Black is beautiful in business this year

It seems 1994 is the year to be black and in business. With the year just over a month old, there have been three deals involving takeovers of major companies by black businessmen.

The latest of these was the takeover of African Life Assurance by black investors this week in a deal worth R160-million. It follows hot on the heels of the Argus Group’s sale last week of the Sowetan, the country’s biggest-selling newspaper, to a black consortium led by Nthato Motlana

It is one of a stream of big companies in which black groupings have acquired controlling stakes without necessarily having capital at hand. They have mostly had to rely on outside parties to provide the financial backing. Observers believe this will become a trend.

‘It is interesting to see that black entrepreneurs are taking exactly the same route as Afrikaner capitalists in the 1940s by establishing insurance houses. There is clearly a move to mobilise black savings,” notes Innes Labour Brief publisher Duncan Innes.

The African Life deal involved the sale by Southern Life of 51 percent to the “Acquisition Group”, which includes prominent black businessmen, various church groups, some Congress of South African Trade Unions-aligned trade unions, the National Stokvels Association of South Africa (Nasasa) as well as Kagiso Trust and provident and pension funds. Southern continues to hold a 25 percent shareholding in the assurer. It hopes this will enable it to benefit from the anticipated growth of Aflife.

Although the transaction is undoubtedly part of the white business community’s stampede to be seen to be involved in black advance and empowerment before April, it also makes sound business sense. For Southern, its stake in the company will enable it to tap into Aflife’s expansion in the black market. The new owners include groupings, such as cash-flush Nasasa, and the trade unions, who will give the assurer an edge over competition in the rapidly growing black market.

Black investors are not inheriting a used car on its last legs. African Life is a successful company with total assets of R312-million and a growing recurring premium book which in the last financial year stood at R104 -million. It’s share price has also outperformed both the All Share Index and the Financial and Industrial Index on the Johannesburg Stock Exchange.

Judging by the performance of Aflife’s share prim since management issued a cautionary notice, investors also think the deal is a good one. The price rocketed from 450c when the cautionary was first issued to a peak of 555c. It has since settled back to around 510c. When the deal was concluded the price was at 470c and it was at this value that the R160-million price was arrived at.

Market optimism about Aflife is based on the fact that the groups forming the Acquisition Group are all major interest groups with large followings and “legitimacy”. It is said that together they have a membership of more than three million and incoming Aflife chairman Don Ncube (an Anglo American executive) estimates an average of three dependents per member, which would give them access to 15-million strong market Although this may be a little exaggerated, there is no doubt this will be beneficial. This will also be enhanced by the fact the that all these are shareholders of the company.

Ferguson Bros insurance analyst Steve Rubenstein points out that the added advantage of the link-up is that members of stokvels and trade unions are employed people.

“The next five years is going to be a good time for African Life. It will see an enhancement of value,” reckons Rubenstein.

Furthermore, management remains unchanged and the only significant changes will occur at board level, which will be led by Ncube. There is, however, no doubt the new owners will insist on more vigorous implementation of affirmative action. That the new management will use Aflife as a vehicle for other ventures is indicative of a strategy black business interests are using to secure financial clout before embarking on major projects.

Most of the recent acquisitions, such as Prima Bank and Methold, have been in the financial services field. The two most ambitious business startups by black businesses sector, namely African Bank and Future Bank, have also been in this field.

A major development is the strengthening of the union movement’s participation in the arena. With foreign funding drying up, unions are looking for innovative ways of generating capital necessary to make them self- sufficient.

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