You may not recognize his face but you may know the voice.
Liberian-born Max Bankole Jarrett spent more than a decade as a radio program producer and presenter covering major political events during the tumultuous 1990s for the British Broadcasting Corporation’s (BBC) Africa service. Now, the self-styled pan-Africanist is playing a leading role in a bold organization that is at the forefront of policy debate on the continent and its future.
Earlier this year, Jarrett was appointed as deputy executive director of the Africa Progress Panel (APP) headed by former United Nations Secretary General, Kofi Annan, and housed in Geneva. With an all-star cast of panel members, among them Bob Geldof and Graca Machel, the wife of the late Nelson Mandela, the panel is focused on promoting equitable development in Africa. It is also not afraid to point fingers at Western governments for their role in capital flight and underdevelopment in a continent rich in natural resources. The panel’s hard-hitting report last year explored why the continent’s resource-rich nations had failed to reap the benefits of their natural wealth and how this can be changed.
“In many countries, for example, natural resource revenues are widening the gap between rich and poor. Although much has been achieved, a decade of highly impressive growth has not brought comparable improvements in health, education and nutrition,” wrote Annan in the report.
“[A]cting alone, African governments cannot resolve the most intractable natural resource governance challenges. The international community must also shoulder responsibility.”
The report also found that African countries lost $38 billion a year through offshore tax havens and the Democratic Republic of Congo lost $1.36 billion through dubious mining deals between 2010 and 2012 alone.
This year’s report, set to be released in May, will focus on fishing and agriculture, industries that many economists believe could fuel economic growth and large-scale employment throughout the continent. In particular, it will address how African farmers and fishing communities can access the money they need to create so-called green and blue revolutions in Africa.
While efforts in countries like France, Britain and the United States have been made to prosecute companies for corrupt practices committed on foreign shores, Jarrett argues more needs to be done to curb bribery and illicit outflows.
“Western countries and banks should do a lot more to make sure that money that is coming from Africa is legitimately being deposited,” he tells FORBES AFRICA.
Jarrett is skeptical about much of the current ‘Africa Rising’ narrative that he says is overly bullish and doesn’t resonate with many Africans. He argues that political vision can transform the continent. The APP hopes to play a role in this.
“We are moving forward, but this pace as of late, from 2000 has not been as consistently progressive as I would have hoped when I was a young man starting my professional life with the BBC in 1990,” says Jarrett.
“Africa is in a better position now to seize its opportunities; it has more freedom to act and the commodity super-cycle is playing to our benefit. But the ball is in our hands to be dropped.”
The 44-year-old started his career in broadcast journalism. He is no stranger to the world of policy and African diplomacy. He spent 10 years in Addis Ababa working as a communication expert and speechwriter, policy analyst, and a coordinator of a groundbreaking initiative to strengthen media in Africa for the United Nations Economic Commission for Africa before joining the APP.
Jarrett says that the antagonism between some African leaders and Western powers that peaked during the Cold War and continued throughout the second wave of African liberation in the 1990s, has eased and opened up valuable space for debate about governance, transparency and accountability.
“There is no longer a fear of discussing governance and corruption… It is really refreshing for someone who covered this all as a journalist earlier, nearly a quarter of a century ago, to now be able to contribute to, read and reflect on the discussion about governance, where people don’t just get locked up by mentioning it,” says Jarrett.
Jarrett says he hasn’t spent more than eight weeks at a time in Liberia since he left as a child for boarding school in England. Due to the long conflict, and his family’s displacement from his home, he did not return to the country at all between 1989 and 2008.  However, during his years at the BBC he monitored and reported on a civil war in his homeland that he thought would never end. For Jarrett, 10 years after the war, Liberia’s prospects are positive if it can overcome the mistakes, divisions and inequalities of the past that led to the political crisis and civil war.
“It could become a beacon of hope for other African nations, just as it was when it became the first black African republic in 1847,” he says.
If Liberia, a country of under 4 million, managed its resources and political conflicts it could become a nation where all of its children were well educated and well fed.
“Liberia could really set the pace for the continent. We’ve already set the pace in terms of electing the first female president; there are so many other firsts we can continue to make,” says Jarrett.
Africa’s ball seems to be in safe hands.

Africa To The Max

It is a Tuesday morning in Rustenburg, the heart of the platinum belt, in the north west of South Africa. On days like this, at the end of the month, this town is usually buzzing with business. The hardship of months of striking at the platinum mines has turned Rustenburg into a ghost town – a poor one at that.
