The David Gleason Column
For many of South Africa’s larger companies the imperative to become globally competitive is compelling.
There they are, rushing to establish themselves abroad, confident they can compete on equal terms with the world’s best. Well, maybe they can but they still need to be certain they are keeping clean yards back home.
I say this because I am taken aback by a story involving the Anglo American Corporation, which is about to list in London, and an argument in which it is embroiled with a senior international loss adjuster, John Makinson, a man widely respected internationally for his experience in insurance and loss adjustment.
Makinson, whose company, Hamilton Consultants, provided a range of insurance services to the Anglo American Corporation, was advised a few months ago that the arrangement would be terminated with notice of less than three days.
I met Makinson quite by accident last month when we were both attending one of those report-back meetings commercial banks occasionally hold for small gatherings of modest businesspeople.
Makinson was clearly visibly shaken by the speed with which his arrangement with Anglo was terminated. Intrigued by all this (because Makinson gave only a hint of the story), I have since made a few quiet inquiries.
It transpires that Makinson’s company was taken on by Anglo to bring some order to its ”captive” insurance business (those elements where the group insures its assets against a variety of assorted risks).
It had been taking losses in this area (about R3-million a year), and Makinson’s job was to reverse this (when he left it was producing a profit of about R30-million a year).
Loss adjustment and risk assessment are arcane sciences at the best of times. In the insurance field, those involved in it at the corporate level around the world are a small community and they get to know one another, or about one another, pretty well.
Makinson’s reputation, or so I gather, is that he’s held in very high regard as a man of probity and a tough negotiator who relies on his ability to get to and assemble the essential facts.
The best example I’ve heard of this involves the original Botswana Soda Ash plant, built to exploit the soda deposits of the vast Makgadikgadi pans in east- central Botswana.
Within five years of erection, the unthinkable happened (doesn’t it always?): a flood expected only every 100 years swamped the place. Typically, the insurers balked at the bill.
Led by AIG, the United States-based largest listed short-term insurer in the world, about 120-million Botswana pula was put on the table.
Anglo, one of Botswana Soda Ash’s leading shareholders, asked Makinson to intervene, and the eventual payout (let me add, by some of the toughest international players around) is said to have been in the order of 230-million pula.
What must have concerned Makinson most would have been the response of the insurance community. As he put it himself, being ejected in two days suggests either incompetence or dishonesty.
He refuses to say why Anglo wanted him out, but other sources suggest the cause was a personality clash of titanic proportions which, if it’s true, isn’t much of an excuse for what looks like very shabby treatment.
More than anything else, it was the abrupt termination of the agreement which put the cat among Makinson’s pigeons.
An intriguing aspect to all this is that as I learned more about it, so a noticeable nervousness began to develop. Makinson, who was quite open earlier, suddenly became increasingly reticent. ”I hope,” he said plaintively, ”you’re not going to write about any of this. All I want is an opportunity to clear the air with Mike King [an Anglo deputy chair] and I wouldn’t want [you] to queer the pitch.”
King, who wasn’t apparently involved in the initial scuffle, has subsequently confirmed an argument existed, but adds that ”we’ve settled with Makinson [they did so last Friday]”.
King also makes the point that Anglo is involved in major cost-cutting exercises now and that these include examining new sources for some of the services it buys in.
My information is that Makinson and Anglo had been looking at a settlement of about R3-million, subsequently shaved a little by the odd R150 000 here and there. But I was also led to believe that Makinson refused to bargain and was angry enough to approach the courts.
Large sums were talked about – I was certainly given to understand that a claim for R10-million wouldn’t be extravagant. This was emphatically denied by King, who won’t be drawn on the size of the package or the nature of the deal.
But what a pity that what ought to have been an otherwise uneventful commercial transaction was handled in a manner which has attracted so much unhappiness – and now publicity.