Congratulations on breaking the doors down at Anglo American, the mining house that has long been a been a byword for male chauvinism. The all-male culture goes back to Harry, the son of patriarch Sir Ernest Oppenheimer, who was perfectly happy to see his retiring son Nicholas head towards the boards of Anglo and De Beers, but who determinedly kept his more vivacious daughter, Mary, well away from the centre of power.
This, of course, is now ancient history and was only discussed by Johannesburg’s chattering classes when the chatterers were confident that their badinage would not get back to the Oppenheimers’ Brenthurst compound. But the attitudes instilled by Harry can often be discerned to this day.
You might not yet have discovered it, but Harry knew how to bind his chosen key men in something reminiscent of feudal fealty. The fat salaries paid to the top brass in Anglo and De Beers were not paid by the companies themselves — they came out of the Oppenheimers’ own purse, EO & Son. Look, it made some fabulously rich, but at the cost of their kowtowing and even adopting some of the mannerisms of the chairman. There are still some who affect Harry’s pronunciation of “rond” when talking about South African currency. You’ll know when you hear it.
Anyway, now you are entering the doors of a kingdom whose reputation still suffers from the Harry legacy. Years ago, we used to joke that the fact that Anglo’s share price invariably discounted the underlying market value of its assets was because of the “management discount”. In other words, head office management’s contribution to the group was negative. It helps explain why for months Anglo, the world’s third-largest mining company, has been openly discussed as the target for a takeover by one of the other mining giants. But you understand this, you probably picked up the concept back at Harvard in Finance 101.
The view has increasingly become that outside management could improve the performances of Anglo’s fine array of assets better than the present incumbents. Why, only a couple of weeks back Brian Gilbertson was talking of Anglo being ripe for a reverse takeover by his company, Russian aluminium group Sual. Gilbertson knows only too well what it meant to be part of the Anglo empire. When he was on the board of the old Rustenburg Platinum, now renamed Anglo Platinum, he was viewed by the Anglophone Anglo/JCI aristocracy as “not quite one of us”. Gilbertson decamped to the more flexible environment of Afrikanerdom’s General Mining and, from there, went on to build his new company into BHP Billiton.
He escaped the Anglo ethos and soared to far greater heights than he might have in the group snake pit. Many of the Anglo group colleagues he left behind knew little of the outside world of business — they had largely been in the Anglo empire, man and boy, since being spotted as potential high fliers by the Anglo university recruiting teams.
Sure, Tony Trahar — a regular at the Oppenheimer dinner table and the chap whose seat you will soon be occupying — has done some clearing of the Augean stables, a cleaning that started with the cutting of the incestuous (some might say umbilical) De Beers/Anglo cross-shareholding that was central to the Oppenheimers’ control of the greater group. It’s all very well selling. Growth these days cannot be predicated on organic increase alone, it has to be accompanied by acquisition of assets that your management can make perform. Except that poor old Anglo has not enjoyed the market rating that would have allowed it to go head-to-head with the likes of Rio Tinto, CVRD or BHP Billiton. And while it might have used some of the proceeds of its non-core asset sales to buy new assets, the amounts were comparatively trifling and better distributed to shareholders as a means of boosting the Anglo share price.
That’s why Gilbertson talked of a reverse takeover. Sual’s shares, he reckoned, were better rated than Anglo’s. So when Anglo came looking for acquisitions, it would be at risk and probably wouldn’t realise that it was.
There is little point in your reversing or halting some of the sales that Trahar has initiated. Why should you want minority stakes in companies that are unlikely to outperform those you truly control? There is little point in holding on to Anglo’s residual stake in AngloGold Ashanti. It is not likely to outperform and, with your shareholding, it’s unlikely that you will greatly influence for the better the way in which the company is run.
Paper company Mondi is a different kettle of fish. It simply doesn’t fit into a mining group. Maybe Trahar should have accelerated its sale, but it is where he cut his teeth in the Anglo group before his elevation to the group CEO’s office. Before you sell, though, work out how you are going to get the proceeds out of South Africa. It’s clear you are not the sort of person who will put up with any of our local nonsense, that you are going to point Anglo in the direction of developments in countries where it does not have to put up with the political legacy of its apartheid days.