“There’s no business at all here, sales have dropped drastically since the strike resumed in January. We don’t even come close to the business target. Food is going to waste as there are no customers buying. The business has reached its all-time low figures,” laments a restaurant manager who has put her staff on short time.
The manager at this restaurant, who asked not to be named, says because of the long Association of Mineworkers and Construction Union (Amcu) strike she was instructed to reduce her staff’s working hours and pay.
“The bosses are aware of the situation. Generally, a sound business practice is that if you fail to make profit, you either close shop or downsize the staff. I have a fear this will happen if the strike does not end soon. People are suffering; I have a fear that crime will rise because people are desperate to make ends meet. In this shop we also fear for our lives. What if someone walks in armed and demands we hand him chicken,” she says.
At around lunchtime, Marikana Fruit and Veg co-owner, Michael Bendu, was removing rotten bananas from the shelves. He says he hasn’t had a customer all day.
“For me the business is 80% down and I am about to close shop if it continues like this in this month. Electricity, salaries, the rent of this shop and my house are taking their toll. I can’t deal with it.”
Bendu supplies mine hawkers and was making $955 a day before the strike.
“You can stay with me for the day; I promise you will hardly see customers entering the shop. Those who come are not buying in bulk. We can’t carry on like this. I have plenty of credit accounts with my customers but they can’t pay and I understand their plight,” he says.
Bendu often ends up giving away his fruit rather than see it rot.
“Here we survive by mineworkers. The mines are the backbone of our economy. I don’t know what will happen when the backbone collapses,” Bendu.
A few hundred meters from Bendu’s shop stands Marikana Wholesalers, operating since 2006, a stone’s throw away from where miners camp.
Owner, David Neto, says he lost around $955 though rotting food in March alone. In the past, he used to lend money to his hard-up workers but he can’t afford that anymore.
“I am at my bones. I can’t afford to further cut down the prices. It doesn’t make business sense,” says Neto.
“My staff is currently on flexi-hours. I have to force them to take leave, taking advantage of the poor business. The current situation is hurting everyone, I can’t afford a fulltime domestic worker anymore and I need a plumber but I can’t call him. The situation is creating all kinds of nonsense. Everyone is desperate these days. Taxis are forcing passengers off buses. It’s chaos here. My turnover is half of what it used to be. It is painful that I am paying my workers to look at passing people and watch the sun turning,” says Neto.
The taxis that ferry thousands of miners are also feeling the pain.
“Business is bad; the strike is the worst in the history of platinum mines. These are the days we would be seen busy but people are not using our services. This strike must come to an end because the banks will repossess our taxis as we are failing to pay our debts,” says Mojalefa Rantoa, a taxi driver.
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On the side of the road, two Mozambican hawkers, Gina Javana and Julia Makwakwa, watch their pile of spinach and tomatoes rot, along with their dreams.
“Worst time ever. We are so despondent. We came to Marikana to make ends meet but now we don’t know why we should stay when things have turned this bad. We couldn’t return home in December and Good Friday is here. We have no means to see our families, we are stuck here,” says Makwakwa.
Godfrey Jakaya, a 30-year-old Tanzanian herbalist, says in his five years in Marikana it’s never been so bad. He has had to move to a smaller shop to save rent.
“The business is not doing well, my family is living off my savings but it’s drying up. I am just glad my two children are too young to understand what we are going through with my unemployed wife. No more KFC (Kentucky Fried Chicken) meat for them.”
The strike has led to increased violence in the area. Business owners are the targets of robbers who are desperate to get their hands on their stock. Some striking miners have also been involved in clashes with police and workers on their way to the mines.
It has been tough on the strikers, who used to earn around $400 a month, as well. A group of striking Amcu members is seen walking aimlessly in the market area.
“Our landlords are on strike as we are. They understand we can’t pay as we are not earning a penny. But we have an understanding that we hustle for electricity and that’s all we can manage,” says one striker, who refused to give his name.
If the strike is still on when you read this, the hustle of Rustenburg can only get worse.

Rotten Food,  Rotten Strike

A large advertising hoarding at Maputo Airport claims Mozambique has the best prawns; one of the most hackneyed boasts in Africa. Mozambique has a deep, sheltering, offshore ridge stretching along the floor of the Indian Ocean. In these fertile waters prawns thrive in the warm flow of the gulfstream to become big, juicy, and world famous.
