Lebashe founder talks loans, Matjila, malice — and that comment by Holomisa

BEE (black economic empowerment) investor Lebashe ripped into United Democratic Movement (UDM) leader Bantu Holomisa this week for his comments that the company unduly profited from Public Investment Corporation (PIC) money. Business Day asked founder Warren Wheatley how much funding the group has received from SA’s largest asset manager?

The PIC only funded Capitec, which was really our founding transaction.

You say you’re being targeted and haven’t made many friends – why is that and why should that be the case?

I get the sense that if people were competing on a particular transaction and they don’t close it, their next reaction is to call foul on the winner. The comments [made by Holomisa] are not true so there must be a different agenda. And that’s why I’m so certain that it is a malicious agenda at play: spreading lies and conjecture and joining dots where there aren’t any.

Specifically, on the allegation that Harith General Partners and Lebashe are one and the same? Easy mistake given that Harith CEO Tshepo Mahloele is one of your directors, as well as Jabu Moleketi?

Making it sound as if they’re one entity creates this confusion in the public’s mind. The guys have done great deals so their names are popular and it’s easy to write sensationalist stories when you don’t have the facts.

Who have you dealt with at the PIC? Dan Matjila?

You know, the PIC have different silos … and depending on what the transaction is, we would go to that particular analyst who’s in charge of that area.

In certain cases when we were asked to come and present, Dr Dan [Matjila] would be present in some of the meetings and question us on some of the more complex issues, but it was never one-on-ones or anything like that. I’ve always presented to a group of analysts like any other bank; the same kind of thing happens when we present deals to Investec or Absa.

How did Lebashe come about?

I was a wealth manager at Absa Wealth and Tshepo [Mahloele] was one of my clients and I decided to leave and start my own advisory business. One of the ideas I took to him was a method to acquire a chunk of Capitec shares I knew were being warehoused by the PIC, and in doing that we purchased a shelf company called Petra Touch, and I presented him a fully funded deal [backed] by Investec. We presented an offer to the PIC but they came back and said: number one, our price was too cheeky, and number two, we’re holding these shares for BEE so we can only sell it to a consortium that meets BEE requirements. We then put together a consortium, we also used call and put options to structure a deal with Investec, so we submitted an offer and signed a sale of shares agreement. But then you have to go through a legal process and, in between, Capitec’s share price increased by about 40%. So they adjusted the price — they couldn’t sell it to us at R370 when the market price was R540. But because we had already effected the hedging transaction with Investec we were short the 40% and the PIC funded the difference for us.

As part of my advisory mandate to Tshepo, I asked for some of my fees in cash and some in equity in the consortium and I became a shareholder in Lebashe. We’d created a decent amount of net asset value in the entity and then we thought, do we use the value the same way that Remgro or PSG did and build a permanent capital vehicle? So we changed the shelf company from Petra Touch to Lebashe and the name comes from Legacy Balance Sheet. Our first aim was to start building a financial services platform. We then identified an additional opportunity with Capitec and approached the PIC to fund this second leg … the first tranche of the loan has been repaid.

How big was the PIC loan?

It was for about R720m and we repaid just over R1bn to them ahead of time. The second [was] a facility of R1.5bn and the idea there was to give all existing BEE shareholders the opportunity to exit and we would buy them out and create a listed vehicle. That transaction is still under way.

Are you a bit like African Rainbow capital?

I wouldn’t compare us. The key difference besides being listed — and we have plans to list in the very near future — we wouldn’t take a stake of less than 30% in a business. The whole idea is to bring a financial services platform to market where the full range of services are made accessible to all people, including insurance, banking, investments … and what we want to do is collect capital from institutional investors and use that to fund SMEs [small and micro-sized enterprises].

Do you think BEE has been perverted by politics?

I think that type of behaviour creeps into all types of business, not only BEE transactions and not only in SA. We don’t hardcode any political party into our structures. I’m politically agnostic. I do vote but I’m not going to say who for. Our balance sheet was built through finesse and financial engineering as opposed to political favour.