Business

Show me the money

Kevin Davie

This was the decade when success was spelled E-X-C-E-S-S? Kevin Davie counts the ways -- from the heroes to the zeros.

The Noughties were the decade of increasing wealth and income inequality both here and elsewhere. It was all about the bucks. Big bucks.

South Africans are generally little leaguers compared with the heavy hitters of Wall Street, but we also have some stand-out personalities who, and companies which, have excelled at excess.

The decade started with the warning that if things seem too good to be true, they probably are. The dotcom era (1995 to 2001), and resulting fallout, were fresh in everyone’s minds.

But Federal Reserve chief Alan Greenspan came to the rescue, decreeing that Americans would have cheap money to ease the pain of the blown bubble. The game was now on. Everybody wanted to play.

Wall Street realised that it could party and send the hangover to the taxpayer. You bet your own balance sheet but put the government on the hook if things went wrong.

As with the dotcom era, new rules were needed. The old ones were a bother.

Regulation became a tradeable item. If a market was too regulated, players just created a new one.
Today’s derivative became tomorrow’s credit default swap.

An innovation was the subprime mortgage home loans to people who could not afford the repayments. These were then spliced and diced to create, in a truly magical way, AAA-grade investments sold into the markets as something as safe as houses.

It all became a little unreal. A German economist later described trade with the Americans: “We give them Mercedes-Benzes, they give us Lehman paper.”

If the rules got too much, you could just ignore them. Witness Bernie Madoff. The word “Ponzi” did exist before 2000, but Madoff executed it with such aplomb, such chutzpah and finesse, that he should be allowed to copyright the word and earn a small fee every time it is used. In the spirit of the times, make that a large fee.

Hero and zero were never far apart in the Noughties. It is fitting that the decade ends with Tiger Woods, the world’s greatest sportsperson, or at least its richest, embroiled in a seedy scandal with his pricey public image 100% at odds with reality.

If you think that we—South Africans—have been wallflowers at the party, think again.

We have some world-class candidates. Let’s start with Brett Kebble, truly podium material in this game.

His genius was to understand, or believe like his Wall Street peers, that everything—including the national police commissioner—is ultimately tradeable.

But Kebble’s currency was altogether different to that used on Wall Street. He was the master of the now-you-see-it, now-it-might-not-be-there-at-all BEE (black economic empowerment) deal.

He soon created a make-believe empire that was completely unfathomable to outsiders.

The empire supported a lavish lifestyle with enough exotic cars to set up his own dealership. He also became the country’s top benefactor of the arts.

But in one sense Kebble was a little leaguer. When the music stopped in his game of musical chairs, he seemed to believe that he should kill himself rather than face the rest of the game without a chair.

True masters of the excess don’t kill themselves. They get a spin doctor and brazen it out. You go on Oprah or Noeleen on 3 Talk. You join the Rhema Church. If you end up in jail, you develop an incurable illness and are freed so that you can apply for a presidential pardon.

Kebble, the amateur, didn’t get this.

Our corporate equivalent of Lehman Brothers is petrochemicals giant Sasol. Overseas it was fined the equivalent of R3,7-billion by the European Commission for price-fixing.

Back home it admitted to cartel behaviour in a string of its divisions, racking up so many contraventions of competition law that it was described by the former head of the Competition Tribunal, David Lewis, as a serial offender.

Whatever the claims by Sasol to the contrary, you have to think its corporate culture is based on two maxims: it is okay to play fast and loose with the law so long as you are making money and, if the brown stuff is about to hit the fan, make sure that it is your brown stuff.

The latter is a well-understood tenet of the age of excess: he who rats first gets leniency.

My individual candidate for best success excess is Patrice Motsepe, who tops the Sunday Times‘s Rich List with investments of R14-billion.

The oligarch’s oligarch, he makes other BEE luminaries, such as Tokyo Sexwale (R1,1-billion) and Cyril Ramaphosa (R988-million), look like amateurs.

Only ArcelorMittal’s Lakshmi Mittal has more investments in South Africa. Note that ArcelorMittal is also in trouble with the competition authorities, having had a R700-million fine imposed on it. The fine is under review.

The suspicion with Motsepe, it has to be said, is that he sees broad-based empowerment to mean that it includes his wife and kids, while the other oligarchs have seen it in at least slightly wider terms.

But whatever Motsepe’s exact strategy, it could only have been in the age of excess that his invested wealth could so quickly eclipse the combined investments of the Oppenheimers (R5.3-billion), Ackermans (R3.2-billion) and Ruperts (R3.1-billion).

The Rich List tells us more about our star performers. There’s the mysterious Elephant Consortium, which is in sixth place with investments of R3.2-billion. Elephant excels in both secrecy and excess.

It is much richer than the Royal Bafokeng, position 22, with investments of R674-million. The Bafokeng own a chunk of the richest land anywhere, abundant in platinum, chrome and other desirable metals and minerals.

Elephant’s only asset is a big slug of Telkom, notorious for overcharging us for inferior service.

Who is Elephant? Headed by former communications director general Andile Ngcaba, it has leading BEE luminary Gloria Serobe as a shareholder too. Smuts Ngonyama, Thabo Mbeki’s former spokesperson, was also a shareholder, but is said to have since quit.

Is it wrong to equate BEE with excess? A successful South Africa needs wealthy black people just as much as it needs a thriving black middle class.

But it is clear that relatively few well-connected people have been able to garner much more than an equitable share for themselves. You would not have expected less from excess.

There is also a handful of whites who have done spectacularly well from BEE. Top performers are HCI’s Johnny Copelyn and Mvela’s Mark Wilcox at positions 31 and 32, with respective investments of R529-million and R493-million.

Copelyn, a one-time unionist, made his fortune through managing the investments of the Southern African Clothing and Textile Workers’ Union (Sactwu), securing a personal stake in ¬≠investment holding company HCI along the way. HCI, which has Sactwu as a ¬≠significant investor, used its ¬≠empowerment credentials to ride the BEE wave.

Wilcox, Sexwale’s financial man, has a significant stake in Mvela. He has prospered in particular from the early days of BEE when leading businesses somehow thought that BEE deals had to have Motsepe, Ramaphosa or Sexwale at the helm.

Former MTN financial director Robert Nisbet is also one of these white beneficiaries of BEE. The Rich List shows him in position 53 with investments of R253-million.

Nisbet and other senior MTN directors were the prime beneficiaries of a deal funded by the Public Investment Corporation, the terms of which have not been disclosed.

They were major shareholders of a staff trust, Newshelf, which the company used as part of its empowerment credentials.

Their positions in Newshelf were unwound in December 2008 and several of the beneficiaries have now left the company, but three of them, Phuthuma Nhleko, Ralph Nisbet and Sifiso Dabengwa, still appear on the Rich List with combined investments in MTN of R1.1-billion.

I am all for people making money. In MTN’s case I’d be cheering louder than the next person, although not for Nesbit (whites should not have benefited from BEE, no matter what), but for one small matter: interconnect fees of R1.25 a minute.

The cellphone networks charge themselves and Telkom these fees for calls which terminate on their network.

The fees, which are completely out of whack with what they should sensibly be, make MTN a giant machine for taking money from the poor and giving to the rich, including their fat-cat directors.

Have a happy Christmas and an excessful New Year.


Topics In This Section

Comments

blog comments powered by Disqus