Under the sea bed in these same blue waters is another natural resource that could make Mozambique more famous than it is for prawns.
Twenty-two years after the guns of a bitter civil war fell silent over this poor and weary land, Mozambique is on the cusp of an energy boom. In a generation, this boom could transform the country into a rich player in the lucrative business of supplying an energy hungry world.
Energy appears to be a field where African prosperity could lie. It is a sign of the times that when FORBES published its list of the world’s top 10 oil and gas finds in 2013 – six of them were in Africa &#8211; a remarkable number in year of scarce finds, called lackluster by the industry; in a year when exploration giant, Tullow, drilled 20 holes only to find them dry.
The biggest find of 2013 was 80 kilometers off the shores of Mozambique. Italian energy company, ENI, struck gas more than six kilometers under the sea in the Agulhas field. The company says it has between five to seven trillion cubic feet of gas (tcf), worth the equivalent of 700 million barrels of oil (BOE). That’s about two years’ worth of Nigeria’s oil production.
This rich find is merely the tip of the iceberg. Industry estimates say Mozambique has the world’s fourth largest gas reserves after Russia, Iran and Qatar. This year, the energy giants from Texas, Anadarko and partner ENI, will decide whether to build one of the world’s largest liquefied natural gas facilities in the world, off the coast of Mozambique. The complex would pave the way to tapping deep off-shore gas fields that could rival Australia and Qatar as the largest liquefied natural gas reserves in the world.
Mozambique’s hopes will enrich an economy rated by the United Nations as the fourth poorest in the world, with most of its more than 23 million people living on less than a dollar a day.
It is likely to prove a long and expensive road to prosperity. Mozambique has a huge skills and infrastructure gap coupled with meager state coffers. One look at the potholed roads of the capital, which turn into a river of mud in heavy rain, will tell you how far Mozambique has to go. An encounter with corrupt policemen on the street will tell you why hard work and enterprise could also struggle.
These are among the many obstacles to vast and unimagined wealth lying under the sea. The most promising discovery is in the massive Rovuma Basin, which is 30,000 square kilometers – about the same size as Lesotho. Since 2010, there have been 10 offshore discoveries in the basin promising 190 trillion cubic feet (tcf) of natural gas. The industry believes a supply and demand gap for natural gas will open up by 2020, sending prices soaring. If Mozambique can get its industry together by then it will be able to compete, albeit from a low base, with the big world players like Russia, Australia and Canada.
A senior government advisor in Maputo told me that Mozambique aims to be shipping gas to Thailand, South Korea, Japan, South America and the United States by 2019. The infrastructure bill for this dream is likely to be immense. One of the reasons why investors often fight shy of gas, unlike coal and oil, is because it is difficult to move it to market.
It is a sobering thought that investors have sunk more than $1 billion into extracting Mozambique’s gas with very little to show for it – it is going to take many billions more in foreign investment. This, at a time when the new Basel III banking rules are tightening around the world and it is getting tougher every year to summon up interest in this kind of 20-year, high-risk, infrastructure.
The next step on the road to gathering this foreign investment is the fifth round of licensing bids, expected this year, most of which will be for the Rovuma Basin. Exploration data is doing the rounds among interested investors, but a few are also looking at their watches.
“This is all taking too long for us,” one investor told me in Maputo.
One reason why it is taking so long is that Mozambique has little experience in running an energy industry and wants to make sure the national exchequer gets its fair share. Mozambique has studied how other African nations have been by-passed by their resources booms and is tightening legislation.
The fear in Maputo is: most of the revenue will flow overseas; the equipment will be bought in from elsewhere, as will highly paid expatriates, leaving the people of Mozambique as bystanders in a land where their government owns all the mineral rights.
“We are striving to make the market more stable and predictable for investors… If you align your project with Mozambique’s priorities, you will have a strong chance of success,” says Leopoldo de Amaral, the manager of natural resources for the Maputo legal company Sal and Caldeira Advogados, told the MMEC conference on mining and energy in Mozambique in March.
These priorities will be laid out in the amendments to the Petroleum Bill, on its final passage through parliament, which will lay down new rules for foreign investors. The bill is expected to be published in the next few months, before parliament dissolves ahead of elections on October 15, and has a tough job ahead of it. The plan is to maximize revenue for Mozambique and provide certainty and clarity for investors, without jeopardizing competitiveness.
