investing in South Africa at this point, despite the overwhelmingly negative news flow, the spokesman replied: “The company is very confident of South Africa’s future as one of the continent’s internationally recognized economic leaders… All proposed major new mine developments, by their very nature, must include assessments of longer term outlooks on investment climates and host-nation environments. Ivanplats is not pre-occupied by present views and events, as you term them, for any single nation. There are other, positive, views on opportunities for projected economic and social advances in the future.”
Friedland has made controversial decisions very successfully before, such as with his last venture, Ivanhoe Mines, which developed the huge Oyu Tolgoi Copper Project in Mongolia. That is now controlled by Rio Tinto.
The media shy man is an enigma of sorts. According to his FORBES profile, he attended Reed College in Oregon and studied Sanskrit and Buddhism in India, after graduating with a degree in political science.
This probably accounts for the strange “No comment,” he gave me when I first tried to question him on Ivanplats five years ago at the Cape Town Mining Indaba conference. He inclined his head, made the Indian “Namaste” spiritual greeting sign with his hands and said: “Forgive me but I do not want to talk about it,” before diving into his waiting limousine.
I have heard him speak on several occasions at the Diggers and Dealers Mining conferences in Western Australia as well as at the Mining Indaba.
At his best—such as addressing Diggers and Dealers in the early days of Oyu Tolgoi—he is a spellbinding speaker combining a comprehensive grasp of his subject, with the oratory of a master politician and the conviction of an evangelical preacher.
At his worst—such as the keynote presentation he gave to the Mining Indaba in 2011—he comes across as patronizing, delivering a minimum of information with a maximum of hype and arrogance.
When, on that occasion, I asked him from the floor, why he had given out so little real information his reply was: “I do it to irritate people like you”.
He can also be highly amusing, such as in 2005 when he told Diggers delegates that Ivanhoe faced the ‘Princess Leia’ and ‘Darth Vader’ options in finding a JV partner.
‘Princess Leia’ involved linking up with one of the “better-looking” copper-end users such as Mitsui. While going the ‘Darth Vader’ route meant bringing in a major mining group such as “One of those companies that use letters for their names and want to control the world’s supply”.
He did not have to name Rio Tinto (RTZ); we all got it. But it was at that same conference that another story about Friedland did the rounds, which also drew on a Star Wars analogy.
According to an industry insider, you knew the crucial moment in any negotiation with Friedland had arrived when, “He fixes you with his Jedi mind-$%@* stare”.
Irrespective of how it all works out in the end on the Platreef, this one is going to be interesting and South Africans have a ringside seat for Friedland’s latest venture.

The Spiritual Tycoon  Spies The Prize

Quick! Where is the next investment destination in Africa?
If you follow popular sentiment you’re probably going to say South Africa or Egypt. And if power supply, road networks and telecoms are all you’d go by, you’d probably be right. But consider this  from Beverley Spencer-Obatoyinbo, UK-born head of British American Tobacco (BAT) Nigeria.
<div id="attachment_1532" style="width: 209px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-1532" class="size-medium wp-image-1532" src="/wp-content/uploads/2017/04/Mrs-Beverley-Spencer-Obatoyinbo-Pix-1-1-199x300.jpg" alt="" width="199" height="300" />Mrs Beverley Spencer-Obatoyinbo</div>
“Here in Nigeria there is such massive opportunity for business. There are so many sectors that are completely untapped. If I was working for a different multi-national and I wasn’t working in Nigeria, I would be telling the board that we should be looking at this country, it has massive growth potential and a huge untapped population as well; it should be the gateway for growth in Africa.”
Nigeria’s investment history is littered with success stories and broken dreams. Like cellphone giant MTN, BAT is one of the success stories taking lead of the domestic tobacco market since November 2000. By 2010, BAT held around 70% of the legitimate market.
Airline operator Virgin by contrast, didn’t fly.
“So, why did Virgin get it wrong? I suppose it’s a different market, the average consumer in Nigeria can afford to make a phone call because you can break it down, it’s like breaking down soap powder in a box to a sachet, you can’t break down getting on a plane, it is expensive.”
Spencer-Obatoyinbo has worked in Africa for 15 years and has made her mark on the continent’s big three—South Africa, Egypt and Nigeria. After three years as general manager of BAT, she left Egypt for Nigeria just before the revolution gripped the North African country. Previously, she worked in marketing as a distributer and brand marketer. To succeed in Africa, you need an afrocentric business outlook and to stick to the rules and your values, according to Spencer-Obatoyinbo.
“One of the challenges that we often face, I suppose I would talk specifically about where I am at the moment and a lot of people talk about it, is corruption. You need to stand by your values and not be swayed. I think that is a very important thing for me personally,” she warns.
It’s not uncommon in emerging markets that companies and government officials meet behind the scenes to unlock regulatory obstacles. In 2009 KBR, a former subsidiary of Halliburton Co., settled a Nigerian corruption case for $579 million. However the consequences could be dire.
Tobacco regulation is tough because consumption and exposure to tobacco has been proven to have serious health consequences that could lead to death, diseases and disability. Government wants to reduce Nigeria’s smoking rate, which is estimated at 8.6%, according to the World Health Organization (WHO). While the rate might seem low, Nigeria’s population of 162.5 million means that the number of smokers is large. It is estimated that annual cigarette consumption is more than 90 million units.
While the tobacco companies acknowledge that regulation is part of their business, they have advocated for regulation that is balanced and is based on evidence.
“Our main position as BAT Global is that along the way when regulations and laws are made, we would like our voice to be heard because often the laws and regulations are made in isolation of the industry,” says Spencer-Obatoyinbo.
Despite the shortcomings of the tobacco industry, its failure could be a major blow to the fledging Nigerian industrial sector. The industry is a major source of excise duty and employment.
BAT’s business health, buttressed by cost-efficient productivity, is still intact and there are no signs of failure.
“Productivity is a core pillar of the business. Here we have specific challenges because our cost of manufacturing is higher than it would be in other countries so we will be looking for all sorts of ways to be more cost effective. However, there are certain things that we would not compromise on…”
“Our productivity gains is another area. At the factory we are constantly looking for new ways to evolve the way we manufacture, there are also all sorts of productivity gains that we make by reducing our waste. We look at the ways we work with our farmers for example, so that we get better yield on local crops, and there are also little things we do internally with the team, talking about less waste and trying to move slightly towards the green environment, which is difficult when you are running a generator,” she says.
Spencer-Obatoyinbo says there’s more to do. Right now for her it’s about sustaining BAT Nigeria’s success from the last 10 years and to look for new opportunities in West Africa. She admits that it is not going to be easy task considering the insecurity challenges that befell Nigeria and Mali. But Nigeria is where it’s at and she’s pretty sure of that.

Nigeria,  The Place To Be?

“When sailing a boat or driving a bus, I don’t want to be in the passenger seat, I want to drive.” These are the words of former MXit CEO, Alan Knott-Craig Junior, who stepped down on October 19. He and the shareholders knew where they wanted to take MXit, but didn’t agree on how to get there.
In 2013, instead of sitting in the boardroom, Knott-Craig won’t be driving a bus but a motorhome, contemplating his future. He bought MXit in October 2011 through his company, World of Avatar, and announced his resignation in October 2012; in the same breath MXit announced a R100 million ($11.4 million) investment.
The word is that Knott-Craig clashed with shareholders and FirstRand heavyweights Paul Harris and GT Ferreira.
Knott-Craig sold the shares in World of Avatar, which bought MXit from its founder Herman Heunis; who in turn sold all his MXit shares to World of Avatar and is now on sabbatical photographing wildlife in Botswana.
Knott-Craig will also be taking time out to reflect on his decisions and traveling.
“They bought me out, it was quite emotional. In retrospect it was a long time coming,” he says.
Duncan McLeod, tech columnist, founder and editor of TechCentral says it appears the disagreement was largely between Knott-Craig and Paul Harris. He also said that Knott-Craig’s management style, which included not taking minutes; allowing staff to wear baggy pants and having an unstructured approach, was appreciated by his employees, especially at iBurst.
“It depends on who takes over MXit. They’re facing fierce competition [from] BBM and WhatsApp as the market moves to smartphones,” says Mcleod.
Knott-Craig believes his former business will prosper.
“It’s got a lot of money invested in it. It makes a lot of money. It’s got a lot of employees; a lot of users and that’s the ecosystem. It’s not going anywhere anytime soon; it’s on the right track. My [former] co-shareholders are not fools, they wouldn’t be investing in this thing unless they thought we had a chance. So it’s quite exciting,” says Knott-Craig.
For now, Knott-Craig is off on holiday for six months; he’ll travel the States with his wife and two children in a Winnebago mobile home. He will have plenty of time to consider his future on the open road. When he gets back he wants to study South African history, maybe he would do well to study South African boardroom politics as well.

