Canny move or more control for Wiese?

At first glance it looks as if Mergence Investment Managers has just paid R420m to become a junior member of Christo Wiese’s control pool at Brait. That sounds like an excellent deal for Wiese, who is thought to be under some cash pressure in the wake of the Steinhoff implosion, but not such a good one for Mergence or the funds it manages.

A voting-pool arrangement tends to be dominated by the major shareholder and minority investors struggle to secure privileges, such as any influence on the underlying strategy. The Brait voting pool represents 46.35% of shares. Wiese’s private company Titan remains the largest shareholder by a long shot with more than 35%. The 27.3-million Brait shares just bought by Mergence lifts the investment manager to 9%.

Even in the post-Steinhoff era, not too many people would be optimistic about their chances of exerting influence over Wiese with this sort of stake. Yet the Mergence team appears to be. It is confident the voting-pool arrangement with Titan will deliver the “value-unlock strategy” it believes is most appropriate for Brait. It also notes it is the only party Titan has contracted to deliver on that strategy.

But there appears to be a gap in objectives with Titan stating it is aligned with the Brait board in working with its corporate advisers to reduce debt and drive the performance of underlying investments. By contrast, Mergence also wants to amend Brait’s advisory contract, reduce its costs and sell off assets.

Mergence’s stance towards Brait seems significantly more aggressive than Titan’s. Whether this reflects the reality or just the usual posturing of the early stages of a value-unlock strategy will become evident soon.

Capitec stamps up its footfall with more branches

As the big banks close branches, Capitec plans the opposite: it wants to grow its branch footprint and hire 600 new employees in the next six months alone.

The other big banks have become union Sasbo’s enemy number one, and a strike was narrowly averted, thanks to the labour court ruling on Thursday that such a demonstration would be unprotected.

Banks say digital banking-induced retrenchments are unavoidable because many branch employees’ jobs have become obsolete. But Capitec has somehow managed to grow both digital and branch activity, showing everyone that using digital systems to raise efficiency does not have to be a zero-sum game.

Its digital banking clients have grown to 6.8-million a month, but more than 6-million still visit its branches, it says. The key insight in these numbers is that in SA, where data costs remain high and a big part of the population still feels too uneasy or is not literate enough to bank online, there is power in having a branch network even if inbranch transactions decline.

Capitec has more than doubled its number of branches in a decade, from 371 in August 2009 to 834 in August 2019. Its plan to continue growing its branch footprint, shows it understands the power of physical presence in a way other banks don’t.

While in-branch transactions are not growing as they used to, Capitec is using its bricks-and mortar presence to sell about 80% of its funeral policies. Branch presence is also likely to have played a big role in Capitec attracting 200,000 new clients every month over the past six.