Under the bill, crude oil will be subject to 10% production tax and for natural gas, 6%. It stipulates that 5% to 20% of the capital of foreign companies be placed on the Mozambique Stock Exchange, within five years, for sale to locals.
Furthermore, investors must inform the state of discoveries within 24 hours and remit the proceeds of exports back to Mozambique within 90 days. Ample discretionary power is given to the minister, giving he or she a say over the transfer of mining rights and the right of the state to participate in projects. This is unlikely to impress foreign investors.
Another worry for foreign investors is a hefty capital gains tax of 32% that came into force on January 1. The rules stipulate that the tax will be levied on the sale of equity in any operations in Mozambique, no matter where in the world transactions take place.
On top of this, foreign companies will have to set aside a hefty budget for training. The bill says foreign companies, operators and subcontractors alike, must train workers from Mozambique: 5% for big companies; 8% for medium-sized companies and 10% for small companies.
Mozambique also plans to take advantage of the end of a 10-year agreement with energy giant Sasol, to supply cheap piped gas to South Africa in order to encourage the building of infrastructure. Under the agreement, Mozambique was selling around $700 million of gas to Sasol at around one fifth of the price. According to the watchdog, Centre Integridade de Publica de Mozambique, the country was making as little as $10 million out of the deal.
With the expiry of the deal in March, Mozambique will be able to reap more from its gas and there will be more space on the pipeline to do so. Sasol is going to spend $190 million on the 865 kilometer pipeline, from Pande to Secunda, in South Africa, to increase its capacity by up to 30%. The energy giant is also going to spend $135 million on a new processing plant to be opened in 2015. Sasol is having to revise its prices now that the sweetheart deal from Mozambique is over and is already suffering a volley of criticism from customers.
The very fact that one of the biggest energy players in Africa is prepared to put its millions into Mozambique bodes well for investor confidence. Despite this, many investors are likely to look at the country’s new rules and scratch, if not shake, their heads.
Mozambique, rated as the fourth poorest nation on earth, has a long, long, way to go before it can become a player in the world energy market and become more famous for power than prawns.

Prawn To Be King

Max Hussmann was just an 18-year-old when he realized he wanted to make his own money. He would do this through Elegance Group, a company in the business aviation industry. While doing this, Hussmann is also swimming laps in the pool in the hope of competing for Germany in the 2016 Olympic Games.
Born in Accra, Ghana, Hussmann completed his schooling in Germany and spent most of his time flying between Africa and Europe.
At the time, his parents worked in Ivory Coast, Ghana, Nigeria, Gabon, Congo and Equatorial Guinea and the young Hussmann learnt to speak French, Portuguese, German and English. When Hussmann was about to turn eight, his mother took him to a school in Germany. He stayed there until he completed a degree in international relations and finance.
“My holidays were always spent catching a plane and flying down to Africa to see my dad. And then I always went back and forth,” he says.
Once his degree was completed, he spent a summer working in Greece and forgot about a career in international relations and finance.
“I always wanted to become a pilot. Aviation was always my big dream,” says Hussmann.
After a few chats between father and son, it was agreed that the family would pay half the cost of a pilot course in Germany and Hussmann would pay the rest. His father would pay the other half back to him when he completed the course.
But when an opportunity arose to work for Brazil’s largest carrier, TAM Airlines, Hussmann didn’t think twice. He packed his bags and moved to Brazil without finishing the course.
After two and a half years in Sao Paulo , Hussmann had dinner with the former vice president of TAM Airlines, Fernando Sporleder. The dinner was a brainstorming meeting on aviation. It was over starters that he realized he wanted to make it on his own. There were a lot of decisions made by TAM Airlines’ management that he would have done differently. He realized the airlines were doing things he could do himself.
Business aviation was a tough industry and needed a lot of capital to break into. It was a market that was growing incredibly fast in Latin America and Europe.
But his idea for Elegance was an unrealistic one. It was a dream based on risk.
At the same time, he felt the need to finally finish the pilot course at the Gryphon Flight Academy in South Africa, where it was most affordable.
