Rupert: money goes where it is welcome
Business person Johann Rupert has cast doubt on SA’s ability to agree on a social contract between business, labour and government to address the country’s socioeconomic challenges, putting the blame at the door of politicians.
“I’m not too hopeful that there will be a social contract, especially with the overtly racist behaviour of some of the political parties,” he said.
Rupert, SA’s richest man, was speaking at investment holding company Remgro’s annual general meeting. He painted a picture of a country that could no longer attract foreign investment. “Investors do not invest where people call each other comrades,” he said.
He also lamented SA’s failing infrastructure, pervasive lawlessness and the lack of consequences for private and public corruption.
His comments on lawlessness echo those expressed by Old Mutual chair and erstwhile finance minister Trevor Manuel, who said earlier this year that SA is entitled to a speedy resolution to the “epidemic of crime and corruption”.
During the 2022 state of the nation address, President Cyril Ramaphosa promised to “forge a comprehensive social compact that would join all social partners in a common programme to rebuild our economy and enable higher growth” within 100 days.
The compact — which would be focused on energy, transport, and job creation, crime and corruption — has been plagued by endless delays, with all the parties at Nedlac blaming each other for the stalled process. Ramaphosa said in February the government could not conclude a social compact as partners had not reached consensus.
Rupert said on Monday the politicians he “sees on stage” did not give him hope for such a deal to be concluded, but nonetheless urged the government and citizens to “all start working together” to make it a reality.
“We as business, we are
powerless. It has to be the whole society that must get together.”
SA politicians are “decades behind the curve” when talking about nationalisation and the government creating jobs when only the private sector can create employment.
Rupert said the new world works in ones and zeros rather than hard assets.
“You cannot nationalise a person’s brains. And it’s instantly movable.”
Rupert also spoke about the difficulties of investing in SA, saying the country is no longer on investors’ wish list.
“If you cannot guarantee electricity, or water or the safety of the employees, I don’t think we can rely upon foreign capital coming into SA.
“The railways have fallen apart. So now the roads have been overused, so the roads are falling apart.”
As load-shedding intensifies and unemployment rises, a growing number of business leaders have called out the government for failing to maintain infrastructure, cut red tape and create a business friendly environment. In May, Nedbank CEO Mike Brown said Eskom, Transnet and water provision were at crisis levels along with “disappointing municipal service delivery and high levels of crime and corruption”.
NET ASSET VALUE
Car manufacturer Volkswagen last week said it is getting harder to justify having car factories open in SA.
Astral CEO Chris Schutte recently slammed government’s inaction in helping poultry firms cope with the devastating losses caused by mandatory culling in response to bird flu.
Rupert addressed the discount to its underlying net asset value (NAV) at which holding company Remgro trades, saying it is not something the company can sort out as institutional shareholders are responsible for it. This is because large asset managers are the ones that buy and sell shares and move the share price.
Investment firms typically trade at about a 30% discount to underlying assets.
Remgro has taken some listed assets, such as Mediclinic and its whiskey interests, private, so people have to buy the holding company’s shares to invest in them. But despite this strategy, the discount to intrinsic value remains.
Rupert said Remrgo will invest in companies that produce healthy cash flows and not run a firm to close the discount at the behest of analysts, whose ideas he criticised.
“We are willing to engage with anybody as long as what they ask is logical and not based on short-term thinking.”
Some ideas that analysts “push” onto Remgro CEO Jannie Durand and his colleagues are “insanity”.
“I’m gonna incentivise my colleagues to [invest in] proper companies that produce superior free cash flow in a sustainable way over the next five, six and seven years. That’s how this company became successful, not by corporate finance and rejigging apples and pears and moving assets around.
“Find something that is really good and really support it.”