Charlene Smith
Since April last year, Old Mutual has invested R2,3-billion in 26 black empowerment deals and says there is no cap on how much more it is prepared to invest. The company’s commitment to economic empowerment is the biggest and most significant initiative from a South African financial institution.
Its portfolio manager in charge of black empowerment, 28-year-old Derrick Msibi, says it was only after his wife read a recent article in the Mail & Guardian about financial institutions involved in black empowerment that he decided to adopt a public profile about Old Mutual’s incredible backroom work.
Msibi says Old Mutual is investing money from its R235-billion asset base in empowerment. Existing investments have already seen returns averaging about 35%.
Msibi is a hard-nosed deal-maker. “There are two types of empowerment groups,” he says. “Some are guys building shacks, picking up all sorts of assets without thinking about what they are going to create, and when the rain comes, which it will, most will get washed away.
“The second group are building mansions. They have sat down and agonised about the areas they want to build in. They have strategies about how they are going to differentiate core competencies. We are not interested in guys who are investing 1% here and 2% here. They will make no real difference in economic terms.”
Msibi is maintaining a conservative approach to investments. “We have looked at structured finance deals to the value of R2,36-billion since April last year. Investments are carefully selected in terms of the risk- return relationship.”
Investments include 12 deals amounting to R521-million in ventures like Johnnic and black-driven transactions involving Forbes, African Media Entertainment and Avis.
Beneficiaries include the Women’s Investment Portfolio, Malasela, Worldwide Investments, the Women’s Development Bank, the National Empowerment Consortium and the South African Railway and Harbour Workers’ Union Investment Company.
Old Mutual has placed R145-million in unlisted direct equity investments.
“We want to identify people before they come to the market. The average investment is about R20-million. Here we look for the credibility of partners and future deal flow.”
Investments in listed empowerment companies must be black-controlled and black-run, with the ability to deliver above-average returns.
Black-chip investments include Real Africa, New Africa Investments Limited, Hoskens Consolidated Investments, Capital Alliance and Molopo Foods.
Old Mutual has also placed R700-million in infrastructural development investments, including sugar and electrification notes issued by Eskom, the Land Investment Trust and the Rand Water Board. Msibi says empowerment has evolved over the past four years: “Then it was enough to have black directors and if the director was a black woman, so much the better. Now the criterion at listed black companies is what difference are they making at the companies they are in.”
Old Mutual is not involved from any sense of altruism, he adds: “We are saying to these guys, sell us a vision – one that can create wealth for us as shareholders.”