“Having my heart and spirit set on the African continent was for me the point of a very simple decision that I’m going to South Africa. I moved to Cape Town initially. Obviously as a foreigner in South Africa your dream is to be in Cape Town. I stayed in Cape Town for a year and very quickly realized that Cape Town wasn’t the place for this industry I want to get into,” says Hussmann.
He moved to Johannesburg a year later where he finished the course. Elegance moved to South Africa just before the soccer World Cup in 2010 and Hussmann thought that the business would be able to play a role in the biggest sporting event in the world.
He had grown up speaking four languages and this was his opportunity to use them.
But he quickly learnt that it wasn’t going to be easy and Elegance had no chance in the market at that stage.
He says many governments still take aviation for granted. It is an overly regulated industry that lags on associated infrastructure investment and it is difficult for newcomers to cut their teeth in the industry.
“I realized there are big competitors here who have established successful companies. But, my goal was always from the word go, to one day turn around and be the bigger one and it still is. I want to be the bigger one, not through monopoly in the country and not through hierarchy, but through innovative and creative ways of business,” says Hussmann.
Elegance survived and thrived. Hussmann started Elegance Group which now has different targets and divisions that he hopes will help him attain his goal of becoming the industry’s leading aviation specialist. The divisions include a concierge and charter service called Elegance Air, a sport consulting division and Aviation Consulting which, since 2012, has a footprint in Germany, Hong Kong, South Africa and Brazil.
Hussmann says he is the first business aviation company in Southern Africa to offer the hour package flying principle.
“Companies are able to buy bulk hours of 25 or 50 hours and utilize them to their own flexibility. And it brings huge flexibility to companies, it brings a certain ownership to your hours, and huge tax benefits. Again, a concept that comes from Europe and hasn’t been implemented here,” he says.
One of the reasons it is not in Africa yet is that companies are worried that selling hourly packages is a huge risk in a country where the aviation sector is not yet stable.
But why have such a versatile company that combines sport and aviation?
“They’re both driven industries. I myself have been heavily involved in sports on the swimming side. It is both a future orientated and innovative industry. You can draw a lot of goals and focus from sport into business. Being versatile comes from something I’ve learned from Virgin Group. That’s exactly where Elegance Group is going. Not being rigid in one industry,” he says.
As for expanding the business and becoming an industry leader in the business aviation trade, Hussmann considers moving into countries similar to those that his parents have worked in.
Maybe Hussmann can win a gold medal in both African aviation and the Olympic Games. It never hurts to dream.

The Olympic Dreamer With His  Head In The Clouds

Nestled on a ridge overlooking the sea to the left and Durban’s beachfront to the right, with Moses Mabhida Stadium on the horizon, is the view from the balcony of a multimillionaire. Michael Attridge is one of the guiding spirits of one of the world’s biggest pharmaceutical companies.
His stride is that of a man who knows where he is going in life. The handshake is firm but welcoming and his warm smile reassures you that Durban may be hot, humid and sticky but it’s a fun place to live.
Attridge, who’s been called Gus since his school days, is a charted accountant by training and the deputy group chief executive of Aspen Pharmacare, a R125-billion ($11.8 billion) company as of the beginning of April according to Reuters, listed on Africa’s biggest bourse, the Johannesburg Stock Exchange. If you bought $10,000 worth of shares, valued at R2,36 in 1998, what would it be worth now?
Attridge is one of four founding shareholders who built this business in their backyard in Durban.
It all began in an old Victorian house, converted into offices, near Greyville racecourse in 1997.
“It was in a rather less fashionable part of Durban, at that time this was sugar cane,” says Attridge, referring to their current offices in La Lucia.
Attridge made his debut on FORBES’ list of Africa’s richest in 2013, coming in at number 37, with an estimated net worth of $525 million. A listing he says he didn’t know about and would rather be without.
The debut was down to Aspen’s stock shooting up nearly 75% in 2012/2013 thanks to its booming business in Asia and Australia, says chief executive, Stephen Saad. Attridge is the second biggest individual shareholder, owning a 4% slice, with co-founder, Saad, who is also on the FORBES list with a net worth of $1.5 billion.
How two friends from Durban came to be worth $2 billion is an African story worth telling.
In 1981, Attridge completed a bachelor of commerce degree from the University of Natal [now University of KwaZulu-Natal] in Durban. He added a diploma in accounting, a year later, followed by another in datametrics before his training with Coopers &amp; Lybrand, now PricewaterhouseCoopers. This is where he met Saad. They worked together on assignments; Attridge was Saad’s senior, who was to climb the ladder at Coopers &amp; Lybrand to become a manager in the corporate finance division in London.