Knott Mixing It Anymore

The year was 1994. South Africa’s political climate was changing; a new president promised democracy and opportunities for all. For Romeo Makhubela life was just beginning. After years of teaching, he decided to register at business school. He put down the chalk and left the classroom, and today he is the CEO of a 100 percent black-owned investment company, a world away from high school teaching.
This epiphany turned him into one of the country’s emerging financial services providers. The reason Makhubela was in the classroom in the first place was no surprise. For most black South Africans at the time, that was the highest you could reach. You could either be a policeman, nurse or teacher.
It wasn’t that he didn’t like teaching. He had studied for a Bachelor of Commerce degree and topped it with a teaching diploma, which led him to become a commerce teacher for final year students, in the North West province of South Africa.
“The most exciting part as a teacher, especially a high school teacher, is when the [matric] results come out, and you realize that the investment that you made [has paid off]. I remember one year ‘I’ had a lot of distinctions and for me that was so fulfilling because you could see people going to university, some are now working and you know that you were part of that product,” says Makhubela.
“I started teaching in 1990… Around 1992 or ’93 I started noticing that a change was coming in South Africa and clearly businesses would start transforming and there would be huge opportunities, especially for people who had a Bachelor of Commerce qualifications,” says Makhubela.
It was never easy, amid the political turmoil of his country. During his university studies, Makhubela was also politically active.
“I matriculated in 1983. Things were quite tough at that stage; I think the upheavals were starting… It was terrible in those days and I had [to take] a break in ’84, then in ’85 I started doing my Bachelor of Commerce degree ’till around ’88. There was one year where we didn’t write exams because of the [political] problems.”
“Politics then was something that you just couldn’t avoid because there were a lot of injustices in this country… Especially at [university] because you started seeing the world and seeing that certain things weren’t correct… The way some lecturers conducted themselves, I can tell you one example; [In our first year] the one [lecturer]… just came and said ‘Look this is such a big class, I’m not used to teaching [so many people] and I can assure you that in third year 80 to 90% [of you] will be gone’. And you sit down and say ‘How could you make such a statement?’.”
Today, he is no longer in politics; he sits at the head of Vunani Limited. The eight-year-old company was launched in 2004 following a management buyout from African Harvest. In 2007, the company listed on the JSE AltX Exchange raising R175 million ($21.4 million). They currently have offices in Johannesburg and Cape Town, in South Africa and Harare, Zimbabwe.
He worked his way to the top, starting out at an insurance company as a graduate trainee, then he became a financial analyst for an asset management company and after around six years in the asset management field, he was recruited as chief investment officer for a life insurance company. And now he is heading Vunani Limited, an emerging company that wants to leave its mark as South Africa’s leading black-owned financial services provider. Vunani Limited is listed on the JSEAltX; it is currently listed 19th in the financial services sector, with R204.5 million ($24.96 million) of market capitalization. The company has a diverse portfolio, which consists of Vunani Fund Managers; Vunani Capital; Vunani Technology Ventures; Vunani Securities; Vunani Capital Markets and Vunani Properties. Now it is going up against the best in the financial services industry and is forging its own way. One challenge they, like many other companies, are facing is growing the industry.
Makhubela’s focus now is on getting his countrymen to start putting away more for a rainy day.
“One of the biggest gripes about South Africa is that if you look at our saving ratio, it’s quite low and clearly that tells to the culture or the environment from which people [come from]. My sense is that, maybe in the white culture it’s much better because at least that kind of information was instilled but in the broader black community… the kind of savings that you generally see within [them] would be pension funds, which is forced, because when you work you get your pension fund automatically.”
Last year, South Africa’s minister of finance, Pravin Gordhan, said that South Africa’s savings rate was low and that it “needed to increase its saving rate if it were to become the ‘China of Africa’”.
Makhubela agrees.
“Savings are critical… look at the Chinese for example. The savings rate there is extremely high—but you could argue that it’s influenced by a number of facts because they don’t have a proper social system… But that helps because if you look at the global crisis we are experiencing now… the Chinese have played an important role in terms of lessening the impact of the global crisis because of their savings.”
According to The South African Savings Institute (SASI), South Africa is the lowest ranking member of BRICS when it comes to saving.
“The International Monetary Fund (IMF) statistics show that since 2001, compared with its BRICS counterparts, SA’s rate of national savings has remained flat… In China, gross savings are over 50% of GDP, in Russia 30% and Brazil over 18%. In South Africa that figure is about 16.5%… It’s 72nd in the world behind Algeria (3rd), Morocco (25th), Nigeria (27th), Zambia (32nd), Namibia (34th), Botswana (42nd) and Lesotho (62nd)”.
The poor argue that saving is the last thing on your mind when you are living from hand-to-mouth, while the middle class chooses to splash out, so where does that leave the future of the fund management industry?
Makhubela says that when the rate of unemployment decreases, and more people start earning and being forced to save, then the tide will change. But while there is no growth in savings right now, Makhubela and his team are looking beyond borders, with Zimbabwe under their belt, they are also currently setting up in Namibia.
From marking exam papers to signing off millions, Makhubela is trying to teach one of the greatest lessons in life—how to save even when it hurts.

