It’s been extremely busy at the Sandton headquarters of the Blue Label Investments (BLI) this week, which says a lot. The company, which has ballooned into a R12-billion-a-year juggernaut with 36 subsidiaries in the space of six years must be frantically busy at the quietest of times.
The extra frenzy revolves around a bid to list the company on the main board of the JSE in November, which, if it succeeds, will thrust one of South Africa’s most intriguing emerging companies into the limelight — and along with it an amazing story of compulsive entrepreneurship, hectic deal-making, serious connections and lots of Johnnie Walker Blue Label whisky.
But perhaps the most intriguing aspect is the rise of two young white brothers, Mark and Brett Levy, 35 and 32 respectively, in the time of black economic empowerment (BEE), and in the highly regulated BEE-intensive telecoms industry at that.
“My brother and I were fortunate enough to have the entrepreneur spirit from the time that we can remember,” says Brett Levy. Their father died when he was five. “We learned to depend upon ourselves”.
Starting with R35 000 in 1997, the Delmas-born Brett and Mark, who had just graduated from Wits with a BCom, bought car radios in Pretoria, flogging them to audio fitment centres in Johannesburg. “Those were the days when cars didn’t come fitted with radios.”
This led them to the insurance replacement industry, which resulted in a wider arbitrage in white goods, among many others. “But all of these things were just really paving the way for us in 2001 when we took a great calling on the market when Telkom launched pre-paid telephony in South Africa.”
The fixed-line monopoly issued tenders for the distribution of their pre-paid products, which included the phones as well as pre-paid phone cards. There were 17 tenders for regional distribution licences going, and three national licences.
In order to bid for one of the national licences, the Levy brothers formed The Prepaid Company, and brought in two empowerment partners, Desmond Lockey and Japie Moropa, and started a company ritual by toasting the deal with a R1 500 bottle of Johnnie Walker Blue Label.
Today, an entire wall at the BLI headquarters is covered with “about 200” bottles, each stemming from another deal or “happy occasion”, says Brett. It is testimony to the brothers’ insatiable deal-making and the orbit into which the Telkom licence propelled them.
One version of the story is that they almost immediately bought out the other licence holders after winning one of the national licences. Selling pre-paid products for Telkom was a low-margin business, and many new licencees did not have enough capital to sustain their businesses.
But Brett Levy counters this, saying that they bought out only one licence holder who ran into trouble.
The unexpectedly rapid take-up of fixed-line prepaid by the market was only the start of The Prepaid Company’s success. In 2002, Telkom shut down its prepaid services for a month in order to install a new computer system.
“Rather than sit around doing nothing,” The Prepaid Company approached all three cellular companies with offers to sell their prepaid products through the distribution network they had built up with retailers throughout the country.
The retailers liked it, because it meant buying from a single supplier, but it took some convincing from the cellular companies, who saw them as middlemen, rather than as marketers of their products.
They came around, especially since The Prepaid Company developed the technology — 80% in-house, says Brett Levy — to sell virtual airtime through point-of-sale devices.
“In emerging markets like South Africa, it’s very difficult to distribute physically, countrywide every single day. It’s also a very big risk [because of] hijacking and theft, and it’s a big threat to the retail stores themselves, because in a physical format, by the time they got to selling the 10th card, sometimes the 10th card was missing. What we did is create a virtual network that would eliminate all three of those things, and can deliver countrywide within an hour.”
A joint venture with an Indian firm to roll out the concept there added another bottle to their collection. In spite of the extremely competitive conditions in India, the roll-out of virtual airtime devices there is going “tremendously well”. One of their reasons for wanting to list is to expand the service to other emerging markets, including the rest of Africa and South America.