“I’d always set my objectives on becoming a partner in one of the firms. That was kind of my pinnacle as a trainee in the accounting profession,” says Attridge.
Just before the end of apartheid, he returned to South Africa to establish a corporate finance division in the Durban office of Coopers &amp; Lybrand.
During that time, Saad left the company, leaving Attridge behind, suffering from the entrepreneurial itch. But Saad returned. Not to the company, but to Attridge, whom he approached with a lucrative business idea.
“The day he [Saad] could first get out of there, he got out of there. I initially had some career ambition there. But I quickly realized that selling time was not very entrepreneurial and it was difficult to get rewarded effectively for your efforts when you were selling time because it did not measure what value you added to things. I was eager to find an opportunity in business,” says Attridge.
Saad and Attridge put their heads and money together.
“And that’s where my business partnership with Saad began, probably 20 odd years ago,” says Attridge.
He left his job at Coopers &amp; Lybrand in 1994, the year South Africa held its first democratic elections. Their first venture was to buy Varsity College, a struggling private tertiary institution, for R1.5 million ($142,000) and to apply a fresh idea.
“We embarked on quite a differentiated, let’s call it, advertising campaign where essentially we guaranteed students who attended all their lectures and did all their assignments that we would give them their tuition fees free the next year if they failed under those circumstances.”
“It was all built around adverts that went into the press which were around the F-word. It was F***, being fail, but it provoked some reaction generally as well because it was a bit provocative I suppose,” he says.
Few students fell foul of the F-word.
“In a student’s DNA, to go to all lectures is foreign. But really, with that diligence required to attend all lectures and to submit all your assignments and so on, you will pass. Unless you chose a course incompatible with your skills set,” Attridge says.
He and Saad also bought a private primary and secondary institution, Crawford College, one of which is opposite their head offices in this suburb of La Lucia in Durban. It worked. The partners turned the losses of Varsity College and sold it in 1996 for R10 million ($948,000).
This paved the way for another adventure.
“We’re not people with 10-year plans. We don’t even have a three-year plan. It’s a good thing we haven’t because we would have never stuck with any of those plans because we move too quickly, things change quickly,” says Attridge.
Three years into the pharmaceuticals business, Aspen took a big risk. It was a highly leveraged hostile takeover of South Africa’s oldest pharmaceutical business, South African Druggist (SAD), for R2.4 billion ($227.5 million).
“That changed our business forever and changed our business model,” says Attridge.
SAD worked in a number of areas, including the development, production and marketing of pharmaceuticals, within South Africa.
Aspen’s initial business plan was to avoid manufacturing. Its plan was to be a small business selling good margin products to build its name.
The takeover wasn’t going to be easy.
At the time, Fedsure owned 34.9% of SAD, but its attempt to buy the remainder of the company and then sell Pharmacare to Adcock Ingram was opposed by the South African Competition Board. Pharmacare was the main pharmaceutical unit of SAD.
“I remember I was driving from work and I was listening to a business program and I heard this deal had been cancelled or disallowed. I walked in the house, picked up the phone to Steve and I said, ‘you know a lot more about the history of SAD, you know their products well but I’ve just heard that this is cancelled, this deal is not going ahead,’” recalls Attridge.
It got even more complicated.
There were other companies involved in the acquisition. A business called Macmed Health Care initially did the running to buy SAD. They specialized in medical devises rather than pharmaceuticals. They had an agreement with Aspen to divide up SAD in a way that would allow other players, who wanted other parts, to enter into a consortium.
“We had to put up guarantees. It was a hostile arrangement. Management at SAD had their own ideas about acquiring the business for their own benefit. So there were a whole lot of different issues going down. We weren’t allowed to do due diligence,” says Attridge.
Luckily for them, SAD was a public company and Saad had a good knowledge of the product. Financing the deal was a problem but they were helped by property entrepreneur Jonathan Beare, who relished backing small businesses like Aspen. Beare introduced Attridge and Saad to Investec’s chief executive, Stephen Koseff. The two businessmen put up money and Aspen led the deal.
“We didn’t think we were going to buy the whole pharmaceutical business. I don’t know whether its fate or what, but we got it.”
With the deal done, the business grew to a $11.8-billion global corporation with Saad as the chief executive and Attridge the deputy.