Trading The Classroom For The Boardroom

At the end of April on a typically blustery Western Cape autumn day, a sleek private airplane glided into an airfield near the capital of South Africa’s fruit industry. Ceres doesn’t often play host to such finery and at the airfield’s perimeter fence, a huddle of children watched excitedly as the aircraft came to a halt and its door opened.
A small group of men emerged and the children seemed slightly disappointed.
They looked quite ordinary—and outwardly that was certainly the case—just a few friends on a weekend junket.
At their head was a man who shuns such attention; someone who has thrown off the shackles of a life in auditing; a man responsible for one-in-four of the private prescriptions being written at corner pharmacies and one-in-five in the public sector.
Stephen Saad is the chief executive and founder of a South African phenomenon—a pharmaceutical company that is the biggest in the southern hemisphere. It has found favor with American presidents. It has also defied the odds and based its manufacturing in a country dogged by the negative influence of a persistently strong currency; a lack of investment in infrastructure; poor skills and an attitude that has generally embraced these problems.
Saad is a multi-billionaire in rand terms and worth at least $650 million, according to Forbes, but his appearance in a private airplane, in a relatively remote rural region, is a world away from the allure and shimmer of wealth. He flew in for several hours of sweat and hard graft; a 240km cycle race to raise awareness of a condition that killed the 28-year-old son of his chairwoman and friend. The reason for the private jet? Saad assures us it is merely to save time so that he spends as little time away from what he calls his ‘big five’; his wife and four daughters.
I first met Saad in Monaco in 2004. Despite his modesty, I look back at that meeting and realize that he could easily have slotted into the glitz and glamor of the French Riviera. He was youthful in appearance and had a drive and ambition that laced every conversation.
We were at the World Entrepreneur Of The Year Awards. Saad represented South Africa having beaten off stiff opposition from stalwarts of the old guard of South African business. When the final votes were counted, an American pipped Saad at the post. The word on the night was that tactical voting had denied him the title that many believed was his.
Saad was visibly rattled. Being second in a global competition of such prestige would, for most entrepreneurs, be an accolade of which to be enormously proud.
Not he on that night.
Whether it was the nature of the defeat, with the whispers of voting to appease sponsors, or the disappointment of being second best that irked him, I’ve never quite worked out.
The disappointment in Monaco was merely one leg of a long journey. Saad graduated from the University of KwaZulu-Natal in South Africa as a chartered accountant in 1986. He joined Coopers and Lybrand as an article clerk.
“My father wanted me to extend the 30 years of family tradition by joining his practice but I knew, I absolutely knew, that there was no way that was going to happen. I couldn’t do it. One of the partners at the time recognized this and privately told me that in this industry he could see I was like a bird with its wings clipped.”
During this time, Saad was seconded to a small company that specialized in pharmaceutical wholesaling. The owner was impressed enough to offer Saad a job, which he accepted. Little did either of them know that this offer from an underperforming small business would launch the career of one of Africa’s great entrepreneurs and spawn a global pharmaceutical giant.
“We sold to markets and to people that other companies ignored. It was an eye-opener. Not many whites had ever been to a township let alone done business there. But this was where the huge potential was. I was a rep in the townships and I learnt a lot of life lessons in those days. My future thinking was modeled in those early days.”
Saad’s experiences at the grassroots of the pharmaceutical industry proved invaluable. It forged within him a philosophy that holds true in the doctors’ rooms of a remote township, as well as in the boardrooms; people don’t want to compromise when it comes to their health, but at the same time the price of medicine is crucial.
When interviewing Saad, the first few minutes are uncomfortable. He is clearly suspicious of a stranger probing his thoughts, but as the conversation progresses and the line of questioning moves to subjects that are of interest to him, with which he is comfortable, there is very little that can stop him from extolling the world according to Saad.
“When I was a rep I’ll never forget being in the surgery [rooms] of a township doctor and presenting him with two products; one was in fancy packaging and the other in a rather plain brown box. I suggested that he could give the first to his medical aid patient and the other to his cash customer, after all they were essentially the same and were based on the same active ingredient. He looked me in the eye and told me that a patient is sick no matter what his or her status, and that he wouldn’t treat them differently. He’d made his point, and I wouldn’t forget that.”
Saad became a 50% shareholder of his employer, QuickMed, and convinced the owners that the ownership of intellectual property was the only way to, not only grow the business, but to save it. He then set about employing the spirit of entrepreneurship that was to become a hallmark of everything he’s done since.
One of the early moves was to persuade Covan, a small, family-run business that manufactured eye drops, to merge with QuickMed to form a new entity named Zurich.
Zurich flourished in the early 1990s, as Saad threw himself into the business. Turnover doubled and suddenly the company was the focus of the attention of larger companies. Prempharm (today Adcock Ingram) couldn’t resist dominating the upstart and bought Zurich for R75 million ($9.1 million) in 1993.
With the purchase price came a restraint of trade on Saad. He wasn’t too worried at the time, with R20 million ($2.4 million) in his back pocket at the age of 29 and thoughts of early retirement, this technicality was a small price to pay. It was a time for reflection and planning.
Saad’s passion for the pharmaceutical industry was apparent, but education was also close to his heart. Varsity College was a private tertiary education institution that was managed poorly and under threat of closure. The idea of the college as a business opportunity was offered to Saad and his partner from QuickMed, Gus Attridge.
For a nominal sum they acquired the business. They set about restructuring the top-heavy overhead base, removing the founders and offering incentives to learners through aggressive advertising campaigns, not normally associated with the business of education. Potential students were offered a money-back guarantee should they not pass their exams, provided they attended a full program of lectures. The business began to thrive.
The business had cost just R1.5 million ($182,500), Saad sold it to LeisureNet for around R100 million ($12.1 million) at a time when education stocks on the Johannesburg Stock Exchange (JSE) were attracting significant premiums to the overall market. He had again turned a company riddled with inefficiencies into a success.
In 1997, as a wealthy young man, Saad teamed up with Attridge and Steve Sturlese to form Aspen Healthcare (Pty) Ltd.
“When I look back at the early days of Aspen my philosophy was based on the experiences gained during my days as a rep and partner at QuickMed. In those days, I’d asked whether the business was about moving boxes or owning intellectual property. It was so obvious that there was a market out there that was hungry for high quality but affordable products and that needed representation. Although this knowledge had been acquired through the little sphere of doctors that I serviced, I was convinced it could be applied on a bigger platform—even globally.”
During its first year of trading, Aspen recorded revenue of R105 million ($12.8 million). The philosophy was clear from the start: buy licenses from large multi-nationals for their non-core brands. These products were important in the life of the new company selling to a new market. It was a two-way street, the people were ready to buy pills they had never been offered before, the big players were happy to off-load them.
Aspen began to own intellectual property, such as patents, trademarks and pharmaceutical dossiers, without having the expensive overhead of manufacturing and its complications.
The management realized very quickly that they had a winning formula, but their ambitions were such that there was a real danger of being restricted by insufficient capital.
To rectify this, and make way for the grand plan, Aspen targeted Medhold Medical Ltd, a small company on the Johannesburg Stock Exchange. Aspen concluded a reverse takeover of the business and thus became a public company. Records show that at the end of June 1998, Aspen’s annual turnover was just under R119 million ($14.4 million).
A year later, it was more than R522 million ($63.5 million) and the investment community was taking notice. The company’s stock was moving.
Then the audacious deal, that defined the Aspen approach to business, was unveiled. SA Druggists (SAD) had been the object of desire of Adcock Ingram but the deal had fallen through. Despite the mismatch in terms of size, Saad went to his financiers with his plan to purchase SAD for the princely sum of R2.4 billion ($292.2 million). Fedsure was SAD’s largest shareholder at the time and would keep the insurance and manage the healthcare part of the business. Aspen kept the pharmaceutical business once all the transactions were rubber stamped, Aspen realized approximately R1 billion ($121.8 million) from the divestments.
The financiers had backed the upstart Aspen, but there was institutional investor reticence to the deal which seemed to defy conventional business logic. Aspen’s bank asked that shares in Aspen be discounted, but this was not an option for Saad and so the company was saddled with R1 billion of debt with an operating profit of around R123 million ($14.9 million).
Since the SAD deal, the story of Aspen has been one of extraordinary growth. Strategic agreements have been a key part of the growth story, not least the link with GlaxoSmithKline (GSK) in 2003, that allowed Aspen to market and distribute 40 branded products into the South African private sector.
Although the company’s phenomenal success has been based on its South African business, its ability to penetrate further afield, often a graveyard for others, has distinguished Aspen as a global pharmaceutical concern with which to be reckoned.
The Clinton Foundation chose Aspen as the first southern hemisphere-based company to provide generic anti-retrovirals (ARVs) for the United States’ government, while that country’s Federal Drug Administration pre-qualified the company for the provision of generic ARVs, funded by President Bush’s emergency plan for AIDS relief.
In 2005, Aspen secured the majority of the South African government’s ARV tender with an allocation of close to 60% of volume. At the same time, results showed that Saad’s company had generated an annual turnover of more than R2.8 billion ($336.5 million).
As the relationship with GSK became closer, and with an aggressive acquisition policy Aspen became truly global by expanding its footprint into the Asia Pacific region and into Latin America through an investment with Strides Arcolab Limited. In 2010, Australia was conquered with the massive R6.1 billion ($738.2 million) acquisition of Sigma Ltd pharmaceutical business.
I put it to Saad that perhaps the rapid expansion into so many new territories and jurisdictions would stretch the resources of a still relatively new player with a CEO who prefers not to travel too far from his home in Durban.
“I have a video conferencing facility,” he replied rather drily.
But there is clearly more to international success than the ability to talk to Rio de Janeiro and Sydney without leaving the boardroom.
“Most of my guys, the ones I’m in business with, have had start-ups and they understand my philosophy, the Aspen way of doing things. There’s no universal strategy, but on certain points there is no negotiation.”
This is where the media-shy CEO billionaire starts to become animated and I realized that to work under him is not for the faint of heart.
“I decided to bring all our people together from all our offices, from all over the world. So of course I chose Umhlanga Rocks for our conference! I stood in front of this group and told them that certain things were not negotiable. They must have passion for the business, and then people will follow them. At the same time, I told them it was essential to have humility and compassion, and that there was absolutely no negotiation when it comes to delivery. In business, you get leaders and you get managers, and there’s a very subtle distinction between the two. I want leaders, leaders are inspirational.”
Saad demands a lot of his people and clearly recognizes that as head of the company, as its inspirational leader, his behavior and his standards can never drop if his demands are to be adopted. When asked about his ability to maintain such a punishing pace, his stock response is “to rest is to rust”.
The choice of Umhlanga speaks volumes of the company’s grounding and of its CEO’s recognition of the importance of the South African part of the business. Again, the animation, even over the telephone, is palpable.
“We were told that we were mad to manufacture in South Africa. Some analyst asked me if I was doing this for my own ego. I pointed out as politely as I could that I was a shareholder and that it was the right thing to do. Today, I’m so proud to be able to have proved the doomsayers wrong. Today the billions [of rands] we invested in the Eastern Cape have produced one of the most competitive facilities in the world that sends products of incredible quality to over 100 countries. It’s up there with the very best.”
Saad is indeed a remarkable character.
On the one hand, there is a man that is driven by the old-fashioned values of integrity, hard work, passion, and one that has learned the traditional way of doing business. On the other, is a new-age thinker, one that recognizes that big business is built on layers of bureaucracy and structures but will not allow those structures to be an excuse for any of his team shirking a decision.
“At Aspen I will not tolerate a ‘cover-your-arse’ mentality,” he says with a hint of steely menace.
On the one hand there’s a CEO who is bursting with optimism for Africa and South Africa—who compares the high suicide rates of northern Europeans, who seemingly have everything, to those of the naturally optimistic African people who, in relative terms, have little; on the other, he is a sad South African who shakes his head and whose voice drops to a whisper when he tells of the union which has been enriched by Aspen shares at R6 ($0.7) (they are now R120—$14) and yet forgets the past when it comes to the negotiating table.
I wonder, when I hear him say he’d rather back a good leader in a bad industry than a bad one in an industry that’s thriving, if he might be in his own diplomatic way (and in the presence of a journalist) having a dig at South Africa’s government. I decide not to ask.
In March, Aspen’s interim results included the following highlights:
<ul>
<li>Revenue from continuing operations R7.5 billion ($903 million)</li>
<li>Operating profit R2 billion ($24 million)</li>
<li>Market capitalization R50 billion ($6 billion)</li>
</ul>
When I talk of money the enthusiasm for the interview starts to wane and there’s mutterings of most entrepreneurs that he knows not being in it for the money alone, which I believe, up to a point.
When I talk of personal goals and the future, his interest is revived.
“I still have lots of achievements that I need to focus on. It’s so frustrating living in a country where there’s great thought and great theory, great principles, but so little action. Maybe it’s my personality type but I just want people to stop thinking about it and just do it. If I was like that I’d never have gone into Brazil.”
At the end of April, Stephen Saad and the health minister, Dr Aaron Motsoaledi, started the gruelling 240km Aspen Trans Karoo mountain bike challenge to raise funds for paediatric healthcare facilities through the Sifiso Nxasana Paediatric Trust.
“The children of Africa need the support of large organizations” were his simple words.
Saad completed the race, and when he arrived at the finish line in Sutherland his airplane was  waiting to take him home to his own children.

