Vusi Khanyile is one of the most unflappable defenders of an unorthodox empowerment strategy you are likely to encounter. The 55-year-old founding MD, now chairman and CEO of Thebe Investments displays single-mindedness about the course his company has pursued, not just over the past five years, but over the course of about 14 years, the longest by a designated empowerment entity.
Two recent deals illustrate the league it plays in. A month ago, Thebe announced a short-term insurance joint venture with Pamodzi Investment Holdings. The newly formed entity has revenues of R1billion, but 49% is attributable to short-term insurance giant Santam, with Pamodzi and Thebe sharing 51% (25,5% each) or just more than R250million.
Last week, Thebe announced a deal in the tourism sector. This deal is a tie-up with listed tourism company Cullinan — owner of Thompsons Tours — valued at a R100million. This will see Thebe become a 25% shareholder in Cullinan at a time when peers are making deals of a higher magnitude.
Looking at Thebe, there is little evidence to suggest it has taken full advantage of its early entry into the empowerment arena. It has been overtaken in areas where it was once a pioneer — and with the Big Four banks and Investec in bed with empowerment partners, Thebe appears to have missed a wave of big financial service deals. If there is one thing it can be accused of, it is a failure to think big.
But Khanyile does not see it that way. “Having been around the longest [among empowerment companies], we have seen the good times and bad,” he says. “The lean years are followed by the mean years,” he adds, suggesting the current economic boom does not overly excite it. He argues that its diversified strategy has created a company that is sound and robust enough to withstand adverse economic conditions in the event of a downturn.
The company deals mainly in the financial services and tourism industries, and has strategic investments in Shell and Kaya FM. Other assets include Cape Union Mart, the V&A Waterfront and Thebe Securities.
Its largest division, by number of people, is Thebe Community Financial Services (CFS). So why did it not tie up with one of the Big Four banks? Khanyile says that was a deliberate decision by the company. “We are not good at taking small stakes in large companies.” He argues that such a deal requires massive capital and gives limited influence. Instead, he would like Thebe “to sharpen its vision around” provision of financial services to new markets for the banking and insurance industry. He points out that recent deals create platforms for Thebe to attain scale in the tourism and insurance sector.
Thebe was the first to do a deal in the petroleum sector when it had its groundbreaking charter. This was the merging of Tepco with Shell Marketing in what was, at the time, reported to be a R300million deal. Khanyile starts by shooting down this figure, suggesting it is far lower than the actual figure. Just as well, since Total announced its BEE deal was worth R900million.
An intriguing aspect of the deal, though, is that when it was signed there was talk that it would extend across the value chain, including the expensive refinery side. That has not happened. Khanyile says “they deemed it imprudent at the time and still do”.
Well, BP have stolen the march on them and did an across-the-value-chain deal through the creation of Monsanto Petroleum with the Mineworkers Investment Company and Women’s Development Bank Investment Holdings. Khanyile maintains that its growth strategy will be through a combination of acquisitions and, in the case of CFS, organic growth.
So how much is Thebe worth and what returns has it given? Khanyile says if you gave him R100 000 in July 1992, it would have been worth R1billion at the height of the late-1990s boom, but reduced to a 10th following the dotcom crash of 1999.
In the period since, he has restored the group to roughly that billion. Well, Safika is valued at R2billion, Gloria Serobe says she has grown Wiphold five times since delisting it at R1billion and Shanduka can point to its 1,3% holding in Standard Bank, currently valued at R1,3billion, to match that.
Khanyile has been around long enough to see open scepticism about empowerment turn into reluctant acceptance. So how much longer does he plan to be at the helm? “I discuss that every year with my shareholders,” he says, “and they still want me to carry on.”