The irony of this story was that Aspen were the new kids on the block but survived and prospered. Within 18 months of the transaction, Macmed went bust, about three years later, Fedsure followed.
“So we were the only ones from that consortium that survived and we were the small kids on the block. Those kind of things were instrumental in some of our thinking we try and impart on our staff. We now have a lot of management teams trying to impart on our people that you can never be complacent because you could be succeeding today, because both Fedsure and Macmed were highly rated at the time,” says Attridge.
“You should never be arrogant about your success, because success can be fleeting. You never know how the wheel is going to turn and who’s actually going to need who in the future. I do hope that our people [Aspen staff] understand that. When you’ve lived through and seen what happened to the management team with those businesses and so on, it’s actually very insightful because they all thought they were bulletproof.”
However, a business with a staff of 200 taking over a firm of around 3,000 was no mean feat. One newspaper called it a mouse trying to eat an elephant.
This little company had to get the buy-in from the staff at SAD. They had a small management team that was now going to manage SAD. It all played out at their old Victorian house turned into an office.
“The company which we still own today, Pharmacare Limited, was a company within the SAD label that housed the pharmaceutical business and we invited the chief executive of that business, Kobus Nel, to come to Durban and to meet us and talk about our plans and strategies and get to know him a little better. I think he took one look at that house and the day after he handed in his resignation,” laughs Attridge.
“I think he thought no, look at me sitting in this office park with a view of Johannesburg with a golf course and these guys are sitting here looking into the backyard of someone with a washing line.”
Today, Aspen supplies medicine to more than 150 countries, manufactured in 16 sites in: Kenya; Tanzania; Australia; Mexico; Brazil; Germany; South Africa; the Netherlands and the United States (US), with a French-based site becoming effective in May. It is the largest manufacturer of generic medicines in the southern hemisphere. Aspen is the first company on the continent to launch a generic anti-retroviral for the treatment of HIV and AIDS patients, thus becoming the largest supplier.
On the continent, Aspen has long-term plans for sub-Saharan Africa. Their challenge lies in its fragmented countries but they’re working on it.
“It’s not a big part of our business today but I think the investment in those difficult markets will pay back in time,” says Attridge.
In East Africa, Aspen bought 60% of Shelys, which has businesses in Kenya, Tanzania and Uganda. He says they hope to move away from the tender business into more of a business focused on brands.
They’ve also consolidated some of the manufacturing in East Africa, supported by the South African business, which Attridge hopes will help it to have its best year this year.
The business opened Aspen Nigeria last year. This is a collaboration with GlaxoSmithKline (GSK), a British multinational pharmaceutical company, where they share products and everything else, which has resulted in a strong business in Nigeria that is exceeding expectations.
“We’ve managed to get better market penetration than we thought we’d be able to, early on. It’s very small; it’s not going to influence anyone’s thinking on Aspen today. Everything has to start small. We know that very well at Aspen because we started small,” he says.
And that is how their Australian business grew. They started out with just two employees, but today it is one of their biggest revenue streams. Aspen aims to perform ahead of the market in Australia.
“We’re one of the top players in Australia now. The Australian business is getting to a certain stage of maturity. And the Australian market is challenging at the moment. It has had a series of price cuts which has taken a lot of profits off the table,” says Attridge.
Aspen has an agreement with Nestle that is helping the business ease into Australia. They plan to cut costs of goods through migrating product manufacturers from Australia back to South Africa and Asia.
“There is a big consolidation of manufacturing already well progressed and it continues well into Australia. When we bought the Sigma Pharmaceuticals unit, it had five manufacturing facilities and our target is to end up with one. We’ve got three at the moment,” he adds.
Aspen is Australia’s eighth largest pharmaceutical company by scripts generated. Following its October acquisition of the active pharmaceutical ingredient (API) manufacturing sites in the Netherlands and the US.
Aspen is ranked the ninth largest generic pharmaceutical producer out of 60 generic companies in the world by EvaluatePharma in 2013. It employs around 8,200 people.
But their success comes with problems they have no control over. The beginning of the year saw South Africa’s currency weakening steadily against the dollar, straining Aspen’s South African business.
But because Aspen has become diversified, its money comes in different currencies.
“The rand denomination results have a lot of protection against the weakness of the rand as a group,” says Attridge.