The Golden Wings That Couldn’t Be Clipped

How times have changed. When I covered my first African Development Bank annual meeting nearly 20 years ago, development conversation was often dominated by apartheid—how the last bastion of white rule was impeding the progress of the continent.
Dominant, too, were the other issues frustrating African progress: political instability in the west and east; soldiers in power; corruption; poor governance; poverty etc. Back then aid flows were certainly bigger than foreign direct investment; fewer countries boasted positive real growth rates, let alone expansion at near double digits; elections were at a premium and even rarer—peaceful change in government. It was so dark that five years later The Economist magazine weighed in with its now infamous ‘Hopeless Africa’ moniker.
Now, not only do opposition parties assume power from a ruling party like they did in Zambia last year but you can count on your two hands, the number of countries where democratic elections have become the norm. According to The Economist, all but Mauritius peacefully changed a government or president at the ballot box in the three decades since independence in the 1960s. However, once Benin set the trend in 1991, it has happened more than 30 times.
“We are here to tell the world: African investment opportunities are the ‘low hanging fruit’, part of the solution to today’s global problems,” said Donald Kaberuka, the head of the African Development Bank, at the opening ceremony of the 2012 meetings.
Global consultancy McKinsey &amp; Company in its much lauded Lions on the Move research says 27 of the continent’s 30 biggest economies have been expanding at a faster pace since 2000. These days, The Economist says that between 2010 and 2011, seven of the world’s 10 fastest growing economies were African.
The reforms of the 1990s—the same ones The Economist didn’t see—are beginning to pay off. To be fair they did change tune—in December 2011, that headline had changed to ‘The Hopeful Continent’. The reforms bore fruit at a most opportune time with the rise of the dragons in the east—China and India—happening at the same time that Europe began to decline. All this, illuminated Africa’s investment credentials.
“I have no doubt in my mind that Africa is poised to become the world’s new economic powerhouse for the 21st century,” says Tanzanian president, Jakaya Kikwete. “With its endowment in both natural and human resources, the pursuit of sound economic policies, and with democracy, good governance, respect for the rule of law and human rights being entrenched, nothing will stop Africa from getting there.’’
The 2012 meetings demonstrated just how far Africa has come. It was hosted by Tanzania’s tourism capital, Arusha, at the foot of Mount Kilimanjaro. The theme was taking advantage of the here and now; ‘Africa and the Emerging Global Landscape:
Challenges and Opportunities’. Over five days, seminars, bilateral discussions and workshops discussed everything from the lessons learnt from civil wars, droughts and food security to good financial governance. Here was the evidence, if any more was needed, that Africa’s time has come. The bank’s financials themselves tell the story. While the bank was near collapse in 1995, the AfDB’s financial health is now strong. It remains Africa’s sole AAA-rated institution by all three global rating agencies—meaning it can borrow at lower costs than France, Spain and Portugal.
Last year it approved $5.66 billion in loans, grants and equity investments etc., up 42% from the prior year. But the bank’s value cannot be measured in the money it lends alone. It is an important player in building African institutional capacity and technical capacity which plays a role in fragile states and is also helping the continent to achieve food security. In short, the mandate has moved beyond the original focus on infrastructure envisaged by its founding fathers in 1963.
But caution remains a watchword for Kaberuka, who is now serving his second and last term.
“There are heavy dark clouds on the horizon—the lagged effects of the recession in Europe, the uncertainty about how the BRICs will fare in 2012, and hence the implication for investment flows and demand for our exports. Also, in 2008 when the financial crisis was at its apex, Africa was in a much stronger position to withstand the external shocks. This time round, the resilience is not as robust, the shock absorbers, the fiscal space is weaker,” says Kaberuka.
However, with projections of a near doubling of the continent’s combined GDP to $2.6 trillion by 2020, with consumer spending forecast to increase by 62% to $1.4 trillion over the same period, in key sectors like consumer products, construction, telecoms, financial services and mining; it’s hard to temper optimism that the diamond in the rough may be ready to shine.
“While Africa’s challenges are well-documented, there is an increasing recognition that the continent is on an upward trajectory; economically, politically and socially,” says Ernst &amp; Young in its 2011 Africa attractiveness survey.
From hopeless to hopeful, I wonder what The Economist’s headline will be a decade from now?

