Gogos would not forgive a downgrade
| When poor credit ratings translate into hungry children, black rural women will know who to blame at polls
GLORIA Serobe, co-founder and executive director of the R3-billion women’s investment group Wiphold (Women Investment Portfolio Holdings), has a message for the government:
If South Africa is downgraded and it is explained to women in rural communities in language they can understand why the price of bread has suddenly doubled, or why their chief breadwinners have lost their jobs on the mines, or why “everything is now melting”, they will know what to do come the elections in 2019.
“That conversation we are not having with them,” she says.
“We’re talking credit ratings, we’re talking downgrades, we’re talking currency falls — none of this means anything to them because we are not translating it into language they can understand in terms of their daily lives.
“If we are downgraded, we’re going to be forced to have those conversations because everything will be melting. We’re talking about communities that cannot absorb any more hardship, but now you are loading them with more hardship.”
If it is explained to them in terms they can relate to how the actions of politicians have led to this, it will weigh on the election results, she says.
“A community that understands what is going on is always going to have an impact on the results of any election. Believe me.”
It was announced last week that Wiphold intended to buy a 25.1% stake in JSE-listed specialist banker Sasfin to add to its other investments in financial services, notably Nedbank and Old Mutual. It is awaiting regulatory approval.
Owned and controlled by black women, Wiphold was started in 1994 as an investment vehicle to drive the empowerment of mostly rural black women.
So when it comes to black rural communities, Serobe has her ear close to the ground.
“We must make the time to reduce the sophisticated language of downgrade into Xhosa and Zulu and so on, and make these communities aware exactly what the meaning of a downgrade is for them. So that they understand that if politicians act this way then this is how it will end for them.”
In partnership with Nedbank and Old Mutual, Wiphold started a programme in the Eastern Cape five years ago that has helped 2 000 families to farm maize and livestock commercially on 2 000ha of communal land.
Serobe says this is not about charity but profit. Wiphold’s R100-million investment has returned 20%.
“You don’t have to go to these places with a CSI [corporate social investment] mentality,” she says.
“There is value to be unlocked.”
But investors are not interested because the people living on what she describes as the best arable land in the country do not have title deeds to that land.
“No security of tenure in these areas is the main reason why there are so few investors,” she says.
“Security of tenure is key to developing these areas.”
She says the government cannot criticise banks for not providing services to the rural poor if it won’t give them the security of tenure that would allow banks to provide these services.
“They forget that behind the banks are depositors. And the money they lend out is depositors’ money.
“So when that money goes to the right it must come back to the left. Because there is somebody sitting there behind the bank waiting for his money whenever he needs it.
“So the banks have got to be as conservative as they are. I am not big on criticising them on this matter because risk mitigation is risk mitigation. They must have it in place.”
Likewise with life insurance companies.
“If somebody dies tomorrow, Old Mutual cannot say to a policy holder: ‘No, well, we’ve invested your money in a farm in Port St Johns and now the farm has been taken.’
“Without security of tenure rural communities will remain poor.
“Nobody is going to put money into houses, nobody is going to put money into agriculture without security of tenure.”
She believes “big capital” is waiting to be invested in rural development but it won’t go to areas where there is no security of tenure.
She suspects politics is the problem.
“Maybe the traditional leaders are not helpful in the conversation.”
As CEO of Wiphold’s financial services arm WipCapital, until recently a Nedbank board member for 10 years, and chairwoman of its transformation committee, Serobe has a strong view on banks and transformation, which has been the subject of parliamentary hearings.
She feels that transformation must be seen in broader terms than just ownership and executive appointments.
“If you’re talking transformation you’re also talking the development of infrastructure in poor areas.”
She says as well as no security of tenure, the main obstacle to transformation in this sense is the incapacity of municipalities.
“Why, for example, are banks not investing in infrastructure in Bushbuckridge? Because they require the municipality of Bushbuckridge to unlock that. And therefore it doesn’t happen.
“If it’s the building of a bridge there’s municipal approvals, municipal support, water licensing, all these things that are required.
“Most of the municipalities that need infrastructure don’t have the capacity to absorb investment capital to build this infrastructure, to grant the necessary approvals and so on.”
Until this changes, banks will continue to sit on their capital rather than invest it in development.
“Banks need to look positively at transformation but there is also a need for the government to help with the unlocking of opportunities for them to do so,” she says.
On the ownership front she says those who are stakeholders through empowerment deals need to pull their weight. They need to understand that a BEE stake requires hard work and long-term commitment.
“If you invest in a company which has hopes that you will help with transformation then you must be there 24/7 to help with that. Don’t go off to the Bahamas on holiday.
“You won’t help with transformation if you don’t make it your business to understand the business.
“Asking the CEO if he wants to see Minister A, Minister B or Minister C is not transformation.
“Transformation requires that you do the hard, boring things.”
Serobe, 57, has a BCom and an MBA and a background in accounting and finance.
Her experience is that leaders in the sector “largely do want to do the right thing” in terms of transformation.
“Let’s not trash this sector. People do mean well, and I am a beneficiary of that and an observer of that. I know how much work has gone into transformation.”
She’s not sure how to interpret the call for radical economic transformation.
“I still have to study that. To be honest, I don’t know what that means.” She also says there are no easy answers to the “once empowered, always empowered” debate.
“Most BEE deals are paid for by existing shareholders. In whatever form, without doubt they give up something to make that deal functional with the hope that something will come out of it.”
While it would be unfair to stop BEE shareholders from selling out at the end of the transaction period, the interests of the shareholders who facilitated their BEE deal need to be considered.
“Are you saying they must now facilitate another empowerment deal, or what?”
She says the ideal is that when the debt is paid off the company is left with a BEE partner who believes in and wants to stay in the business and be a normal shareholder.
These are communities that cannot absorb any more hardship Asking the CEO if he wants to see Minister A, Minister B or Minister C is not transformation
“But the question of liquidity and getting some cash is real also. So I’m in sympathy with both sides. The BEE shareholder who wants to sell out and the investee company which cannot go back to its shareholders and say: ‘Facilitate another deal.’ ”
There needs to be a middle ground, but she doesn’t know what that is.
Serobe says the current state of political turmoil does not make her despair.
“We have rule of law, a judiciary that is working, our legal sector is doing a wonderful job, we have a well-respected banking system, our auditing standards are well regarded.
“We still have these institutions of democracy that are working. Of course it means we must watch out that they are not collapsed by anyone.”
The people will “never allow that”, she says.
“South Africans have seen hell before, and they have got themselves out of hell. They are not going to go there again. They will not allow the collapsing of our democracy.”