In January, Aspen Global, a subsidiary of Aspen Holdings, acquired the brands and business worldwide of Arixtra and FRaxiparine/Fraxodi, except in China, Pakistan and India, from GSK. As of May, Aspen Holdings will have acquired a specialized sterile production site that manufacturers the brands in France, a total consideration for the acquisition made through its subsidiary at an estimated R9.79 billion ($929 million).
Aspen has an expanding presence in Latin America and South East Asia. Their expansion plans will stretch as far as Russia and the former Soviet Republic, as well as to Central and Eastern Europe.
Attridge attests that though it’s going well, they’ve had some tricky times when they started out in Latin America. Their aim is to create a business model structured for success, similar to Varsity College’s plan.
“Varsity College was about getting an overhead base and would be covered by the revenues and we take the same approach in every business that we look at, that we have to make sure it’s a business model that’s sustainable,” he says.
They changed the business from one that relied on tenders to one based on brand equity.
“We restructured the business and got rid of some of the manufacturing which was not core to what we wanted to do… We’ve had a lot of challenges with management in Latin America. But in Brazil, we got that right a couple of years ago. It’s really doing well. It’s got a good foundation there.”
Brazil has been Aspen’s biggest part of the business in Latin America but the Spanish region of Latin America will soon overtake Brazil.
Spanish Latin America is a region where Aspen has struggled because they only had operations in Mexico and Venezuela. However, in the last 12 months or so, Aspen made a transaction with Nestle to acquire the infant milk business they bought from Pfizer; increasing their product portfolio offering. This has helped Aspen make inroads into Columbia, Chile, Argentina, Peru and Costa Rica.
Attridge hopes that the Latin American business will be as big as South Africa’s in the near future. Before that happens, they need to decrease debt from the latest acquisitions in Latin America.
This will be done through their cash flow from the business. Attridge says they’d rather use debt to build their business.
“We don’t see having money in the bank as a productive use of funds. If you’ve got money in the bank, you better have a very good investment plan and or you should give it to your shareholders. You shouldn’t be sitting with it in a government bank account,” says Attridge.
He believes the business model must produce a good return of cash. Aspen has also avoided giving equity as it is the most expensive way of raising funds.
“We’ve developed that model in all our businesses, so the profits from our business flow through to the business and to cash very efficiently. And most years our cash flow per share have exceeded our earnings per share before investments. But that’s a very important fundamental.”
Aspen made its way into Russia in January, with around 80 employees on the ground, promoting products acquired from GSK and Merck Sharp &amp; Dohme (MSD) SA.
“One of the philosophies we have is that the more challenging the market, the greater the opportunities that may exist. So Russia has been on our radar for some time as a potential investment area, a market with good growth fundamentals and evolving health sector. But it’s not the easiest market to operate in. If you can succeed in difficult markets, then you can succeed in any market and sometimes in the difficult markets you don’t actually have as much competition as you do in markets where it’s easy to operate in. People are scared of the circumstances,” says Attridge.
In Russia, Aspen will compete with a lot of local businesses who will defend their space and territory from the South African company. Attridge says Aspen is competing with a lot of products not as regulated as theirs.
“It’s not unique to Russia, but being able to access the distribution networks into the pharmacies is critical, so establishing and building on the relationships with the people (wholesalers) who are taking the products… they dictate a lot of what can be achieved. You can’t reach Russia on your own,” says Attridge.
But he says these are challenges they’re willing to take head on. He believes good leadership in other regions is one of the factors to their success of running Aspen from their modest offices in Durban.
“You’ve got to have the right people leading your businesses. We stumbled on that initially in America. We didn’t have the right leadership in place there. We inherited some that weren’t aligned with what we were trying to achieve.”
Besides challenges, the group hopes to enter into the two biggest markets by population, China and the United States (US), as well as making an entry into the Japanese market.
“That’s not to say we are going to rush in tomorrow. We now have a small portfolio in the US and one or two products in China.”
A family man, this father of two doesn’t take work home. He says with all the traveling, he makes sure that when he is home he spends it with his two sons and his wife. This 53-year-old, who celebrates his birthday this month, is a former rugby player, who played for the Kwa-Zulu Natal provincial under-20 team in 1981. He is also a cyclist, like his partner Saad, having taken part in the Argus and Amashova races.
He’s also an accountant who’s not afraid to take risks and this has made him rich.

Tag: May 2014

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