4 EASY STEPS FOR A SUC­CESS­FUL EQ­UITY PORT­FO­LIO

Finweek English Edition - - FRONT PAGE - BY DAVID MCKAY

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.

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