4 EASY STEPS FOR A SUCCESSFUL EQUITY PORTFOLIO
Noah Greenhill, the former banker who is best known for putting the JSE’s AltX on the map, has taken up the job of diversifying the business interests of the 350 000-strong North West province community of Bakgatla-baKgafela since mid-2014.
As a result, he’s casting around for interesting investments in the whole gamut of opportunity ranging from property and industry to energy, and even media. The Bakgatla community, for instance, is the 40% shareholder in Siyaya TV, the newish pay-television provider which has broadcast rights to soccer games played by Bafana Bafana and other national soccer teams including Banyana Banyana, the women’s team.
That’s all good and well. In the short term, however, Greenhill is faced with mining issues; specif ically, just how the sale of Anglo American Platinum’s (Amplats’) Union section plays out. The Bakgatla community has a 15% interest in a joint venture with Amplats in its Union mine and smelter, which is held through Bakgatla ba Kgafela Investment Holdings of which Greenhill is CEO. There’s also a pre-emptive right over a further 11% in the asset in the event of it being sold.
Greenhill told Finweek that the Bakgatla has told Amplats it intends to exercise the pre-empt which would take its overall position to 26%. Yet more interesting, the Bakgatla community has teamed up with one of the commercial bidders for Union.
The sale of Union section is part of Amplats’ strategy to rid itself of its non-core assets in favour of investing in newer operations that it can more easily mechanise. It is also selling shafts in Rustenburg, but it is Union section that is most likely to be sold first.
As such, the Bakgatla community is something of a kingmaker for the interested bidders in Union section because it provides a ready-made broadbased empowerment option in which government is now so keen, after a decade of making individual black entrepreneurs extremely wealthy.
There’s also a lot riding on t urning Union section into a
success. About 98% of t he Bakgatla community’s wealth is derived from the platinum sector, but market conditions are so tough that the dividends have all but dried up. “They’ve invested the money prudently and they have a pool of cash, but the Bakgatla know it won’t last forever,” says Greenhill.
Greenhill says he has also got his eye on the energy market. “We’ve had cursory discussions on coal and the energy space. Diamonds is also an interesting space for us. The fundamentals are looking good and they are improving.
“Yes, I have to diversify the business, but it doesn’t mean diversifying out of mining; it just means diversifying the portfolio,” he says. “So we could become involved in other mining opportunities. Or look for other sectors whether it be energy, food, manufacturing or property.”
One senses, however, t hat t he fortunes of the Bakgatla are tied up with the prospects in the platinum market. The community is, for instance, a shareholder in Sedibelo Platinum Mines, the company which Pallinghurst Resources is managing. There’s been talk of listing the company and achieving a market-related price – which would no doubt assist the Bakgatla community’s balance sheet – but the platinum industry is not yet supportive of equity investors.
What’s worse is there’s no agreement on where the platinum market is going. Most agree that it is running a supply deficit but above-ground inventories are so significant that they could keep a lid on the platinum price for two to two and a half years, according to Impala Platinum.
As a seller of assets, such as Union, Amplats is more optimistic thinking the platinum price could revive before the year-end. Let’s hope Amplats is right.
ABOUT 98% OF THE BAKGATLA COMMUNITY’S WEALTH IS DERIVED FROM THE PLATINUM SECTOR, BUT MARKET CONDITIONS ARE SO TOUGH THAT THE DIVIDENDS HAVE ALL BUT DRIED UP.