From Hopeless To Hopeful

When you think about entrepreneurs, most would think of stocks and successful initial public offerings (IPOs). However when building and growing companies, access to debt finance is even more important.
Historically, most African economies have relied on bank financing, and to a lesser extent, on the equity markets, to fund investments. Except for countries like South Africa and Nigeria, corporate bonds are almost unheard of in the region.
But bonds and bond markets are as important, if not more so, than stock markets, for the efficient allocation of a nation’s resources. In major economies, it is not uncommon for bond markets to be substantially larger than equity markets. But that’s not always the case in Africa.
Today, about half of sub-Saharan African governments have recognized credit ratings.
The bad news is that many African governments borrow little from outside sources. This, in turn, means a limited amount of government debt is available for trading on secondary markets. Don’t go looking for a deep and liquid secondary market for African debt. For businesses trying to issue bonds, this is a problem because a government-bond market is such that it sets interest rate benchmarks for corporate bonds. This is why some countries issue sovereign bonds to replace maturing ones—even when the funds aren’t needed—to maintain benchmarks across the yield curve.
Yet, to have a corporate bond market, companies need to issue bonds. In many African countries, companies have traditionally relied on bank loan financing; international donor financing and in recent years financing from the Chinese.
It will take some persuasion to change that. Today, even if a corporate bond option existed, African companies would still head for the bank or ask its friends in Beijing for money.
Why? In short: cheap money. Companies can borrow at low, government-determined interest rates, irrespective of the risk of the loans. The risk is assumed by the government, which must periodically bail out banks by taking over their non-performing loans. Companies are further encouraged to seek bank financing as state-controlled banks almost always automatically roll over maturing loans at low rates. This is of course a classic case of moral hazard. Costs and risks are absorbed by state-owned banks, which ultimately pass them on to the government.
All of the above makes a convincing argument for the development of an African corporate bond market. Such a market would serve several functions: first, it would enable companies to raise funds even if they are not favored customers of the banks. Africa has some of the world’s most entrepreneurial economies but entrepreneurs aren’t usually well-connected. So, even as new companies are constantly being established, and many have succeeded and created jobs, they tend to be, and stay, small because they lack access to funding for further growth. A corporate bond market could remove this constraint and enable Africa to create more world-class companies and, even more importantly, jobs for tens of millions of people.
Secondly, it allows for fewer systemic risks. Typically, bank loans are of short to medium-term, and therefore need to be rolled over to cover the life of the project funded. This lends an air of uncertainty to business planning. Worse still, loans can be called in before schedule, leaving companies in dire financial predicaments.
Recourse to bond financing would eliminate any mismatch between the lifetime of assets and the duration of liabilities.
Thirdly, as the number of African pension funds, social security funds and insurance funds proliferate, bond markets are key to ensuring that these funds can match their future payment obligations with assured future income. Without a long-term bond market, such funds, increasingly important to Africa, will be at risk.
A well-regulated corporate bond market open to private companies can fund the jobs Africa needs for social stability. Together, government and corporate bond markets can stabilize Africa’s financial landscape by properly matching assets to liabilities and at the same time provide risk capital to entrepreneurs who build businesses, employ people and create economic growth.
Developing African bond markets will unlock Africa’s huge medium-term growth potential.

Why Africa Needs A Bond Market

Last month, I read two articles which I thoroughly enjoyed. Funnily enough they were both related to the renowned US investment bank Goldman Sachs. The first was the in the New York Times on the much publicized resignation of South African-born Greg Smith. Such was the sting of the piece on the day that it wiped out a whopping $2 billion off the company’s stock valuation. The second article was in the South African Mail &amp; Guardian, where Goldman Sachs Asset Management chairman, Jim O’Neill, shared his views on South Africa’s BRICS membership and Africa as an investment destination. As Smith’s public resignation prompted a global reaction, I focus here on Jim O’Neill and his views on Africa.
My source of enjoyment, as wrong as it may sound, came from O’Neill’s candid assessment of Africa and why investors are reluctant to pour capital into the continent. As O’Neill puts it—investors are intrigued by the continent but, at the same time, are scared of it. He identified key issues that investors find a concern, which in turn keeps them at bay—some of these issues I have raised in this column as impediments to Africa’s development. Some might call me an unpatriotic son of the continent—so be it. I believe that it is important to bring these issues to the fore in order to address them and to ensure that Africa achieves economic freedom in our life time, to borrow from South Africa’s African National Congress Youth League (ANCYL).
To summarize the article, O’Neill, vis-à-vis Goldman Sachs Asset Management, is bearish on South Africa and Africa as whole. I must admit I was taken aback by this view, given all the focus on Africa at the moment. Africa is set to be the second-fastest growing region behind Asia driven by a commodity boom, a rapidly growing consumer base and prudent macroeconomic policies. Furthermore, investors are scouring for yield in emerging markets in light of poor returns on offer in developed markets.
What was most interesting was O’Neill’s assessment of South Africa. He accused South Africa of having a sense of entitlement and of being “talkers and not doers”. This was not the first time I had heard this and unfortunately I have come to concur. However South Africa is not alone in this regard. The rest of Africa unfortunately suffers from this curse.
Given the continent’s colonial history I get the impression that we feel a sense of entitlement from our colonizers. This is not in any way to say that colonization was right, or to undermine the ills inflicted on the continent through colonization. It is quite the opposite. It is to say: we have been dealt the cards we have been dealt, but now that we have freedom, how do we take our destiny into our own hands and uplift the lives of our people.
This philosophy is widely recognized in motivational literature. In my view, there is no reason why this philosophy cannot be applied at community, state, national and regional levels. Playing the victim does not help anyone, let alone alleviate poverty. If anything self-victimization only hinders our development and keeps the continent from its rightful place in the global economy.
Once leaders and politicians drop this mentality, we can then address Africa’s pressing issues. These issues include: political instability, corruption, unemployment, poor education among others. Only when a resolution is reached will the likes of Goldman Sachs Asset Management change their view of the continent being a risky investment destination.
In my humble opinion, Africa will continue to attract only a fraction of readily available capital looking for a home. The continent needs to ensure political stability, root out corruption, respect the rule of law and invest in social and economic infrastructure. Unless tackled head on by African governments, investors will continue being intrigued—but scared.

Intriguing, But Scary

With six months to go before South Africa’s governing party, the African National Congress (ANC), goes to its elective conference, incumbent president Jacob Zuma looks set to get another term. And with that, a renewed focus on continental politics, for which his critics have chided him.
Zuma’s opponent, Julius Malema, the party’s rebellious youth league president, is not contesting the ANC presidency but is the spokesperson of a disparate group united in wanting the 70-year-old former political prisoner and intelligence operative removed from power. Their campaign though, has been dealt a huge blow.
Malema is facing several disciplinary charges and the party’s internal disciplinary committee has found him guilty on some, meaning that whatever the outcome, the young man looks set for the political rubbish dump. Unless a worthy challenger emerges between now and the December conference and goes on to defeat Zuma, he is set to remain at the helm of the 100-year-old political party and the head of Africa’s most powerful economy.
Among Malema’s most stinging criticisms of Zuma’s reign was that he had failed spectacularly where his predecessor Thabo Mbeki had done extremely well—in pursuing the African agenda. It was a criticism, and a comparison, that hurt Zuma and one that he has since looked eager to correct.
So, on March 20, when Zuma walked into the Sandton studios of pan-African television channel CNBC Africa for a live hour-long interview, with some of the continent’s CEOs and board chairpersons in the audience, he knew he had a mission to accomplish, or as his aides would have probably preferred to put it, he had a myth or two to debunk.
Sitting opposite CNBC Africa’s chief editor Godfrey Mutizwa, and occasionally fielding questions during crossings to CEOs in countries like Nigeria and Kenya, Zuma showed composure for someone who has countenanced perhaps harsher criticism than any post-apartheid president.
While some of the condemnation prior to his election had a lot to do with his indiscretions, which in turn led to sexual assault charges against him, others were in subtle ways questioning whether a man with only a primary-school education, would be able to fill the shoes of his Sussex-educated predecessor and intellectual, Mbeki. Was he best suited to preside over an ambitious country that not only likes to punch above its weight, and which likes to be loved, but is also the most sophisticated African economy?
The more Zuma sold his optimistic disposition of the continent to the CNBC viewers and the studio audience, the more friends he seemed to be making among the attendant captains of industry, many of whom wasted no time in praising him for his “insightful comments” and for “answering questions”.
One of the continent’s biggest “strides”, he said, was the formation of the African Union. “For the first time, we could define ourselves as one, as Africans and not as former British, Belgian, French colonies.”
The AU has been credited with bringing about continental political stability through promoting the culture of democratic elections as well as the principle of non-recognition of people who grab political power through coups d’état.
Zuma shared with his audience how the AU had advanced in getting member states to commit to investor friendliness, infrastructure development, better and responsible management of natural resources, environmental sustainability, education, and had now started talks about the integration of the continent’s five regional economic blocks. Asked to give timelines for the “practical implication” of the integration process, he replied: “It took two world wars before Europe could come together. Africa should be given a chance.”
A welcome sign of confidence in Africa’s future, Zuma added, was the inclusion of South Africa in BRICS, the increasingly influential group of emerging economies: Brazil, Russia, India and China. “Africa is now part of countries that are going to determine (the world’s economic) direction,” he said.
“I don’t see a crisis. I see prosperity in Africa,” he told the audience, and with a great deal of satisfaction, not to mention his trademark coy chuckle that usually signals cynicism. “Other people speak positively about Africa. Sometimes it’s Africans themselves who are negative; who feel Africa is in trouble.”

