For­tunes of a plat­inum na­tion

The Royal Bafo­keng own a strip of SA’S plat­inum belt and have used its wealth to cre­ate so­cial sta­bil­ity. It and its cap­i­tal, Pho­keng, shine as a bea­con of suc­cess, writes Mamello Masote

CityPress - - Business -

When Royal Bafo­keng Hold­ings (RBH) did not de­clare a div­i­dend last year, there was spec­u­la­tion about the com­pany’s fi­nan­cial health and whether the com­mu­nity the in­vest­ment com­pany ul­ti­mately serves would be­gin to crum­ble. RBH is the mon­ey­maker for its sole share­holder, the Royal Bafo­keng Na­tion Devel­op­ment Trust, which dis­burses div­i­dends re­ceived from in­vest­ments for so­cioe­co­nomic devel­op­ment in the Bafo­keng com­mu­nity.

The Royal Bafo­keng na­tion is based in North West. It is a Setswana-speak­ing monar­chy that owns about 1 400km² (140 000 hectares) of land.

Min­ing com­pa­nies pay the Bafo­keng roy­al­ties to mine on its land.

Although times have been tough on the plat­inum belt, RBH re­mains in good health.

Its chief ex­ec­u­tive Al­berti­nah Kekana says: “We are not go­ing down the tubes; we have a very strong bal­ance sheet.”

Kekana has been at the helm of RBH for al­most two years. Be­fore that, she was the chief op­er­at­ing of­fi­cer at the Pub­lic In­vest­ment Cor­po­ra­tion for eight years.

But RBH knows what it means to be broke. In 1998, it ran out of funds due to the mis­man­age­ment of the min­ing roy­al­ties and had to go cap in hand to FNB for a loan on the back of ex­pected roy­al­ties from the mines.

Iron­i­cally, it now owns 15% of FNB’s hold­ing com­pany, RMB Hold­ings.

In the past 10 years, RBH has paid more than R10 bil­lion in div­i­dends to the com­mu­nity, largely fa­cil­i­tated by its in­vest­ment in Im­pala Plat­inum and Royal Bafo­keng Plat­inum, which have been un­der sig­nif­i­cant strain more re­cently.

“If you go into our [RBH] port­fo­lio, his­tor­i­cally we have been very re­liant on our plat­inum as­sets for div­i­dends, and be­cause of the chal­lenges in the plat­inum sec­tor, our plat­inum as­sets are not able to sus­tain the level of div­i­dends they have paid in the past,” says Kekana.

“We are relook­ing the port­fo­lio just to make sure we are able to pay div­i­dends in a way that is not overly re­liant on just one or two as­sets.”

Some of RBH’s big­gest non­min­ing as­sets in­clude a 14% in­ter­est in prop­erty com­pany At­tacq and 9.4% of in­dus­trial com­pany Me­tair In­vest­ments, as well as the 15% in­ter­est in RMB Hold­ings.

But the bulk of its in­vest­ment, about 40%, is still in min­ing. Here, RBH holds a 56% in­ter­est in Royal Bafo­keng Plat­inum, 13% of Im­pala Plat­inum and 29% of Mer­afe Re­sources.

The plat­inum sec­tor has been plagued by a five­month-long strike and the metal’s price has also come un­der pres­sure, but Kekana says RBH re­mains com­mit­ted to min­ing.

“I think there are chal­lenges that have to do with the com­mod­ity’s cy­cle and chal­lenges that are struc­tural in their na­ture,” she says.

“There are is­sues of over­sup­ply in the [plat­inum] mar­ket, which is ev­i­denced by the fact that even though we have gone through a five-month strike pe­riod, the plat­inum price has not re­cov­ered.

“But we also have ge­o­log­i­cal changes in terms of the qual­ity of the min­er­als and mines go­ing deeper and be­com­ing more ex­pen­sive to mine, [we have chal­lenges with] our abil­ity to con­tain costs and the need to build a more sta­ble labour en­vi­ron­ment, and there are also wider so­cioe­co­nomic is­sues around min­ing towns.”

RBH’s net as­set value has grown from R8.8 bil­lion in 2005 to R31 bil­lion at the end of last year.

Per­haps learn­ing from the fi­nan­cial cri­sis in 1998, Obak­eng Phetwe, the chief ex­ec­u­tive of the Royal Bafo­keng Na­tion Devel­op­ment Trust, says the na­tion uses cash very con­ser­va­tively and only spends about a third of its cash re­serves.

“One of the things the na­tion adopted was a cash pol­icy. If they have R3 in the bank, they can only spend R1 so that if things are bad, you have about two years as a cush­ion while you re­think the strat­egy and re­bal­ance the port­fo­lio and things like that, so it’s been fairly un­in­ter­rupted,” says Phetwe.

Kekana says RBH did take on some debt to fund its di­ver­si­fi­ca­tion strat­egy. “We used some of those div­i­dends [that were not paid out] to in­vest in new as­sets and when we got to a phase when that was not pos­si­ble, we geared up our port­fo­lio and took on debt to take on the fi­nan­cial ser­vices in­vest­ment, for ex­am­ple.”

Ac­cord­ing to Kekana, RBH wants to ring-fence its debt a lot more so the en­tire port­fo­lio is not ex­posed to debt. Its debt cur­rently sits at R9.38 bil­lion.

“If we find an at­trac­tive op­por­tu­nity, we will look to raise money specif­i­cally against that as­set and ring-fence what­ever debt we raise to that as­set and put some eq­uity on to it.”

Sec­tors she finds at­trac­tive are in­fra­struc­ture, con­sumer-fac­ing in­dus­tries, in­dus­tri­als and prop­erty.

PHOTO: DEN­ZIL MAREGELE

HEAVY METAL Cranes roll into work at Kedase, a small busi­ness in Pho­keng, North West,one of sev­eral in­fra­struc­ture projects in the area

PHOTO: MUNTU VI­LAKAZI

MON­EY­MAKER Al­berti­nah Kekana, the CEO of Royal Bafo­keng Hold­ings

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