Perhaps you made this attitude clear when Alcan was playing the reluctant investor over the proposed aluminium smelter at Coega. It would have been a good message to deliver to the sort of people in government who squawked the race card when pale male Gavin Penny was appointed MD of the Oppenheimer clan’s diamond business, the London-domiciled De Beers. Penny has many attributes but, unlike you, he has been an Anglo or De Beers man all his working life. “One of us”, perhaps, but with none of your hands-on experience of the cut and thrust in the real world of geology, mines and smelters.
But you will also be all too well aware that you have to be seen to be making appropriate appointments here in South Africa — appointing appropriate people who will stay longer in the local hot seat than the unlamented Lazarus Zim. Don’t forget there are people here whose noses may have been put out of joint by the appointment of you, an outsider, as Anglo’s CEO designate. I’ve already heard rumblings of discontent and rather uncharitable comments about how lucky you were to have been sitting next to chairman Mark Moody-Stuart in Davos. You’ll understand the emotions; you probably felt them yourself when the latest appointments at Alcan pushed any prospect for you of a CEO position at that company way out into the future.
Have you started to think about what you should be doing with Anglo’s 45% De Beers shareholding? If I were in your boots, I’d be considering what might be the best possible way of getting out of it and turning the asset into a stake in something you can make perform.
For all the sweetness and light of the De Beers-sponsored Kimberley Process, which is supposed to halt the flow of so-called blood diamonds on to the fingers, necks and wrists of the world’s women, blood diamonds must at one time or another have been delivered into the market by the De Beers cartel. Sure, there’s no hard evidence, but when De Beers did control the diamond market and could still rig gem prices, all the other hoods in the diamond world were bringing it diamonds that had been sold to fund myriad African wars. The difference between the suave and sophisticated, who populated the old De Beers boardroom, and the unofficial rough trade operatives in or on the fringes of Angola, the Congo and other war zones was probably superficial. But a nod and a wink from the Brenthurst éminence grise would be all it took to do anything needed to maintain the cartel’s grip on the diamond market.
Anyway, the present De Beers regime is mightily concerned over the coming Leonardo DiCaprio movie about blood diamonds. Its spin doctoring is making everyone in the trade dizzy, and its calls for the movie’s producers to make it clear that “this doesn’t happen now” are risible. There’s a real danger that the Hollywood glitterati could turn away from diamonds, just as they turned away from animal furs. And that could be catastrophic.
You are probably reading furiously about Anglo, but don’t overlook what really underlay the agreement that extended De Beers operations in Botswana. That government upped the share it takes of Botswana’s diamond revenues. And De Beers had, by and large, to take it because of the importance of the Botswana mines to the company’s overall supply. No one will say so at the official photo opportunities where smiling black and white faces and firm handshakes are de rigueur, but there are influential characters in South Africa’s and Botswana’s governments who are singularly unimpressed when the Oppenheimer name comes up. And that’s putting it gently.
To some considerable extent, De Beers might be seen as a family firm providing sheltered employment to Nicholas and Jonathan, the representatives of the third and fourth generations of the Oppenheimer diamond dynasty. But what they say largely goes, and they still have considerable influence over the Anglo old guard. In other words, your ability to control the direction of De Beers could well be circumscribed.
Get rid of it, even if it means trading some of Anglo’s De Beers shareholding with Oppenheimers in exchange for their shareholding in Anglo itself. Don’t forget, the Oppenheimers are probably feeling insecure with their shareholding of only 40% of De Beers and the possibility of Anglo and the Botswana government selling their 45% and 15% shareholdings to cash-flush outsiders.
Anyway, that’s enough unsolicited advice from this recycled mining engineer to a former geologist. You have a great opportunity to restructure Anglo into what it should be: a global mining group as good as any of the others.
Have fun, Jim
Jim Jones is a former editor of Business Day