David Attacks Goliath

The South African Reserve Bank (SARB) has admitted that not all required quality criteria were met in the production of krugerrands by the South African Mint—which is wholly owned by SARB.
Tests on certified krugerrands have been carried out in the presence of FORBES AFRICA journalists. The results show that some contain less than the required amount of gold. The highly-valued collector’s items make up an industry worth billions of dollars. Depending on the gold price a one ounce, proof krugerrand is worth around $2,000.
<div id="attachment_613" style="width: 484px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-613" class="size-large wp-image-613" src="/wp-content/uploads/2017/04/IMG_2917-1024x683.jpg" alt="" width="474" height="316" />Patrick Willis</div>
Patrick Willis, a South African gold investor of 12 years, is behind the claim. He noticed that a number of his krugerrands were losing their lustre—often a sign of too much copper and zinc. These are base metals used to strengthen the gold and decrease wear and tear.
“The issue is that they are under spec. I made the discovery about the colour. It has not happened anywhere in the world, where a national mint produced coins for sale that are under spec,” said Willis.
Tests on several krugerrands found that some were “under specification”—as they say in the trade. By law each krugerrand has to contain at least 91.7% gold. This measure is so important that international gold mints often include a small amount of ‘extra’ gold to ensure they reach the stipulated requirement. A gold assay test proved that one of the coins in question had merely 87% gold. That is nearly 5% less than it should be.
“If I see such a result, I will panic. I’m not pointing any fingers. This is quite anomalous [referring to the 87% result]. I’ve never seen something like that on a coin before. It cannot be explained by sample prep [the margin is too large]. That is a big red flag right there,” says Jaco le Roux.
He is an employee of Spectromed—a company which sells and conducts tests using Niton XRF analyzer guns—who tested multiple krugerrands using the Niton analyzer in front of FORBES AFRICA journalists to verify the results.
The disgruntled krugerrand owner took up the issue with SARB. Natanya van Niekerk, acting head of numismatic coins, at the SA Mint replied:
“As the krugerrand is the flagship of the South African gold industry and has reputational value to South Africa, we will leave no stone unturned to rectify the situation. I am of the opinion that the coins in question are now strictly speaking illegal and that the Reserve Bank has the right to demand all the coins to be returned.”
Hlengani Mathebula, head of group strategy and communications at SARB released an updated media statement on April 13, claiming: “…investigations into the matter have revealed that some of the proof krugerrand coins casted between April 2011 and May 2011 may not meet all the required quality specifications.” Early investigations show that of the 1,500 krugerrands minted in this time only six have, so far, have been found to be under spec.
The SA Mint called a meeting with a number of local and international dealers. They explained that the April and May 2011 batches were under spec. In his most-recent statement Mathebula continued, “…should any of the dealers have reasonable concerns that some proof krugerrand coins may not comply with all required quality criteria, they could return such coins to the SA Mint.”
At stake is the reputation of the gilt-edged SA Mint which created an optimum way in which to market South Africa’s gold. Kruggerrands are one of the safest and most effective ways to secure assets against uncertain markets. They are called ‘liquid gold’ since there’s never a shortage of buyers who can easily turn them into cash.
Willis risked devaluing his investments by performing Niton XRF tests and destructive fire assays on proof krugerrands. The SARB is threatening FORBES AFRICA’s anonymous source with legal action for “destroying legal tender” in order to conduct the fire assays. During a fire assay test, the metal object is smelted to determine its composition. However the concentration of gold would not be accurately proven, without such procedures. This is because the Niton analyzer is not a certifiable method of testing gold quantity. It is not as accurate as a fire assay. However results can be proved against known certified materials.
“The Niton analyzer gives a chemical analysis within a couple of seconds. It quantifies content and concentration in metallic objects. The results are shown onscreen. Its limiting factor is that it depends on the sample prep. If the sample is not clean, or flat or contains impurities on the surface, the results may be misleading,” says le Roux.
The same sample underwent a fire assay at two independent refineries. The results from First Refinery showed it was 87.40% gold while the results from Rand Refineries showed 87.46% of gold concentration. These results prove that the Niton analyzer was fairly accurate in comparison to the fire assay. When the SA Mint was alerted to the results on October 25, it collected the samples and test results to conduct their own investigation.
“Our assay indicated that this batch was in spec when we casted this. If we are at fault, we will make it good to the customer as we followed our procedures and something could have happened. We want to know what happened to ensure it is not repeated in the future,” wrote Tom Davel—while he was still in office—in correspondence with our source.
There is no proof that this is linked to the suspension of both the managing director, Andile Mvinjelwa, and the general manager of Numismatic Coins, Tom Davel on December 8. Their press release stated: “The board has become aware of certain technical issues within the operations of the South African Mint Company. Investigations into the matter have been instituted and are ongoing.” No results from the pending investigation have been produced.
In the statement related to the two suspensions at the SA Mint last year, Mathebula said, “The Mint is a high-security area for SA and I cannot reveal any details of the operations. There are no irregularities. Technical operational issues are being investigated.” He maintained that the suspensions could “never be related to fraud.”
A disappointed Willis said, “Surely, that kind of company would want to be transparent with everybody, seeing as it is a touchy subject and a worldwide distributed product from South Africa. If I were a dealer in South Africa or any other country, and I had coins which were part of the batch that is said to be under spec, I would certainly want to return them to the SA Mint and say ‘give me back my dough.’”

All That Glitters  May Not Be Gold

Struggle songs pierced the air to the sound of marching feet. Protestors jabbed sticks and steel poles to the skies.
One of them was petrol attendant, Thabo Moloedi, who makes the 80km journey from Sasolburg to Johannesburg along the N1 every day. He says tolls will hit millions like him in the pocket.
“Let’s ban them all,” he says.
Roads are the artery of every country and in Africa they are like gold dust. South Africa has spent R20 billion ($2.6 billion) on 185km of spanking new highways that would be welcome from Harare to Cairo.
The problem is now the government wants the people to pay for them. That will mean motorists forking out R14.2 billion ($1.85 billion) day by day. Every time motorists drive up or down the N1, N3, N12 R21, near Johannesburg, from April 30, they will  have to pay 30c for every kilometre calculated by sensors in huge overhead gantries. Those who buy a so called e-tag will pay directly from their bank account —those who don’t will be sent a more expensive bill through the post. If you don’t play ball, you could be prosecuted and new laws are on the way to cover this.
The plan has led to months of grumbling and accusations that the car-driving class is being used as a cash cow. It has also sparked one of the biggest protests seen in democratic South Africa. The Gauteng province protest was one of 34 across the country, which called on more than two million union members. Tens of thousands marched in Johannesburg alone.
“Tolls are a big burden and are going to fuel inflation,” says Lesiba Seshoka, the national spokesperson for the National Union of Mineworkers—the most powerful union in the land.
“We are still a developing country yet government is subjecting us to pay tolls. Whose pockets are going to be filled with this money?” says Dikshi Patel, a 45-year-old worker in the airline industry.
“The government has put the cart before the horse on this issue. A reliable, affordable and safe transport system should be a priority. If you start with the e-tolling system without ensuring that people can move freely from one place to another, you are disadvantaging these people, says Zingiswa Losi, the second deputy president of Cosatu the country’s trade union federation.
The South African Road Agency Limited (Sanral) is building through borrowing on local capital markets. It claims that if roads were funded purely by tax, citizens would still be waiting for their smooth highways.  Sanral calls the e-tag a “user fee” and denies it is double taxation for those who already pay car tax and fuel levy. During his annual budget speech, in Cape Town, on February 22, Finance Minister, Pravin Gordhan, assigned R5.8 billion to Sanral to help pay for the roads. This money allowed Sanral to cut toll fees from 60c to 30c per kilometre for cars in a bid to silence the howl of outrage. It appears to have failed.
Gordhan defended the cost of the toll roads saying they will ease traffic congestion. “Users benefit through lower vehicle operating costs, time savings and improved safety,” he says.
South Africans will also have to dig deeper to pay an increase in the general fuel levy on petrol and diesel, which will rise by 20c a liter on April 4. The money will go to pay for the new highways and motorists are not happy about that either.

