Old Mutual MD Roddy Sparks epitomises the company’s energy. On Thursday the insurance giant threw a big bash to celebrate 160 years of existence. Yet, with its new-found empowerment partners, the company has confidently branded itself the “New Mutual”. Well, there is nothing like acquiring a young partner to make one feel new again.
Sparks describes the group’s empowerment deal, announced last month, as the “centrepiece” of its recently released corporate citizenship report. The deal gives 11% of Old Mutual (OM) South African business to two consortia and staff, as well as clients and distributors. The empowerment partners are the Wiphold Consortium, led by Gloria Serobe and Louisa Mojela, and the Brimstone Consortium, under the leadership of former Cabinet secretary Jakes Gerwel.
The deal, and other major empowerment deals, raises questions about where it might all end. Given that OM’s partners’ stakes are unencumbered, once the deal is paid off they can do with their stake what they want. What if they sell and dilute OM’s empowerment shareholding? Would all this work have been for nothing?
Sparks notes that they would be required to sell to another empowerment player. But, in the case of OM, he points to the 70 service-level agreements signed by the partners to deliver, for example, R2,5-billion worth of new employee benefits business.
“I hope that the commercial relationship that the deal establishes will outlast any repayment periods or [charter monitoring periods],” he says.
OM has led the industry by being the first to pay back excessive penalties to retirement annuity holders following a ruling by the pension funds adjudicator. The adjudicator found that insurance companies were wrong to pay a commission that covers the entire life of an annuity and then penalise a policy-holder if he or she reduced or stopped paying the premium.
Sparks disputes the assertion that even though OM was the first to act, it only did so as a result of a crackdown. “We are actually proactive,” he says.
He points to the company’s new investment product, Max Investments — the one with the cool ad of a broken house, broken luxury car and broken piano. Apart from lower costs and a choice of investment platforms, it also offers customers the option of paying the commission up front or “as and when” they pay their premiums.
The pursuit of the global growth strategy has been a defining theme for OM and Sparks since he took over in 2001. His role has essentially been to pump out the cash to fund growth in the United Kingdom, Europe and the United States. One can imagine the “here comes the money man” reception he gets when he attends the OM plc executive committee meeting in London. “It is not like that,” he says. “My challenge is to make sure that South Africa grows as a contributor to earnings.” The long-term reality, though, is that the US will be a second centre of power. In the first quarter of this year, the US asset management business enjoyed inflows of $9,4-billion.
Another theme that will define Sparks’s tenure is transformation, which coincides with the most rapidly changing phase of the company’s history. Sparks says OM applies an aggressive transformation strategy at the point of recruitment but “once inside, everyone gets the same chance to compete and advance”. That is probably why the company has 45% black junior management, and 55% women junior management. They form the generation that will help grow the 19% senior black management and 24% of women in senior management.
Sparks says he “would like to challenge” Minister of Public Enterprises Alec Erwin’s view that industry is not ready to take advantage of the government’s planned R160-billion infrastructure spending. The group currently manages R4,9-billion worth of infrastructure assets. Sparks points to the 20% cash sitting unused in its R1-billion Ideas Fund as a sign that “there are not enough projects”.
He believes that allocating some retirement fund industry assets should be market-driven since these offer good returns. OM’s Ideas Fund has offered returns of 15,8% over three years. Some of its infrastructure investments include the N3 toll road and bidding as part of a consortium to build an airport in Mumbai, India.
The group estimates that it has facilitated empowerment deals worth R1,7-billion. It has holdings in groups such as Wiphold and recently took a 20% stake in Bulelani Ngcuka’s Amabubesi Investments.
Sparks is adamant that, at 46, he just wants to run a company he joined in 1987 as an investment analyst. “I don’t want to go to London, I have told Jim [Sutcliffe, Old Mutual plc CEO],” he says of the prospect of running the group. One has to believe him when he says he “wants to get results and grow this company over the next few years”.
It is, after all, a very old, or rather new, company.