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03 May 2019 00:00
(Graphic: John McCann/M&G)
Billionaire Patrice Motsepe built his empire over more than two decades. Renowned as a philanthropist and an African business success story, Motsepe keeps company with Warren Buffett and Bill Gates.
Motsepe made his billions at the dawn of democracy in South Africa, becoming the country’s first black billionaire on Forbes’s list in 2008.
His net worth this week is estimated by Forbes to be $2.4-billion, down from $3.3-billion, when his wealth peaked.
But now he has diversified far and wide — from mining into financial services, including banking, telecommunications, property, agriculture and industry, as well as renewable energy, including solar, wind and biomass.
Motsepe started off as a lawyer in the early 1990s, and soon grew a formidable reputation as the first black partner at law firm Bowman Gilfillan in Johannesburg.
His work with the law firm gave him inside knowledge of South Africa’s mining industry and, armed with these skills, he started consulting as a contractor at mines and doing routine work as a legal and corporate adviser.
In 1997 he bought some of Anglo American’s ageing, unprofitable mines and turned them into profitable businesses. At the time, the price of gold was tanking but, with an innovative low-cost strategy, Motsepe started making a profit after only a year.
That was the start of ARM, which launched Motsepe as a mining magnate. He paid back a loan to acquire the gold mines in just three years and also invested in platinum. By 2002, the fledgling ARM was in a position to list on the JSE.
From there Motsepe’s ARM made deals with heavyweight miners Harmony and XStrata, which saw the company evolve into a major mining player in South Africa.
ARM’s latest results, at the end of last year, showed it has total consolidated assets of R34-billion, including the company’s R1.4-billion investment in Harmony Gold. It owns a 14% stake in Harmony. ARM’s market capitalisation in June last year was R23.97-billion.
Motsepe didn’t stop with mining. He created Ubuntu-Botho Investments (UBI) in 2003, and a year later, he madea successful black economic empowerment deal with Sanlam. When the deal came to an end in 2014 after the debt was paid, UBI acquired a 13.5% stake in Sanlam. UBI has an 18.1% voting stake in Sanlam as its empowerment partner, with Motsepe personally owning 55% of UBI.
UBI then founded African Rainbow Capital (ARC), a wholly owned subsidiary of UBI. ARC began to invest in what would ultimately be more than 40 companies. In September 2017 African Rainbow Capital Investments listed on the JSE. ARC holds 51% of ARC-I.
In the first year of its listing, the new investment company almost doubled its assets from R4.4-billion to R8.1-billion. ARC-I, which holds a diversified portfolio of quality investments, including some with an appetite for disruption, is valued at R4.5-billion.
This diverse portfolio includes banking rookie TymeBank, telecommunications startup Rain, luxury property estate Val de Vie, industrial group Afrimat and agricultural firm BKB, andit holds a minority stake in pension fund administrator Alexander Forbes.
ARC-I’s latest financial results showed that, in the six months to December last year, it made new investments to the value of R497-million, which included an additional stake in TymeBank and phosphates miner Kropz.
When TymeBank launched two years ago, ARC paid R317-million for a 10% share. The Commonwealth Bank of Australia was the biggest shareholder at the time, but after the Australian bank decided to pull out last year, ARC lifted its equity to 73% in the banking newcomer.
ARC said it expected 80% of its growth in the medium term to come from the newly launched TymeBank.
Another disruptive entrant, Rain, with former FNB chief executive Michael Jordaan as a prime mover, makes up R2.3-billion of ARC’s investments. ARC has a 20% stake in Rain.
ARC joint chief executive Johan van Zyl, a former Sanlam chief executive, says Rain,which has 40 000 direct customers, wants to erect 5 000 network coverage towers throughout the country in five years, which will make it a telecommunications force.
From the investments he has made, it is apparent that Motsepe, through his companies, is betting on future technology and advances such as digi-banks, telecommunications and, through African Rainbow Energy and Power (Arep), renewable energy.
Arep, formed in 2012, first tried to get involved in renewable energy by acquiring six solar photovoltaic projects through United States company SunEdison. But SunEdison soldto Old Mutual, which then invited black economic empowerment (BEE) bidders to acquire 30% to 35% stakes in the projects.
Arep was then selected as one of three BEE partners to each purchase 15% equity in the SunEdison projects. The value of Arep’s agreement with Old Mutual was approximately R462-million, according to Motsepe.
In October 2016, Arep, also through a private sector bidding process, acquired 30% equity in the Ngodwana Biomass Project from Fusion Energy. The value of Arep’s equity in this project is R153.4-million.
It further invested in wind power through Irish energy company Mainstream Renewable Power, where Arep acquired a 22.50% equity stake in each of the 140 megawatt Kangnas and 110MW Perdekraal East wind farms. Arep’s equity in these wind projects is R188.3-million.
Motsepe is eyeing Africa next, with plans to partner ARC-I with foreign funds in African investments. Van Zyl told BusinessLive it has already established ARCH Emerging Markets Partners to venture into foreign territories.
Last July, not long after President Cyril Ramaphosa came to power, the rumour mill started churning. Critics, mostly from the Economic Freedom Fighters and Black First Land First (BLF), started chanting that the Motsepes are to Ramaphosa what the Guptas were to Zuma.
Billionaire businessman Patrice Motsepe’s family ties with both the energy minister, Jeff Radebe, and Ramaphosa, as his brother-in-law, is a plum target for opponents.This week Motsepe threatened to sue the BLF after its leader, Andile Mngxitama, accused him of instigating regime change in Botswana.
The renewable energy deals for African Rainbow Energy and Power (Arep) as an independent power producer came under fire in a social media assault campaign spanning almost a year. Arep has stakes in nine of South Africa’s independent power producer projects.
When the restructuring of Eskom was announced, critics again said Arep was in a prime position to benefit from Motsepe’s family ties. Former Eskom boss Brian Dames heads Arep;he may be able to leverage his Eskom expertise to benefit Arep in the forthcoming three-way Eskom split.
By February, the rumour mill was irritating Motsepe to such a degree that he called a press conference. “When Radebe was appointed energy minister, I told Brian Dames that we now have a major and serious perception problem,” Motsepe said at the conference. “But the facts speak for themselves. We didn’t acquire a single one of the projects we are involved in from the government. We got them from the private sector in a bidding process.”
Motsepe’s renewables company only got involved in bidding in round four.The total equity value of Arep’s current renewable energy projects amounts to R800-million “or 3.9% of the total equity value of the department of energy’s round four renewable programme, which is R20.6-billion”, he said.
The total black economic empowerment (BEE) equity value of all the projects under the department of energy’s round four programme is R8.6-billion. Arep’s share is less than 10%, he said.
Motsepe conceded that “having relatives in very high positions in government justifiably raises perceptions of favouritism or improper conduct”, but said Arep had consciously avoided doing business with government.
He claimed Arep had to pay more than other bidders. “One of the advantages was we committed almost R400-million of our own money, not borrowed money.”
He agrees that the perception that he is benefitting from his familial ties in government is not something to be scoffed at.
“It is perception, and perception is more important in many instances than fact. The fact is, we’ve got very old, conservative people who work with us and who are there to make sure that at all times we comply with the law and ethics.” Arep “didn’t acquire a single one of the projects we are involved in from the government”, Motsepe said.
Read more from Yolandi Groenewald
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