The Road To Penury

Money sent home by citizens living abroad is a major source of foreign exchange for Rwanda, with an estimated $104.25 million received in 2011, a 42.8% increase compared to the previous year.
With this rise in remittances, Rwanda’s government is now focused on getting Rwandans living abroad to help drive investment to sustain the country’s rapid economic growth.
The government wants to issue a diaspora bond to soak up spare cash from 100,000 Rwandans living overseas through the National Bank of Rwanda. The Bank, according to Governor Claver Gatete, is currently studying the models of other countries that have issued similar diaspora bonds.
“We had to send people on the ground; they are now studying the models of other countries. We want to make sure that this year it is launched. There is no doubt about it. We are targeting diaspora because we want to give them an alternative to invest. This is the best and the easiest way to make an investment without leaving your desk,” says Gatete.
Rwanda joins the growing list of other African countries such as Ghana, Kenya, Nigeria, South Africa, Uganda and Tanzania that have backed the World Bank’s call for issuance of diaspora bonds to woo their citizens abroad to invest in their own countries. The Bank urges African economies to tap into an estimated $40 billion a year.
Countries such as Ghana and Kenya have already launched their bonds while Nigeria will join Rwanda in launching their bonds this year. A caveat is that Kenya’s infrastructure bond, issued last year, failed to attract the required amount because of weak local currency shilling.
The African Development Bank, which also supports the issuance of such bonds, has hinted on helping African nations market their financial instruments.
Raising investment capital through diaspora bonds is not a new idea. Israel and India have thrived on them. Diaspora bonds operate like any other government bonds and are highly secure for investment, especially when the issuers are creditworthy.
Rwanda is rated credit worthy because of its sound economy, sustainable debt and increasing levels of domestic revenue and exports. In 2010, the economy expanded by 7.5% while in 2011, it was expected to rise by 8.8%. This year, the central bank expects growth to slow to 7.6%, owing to uncertainties in the global economy. Inflation, which closed the year at 8.3%, is expected to slow to 7.5% this year—all favorable signals to investors.
Rwanda is one of a few highly attractive African investment destinations because of low corruption, investor-friendly policies and its geographical location in the heart of East and Central Africa—combined local and foreign private investments reached $626 million last year, from $350 million in 2010.
Gatete says that the bond will be issued in the local currency—the Rwandan franc (RwF) to avoid dollarization of the economy. Its proceeds could be used for monetary policy implementation since it will be issued by the National Bank. This means that it could be injected into the money markets.
“It’s not government borrowing, but we could use the bond for different ways to give chances to the diaspora to invest,” says Governor Gatete, adding that the value, maturity period and coupon of the bond will be announced when it is ready for the market.
The current Rwandan government, led by President Paul Kagame, has adopted strong measures to include the diaspora in the nation’s development. This has helped the diaspora come together to form a global network—the Rwanda Diaspora Global Network (RDGN), which has a permanent office in Rwanda and brings together Rwandans across the world.
The network has between 25,000 and 30,000 members in Canada and the United States, more than 40,000 in Belgium, which has the single largest population of Rwandan diaspora, and just over 1,000 members in Australia.
Sending money to Rwanda remains expensive, but with the fund in place the cost would go down, appealing to low-income earners overseas.

Investment Begins At Home

Rwanda’s post-genocide recovery has gone through many hands, but there is one big hand to reckon with—that of entrepreneur Said Sekoko Hatari.
Hatari may not be the richest man in Rwanda, but he is among Kigali’s cash kings. Born to a poor family, he grew up in Uganda as a refugee. One of the bitter legacies of Rwanda’s troubled past is that many of its people grew up sheltering outside the country.
Exile was where Hatari started in business, at the tender age of 20, as a truck driver working for Somalis. He was transporting construction materials from Kisumu in Kenya to missionaries living nearby. He quit the job to trade spare parts and coffee. He made mistakes along the way, including losing $1 million in the coffee business.
More than 30 years on, Hatari, who also served in the Rwandan army, is the king of hospitality and construction in Kigali with a number of business partnerships at his elbow.
“In partnerships, people come with their own money and borrowing connections. When you are alone, you get exhausted,” he says.
Hatari is the executive director of Doyelcy Ltd, founded in 2006, one of the largest firms in Rwanda and under valuation by Ernst &amp; Young. The company may list on the Rwanda Stock Exchange or issue a corporate bond to raise capital for investment in its core businesses of hospitality, property, insurance, renewable energy and agriculture.
Doyelcy is co-investing in hospitality and construction projects in Rwanda along with Dubai World, Chinese investors and Sudhir Ruparelia, one of the richest men in Uganda.
The prime project is the Kigali City Tower, which will be the tallest building in Rwanda and a potent symbol of reconstruction less than two decades after dead bodies littered the streets.
The 1994 genocide took more than 800,000 lives in 100 days. It shattered the country’s infrastructure, as well as its soul. From roads to government offices, private businesses and homes, to water pipes and electric poles—the country needed huge investment to build afresh; money that the government did not have.
Seventeen years later, Rwanda is one of the world’s success stories, with an annual average growth rate of about 8%. It was ranked the top global business reformer in the World Bank’s Doing Business Report in 2010. This was the first time a country from sub-Saharan Africa—the region with the highest poverty levels in the world—won such an accolade.
The tower of Kigali is a bold manifestation of this surge of confidence. It will bring scarce high-end office and retail space to Rwanda as the country plans to position itself as the business-friendly Switzerland of East Africa. Tenants are signing up for 20 floors; they include Rwanda’s plush coffee shop, Bourbon Street; Apple; Kenya’s Nakumatt; and South Africa’s Mr Price.
Ernst &amp; Young valued the tower at $33 million, which also makes it the most expensive landmark in Rwanda.
In another project, costing at least $200 million, Doyelcy is also co-investing with Ruparelia in a modern tax park and commercial buildings in Kigali. Then there is a $60 million five-star hotel with Chinese investors. The 254-room Kigali Marriot will be the largest hotel in Rwanda.
This year, the Central Bank says the economy may grow by more than 7.5%,  with strong recovery in the agriculture and service sectors, in a land where it takes one day to register a business. Inflation is easing and the financial sector grows stronger as more regional banks set up shop in Kigali.
This year, Rwanda expects investments to grow to $550 million, from more than $300 million last year.
Construction and hospitality are the fastest growing sectors in the country. In the first six months of 2011, construction rose by 54.6% compared to 28.7% for the same period last year.
“I believe that the future of this economy is mainly its expansion, going beyond borders as it reduces trade obstacles and introduces new markets,” says Hatari.
Although the construction sector is growing, Hatari says it faces setbacks from a lack of skilled labour and construction materials like cement. There is also a question over long-term finance from the banks.
“Finance is still a challenge and I think it will remain a challenge,” he says.
The good news is that Rwanda relishes a challenge.

From A Truck Driver To  A King Of Kigali

Alfonso Ippolito wakes up in another hotel room in Johannesburg; his Italian home is eight hours away by plane. He checks his email anxiously for updates and prepares for another day of meetings and frustration. A double-breasted suit, tie, shiny shoes and he’s on his way.
At the same time, in another part of Johannesburg, Mosheen Moosa is gearing up for another sparkling day surrounded by diamonds and African jewelry. No tie around his neck. This man is as laid-back as he is passionate about his business.
<div id="attachment_258" style="width: 209px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-258" class="size-medium wp-image-258" src="/wp-content/uploads/2017/04/1-5-199x300.jpg" alt="" width="199" height="300" />Alfonso Ippolito</div>
One Italian, the other South African; both at either end of the long investment chain in Gauteng—South Africa’s place of gold, as the name says. The former has money to invest—the latter needs it like a shot in the arm.
Ippolito—the provider—has been traveling in Africa since 1982. He is the president of Convivium Africa, a non-profit organization carrying out social impact projects in Africa. South Africa’s Gauteng province wants this kind of investment to build the infrastructure and skills to attract more.
“Gauteng contributes a minimum 25% to South Africa’s gross domestic product; if it were a country, it would be the fifth-largest economy on the continent,” says Ebrahim Patel, South Africa’s Minister of Economic Development.
Gauteng competes with countries like Nigeria, Brazil, India and Ghana for this precious foreign investment. Size doesn’t always matter. Gauteng needs a high growth rate, ease of doing business and good infrastructure to have any hope of winning.
This is where Ippolito comes in. In 2004, he was invited by the South African ambassador in Italy to attend a session on investment opportunities in Gauteng. He took on the job of selling the province to European companies. It wasn’t easy.
“We tried many projects but didn’t succeed,” says Ippolito.
In 2009, he hit the jackpot. Italgest SpA, an Italian company specializing in renewable energy, took a keen interest and set up Italgest Energy in South Africa. The proposed project is a $520.5 million photovoltaic plant in Bronkhorstspruit, Gauteng. Italgest has spent at least $2.6 million over two years on the project that fits into South Africa’s target to reduce its carbon emissions by 34% by 2020.
<div id="attachment_259" style="width: 211px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-259" class="size-medium wp-image-259" src="/wp-content/uploads/2017/04/Mohseen-sorting-201x300.jpg" alt="" width="201" height="300" />Mosheen Moosa</div>
Italgest’s plan is simple enough. The land in Bronkhorstspruit will have 1.3 million solar panels placed 1-1.5 meters from the ground. The panels will be manufactured by Sharp in Italy and shipped to South Africa.
The proposed 18-month project has run into numerous road blocks. The constant change in rules and requirements are making Italgest’s project that much harder to see through. A 75 megawatt cap has been placed on the plant’s capacity. The former 150MW project has had to be split in two, forcing the costly set-up of a second company.
Despite chasing a moving target for the past two years, Italgest is still interested in the project and connecting it to the power grid. The construction could create 1,000 jobs, plus the 120 needed to run the plants.
The company projects returns of 17-21%, but this will depend on the electricity tariff and the bank’s rate for the project financing.
Ippolito’s only problem with investment in Gauteng is the bureaucracy. Despite help from the Gauteng Economic Development Agency (GEDA), he feels that there is a lack of co-operation between provincial and national governments.
“More facilitation and help are needed on a national level; even more, the bank system is slow and conservative,” he says.
Ippolito says one of South Africa’s top four banks sent an email approving the financing for the project on a Friday; by the Monday morning, a second email arrived pulling the financing.
Italgest missed the November 4 deadline to submit its final bid for the two photovoltaic projects because it did not receive the documents on time.
Another sign of bureacracy that may lead to a squandered opportunity. Italgest hopes to return in March and try again.
While Italian Ippolito is investing in the province of Gauteng, South Africa’s Mosheen Moosa needs investment for his business, African Romance.
Moosa is a lawyer. He was a young activist during South Africa’s apartheid era, with a law degree from the University of Witwatersrand. He is a human rights lawyer who joined Parliament after the country’s first democratic elections in 1994. In his five years as a senator, he chaired the Justice Committee that drew up the Bill of Rights and the Courts and Administration of Justice of South Africa’s Constitution.
Moosa left all of this to set up African Romance, which cuts and polishes diamonds.
It is a rare business in Africa—most diamonds are exported to the likes of Cartier, Chopard and Tiffany &amp; Co for cutting.
“Exporting raw materials is exporting jobs,” says Patel.
According to the Kimberley Process statistics, Russia was the top producer of rough diamonds globally in terms of volume, 32.86 million carats, and Botswana the top producer by value, $2.59 billion. The 2011 global rough diamond production rose 39% by value and approximately 7% by volume to 133.12 million carats.
A total of 13.67 million carats valued at $1.8 billion were produced in South Africa in 2010, ranking the country fourth by value. Most of Africa’s diamonds are exported for cutting and polishing. The top global importers in 2010 were Europe, India, Israel, Dubai and China.
African Romance stands against this tide. The South African company is bent on beneficiation at home and this needs investment to do so.
African Romance was launched in 2007, after two years of preparation. Moosa and his team started with an investment of around $6.5 million, followed by
$10.6 million in 2008-2009. The capital went into factories, equipment and rough diamonds.
African Romance buys its rough diamonds in South Africa. These are cut and polished by South Africans, adding further value before export. Some 50% of the diamonds are exported.
The diamond industry is a very closed one; the barriers to entry are high and it takes years to break in.
In buying South African diamonds, African Romance competes with international buyers that are paying as little as 2% interest rates, giving them an advantage over the 11% rate that the Industrial Development Corporation (IDC) demands from Moosa.
The company has retail stores in Johannesburg’s Rosebank Mall, Sandton and OR Tambo International Airport. “We want people to know that Africa is more than just masks and baskets,” says Moosa.
In the last three months of 2008, African Romance brought in approximately $650,745, followed by
$4.5 million in 2009 and $11.7 million in 2010.
WakeHold is the holding company for WakeGem, which owns the African Romance brand. The shareholders are the WakeGem Workers Trust, 5%, and the Gauteng Department of Economic Development, 30%. The stakeholders are GEDA and the IDC.
African Romance needs $13 to $19 million in investment in the next three years. This will go towards increasing its exports and setting up more stores in the continent and further afield.
African Romance has come a long way in development funding and will need deep pockets for its dream of listing on the Johannesburg Stock Exchange (JSE) by 2015.
Doors and cheque books have not opened easily for Moosa and his vision. South African banks have not been a part of African Romance’s story. “South African banks are not builders… they are spoilt, want easy money and are not creative enough,” says Moosa.
It all comes down to investment. Is Africa’s richest province selling itself well enough?
The institution responsible for selling Gauteng to investors is GEDA. According to its acting CEO, Siphiwe Ngwenya, its financial system, large and industrialized economy, transport, infrastructure, natural resources and stability make it an ideal investment destination.
GEDA, which held the Gauteng Investor Conference in Johannesburg, in October, stands against the storm. In 2010, $247.2 million in investments flowed into South Africa’s Gauteng province. The target for 2011 is $260.3 million.
In these difficult times, it is going to take a lot of nerve and skill for Africa to lure a lot more Ippolitos from Europe to a hotel room in Gauteng.
&nbsp;
<h3>Cheer Up In 2012— It Is Going To Get Better</h3>
Political economist Paul Laudicina, the CEO of global management consultants AT Kearney, has worked on Capitol Hill in Washington—as Joe Biden’s chief of staff—and in Africa in the oil business. He believes the economic outlook for Africa in the new year may be brighter than expected.
<div id="attachment_257" style="width: 310px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-257" class="size-medium wp-image-257" src="/wp-content/uploads/2017/04/7-300x199.jpg" alt="" width="300" height="199" />Paul Laudicina</div>
The idea of pulling oneself up by one’s bootstraps is no stranger to Paul Laudicina. His ancestors stepped off the boat in New York in the 1920s, penniless and tired after a long journey from Palermo in Sicily. The immigrant family has spent most of the last century concentrating on education, climbing the economic ladder and acceptance.
“My parents wanted us to be more American than Micky Mantle (the New York Yankees baseball legend). We didn’t speak Italian in the house,” he chuckles.
Laudicina is upbeat about the prospect of Africa pulling itself up by its bootstraps.
“Eight out of 10 of the world’s fastest-growing economies are in Africa. Africa’s population will overtake that of China by 2025 and overtake India by 2050. In terms of population and resources, Africa is the last frontier and has great potential. You get Indian technology, Chinese manufacturing, Middle East capital and energy, plus African human and natural resources; put them all together and you have more economic power and more growth than any other part of the world,” he says.
Laudicina believes South Africa, which accounts for 18% of regional investment, is likely to strengthen its position when it comes to investment. He believes that when the new foreign direct investment rankings are published by his company at the end of the year, South Africa will improve on its 18th standing in the world.
“South Africa has the most hopeful and economic structures in the continent,” he says.
On the other side of the investment coin ?
“Business here is not going to come flocking unless people are prepared to take the human resources and train them into productive, income-earning, consuming people instead of protestors on the streets baying about income disparity.”

Tag: Investment

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