Next few years will tell if it’s too late for Distell

It could be the corporate equivalent of the nature versus nurture debate as Distell tries to suppress its management DNA by swamping it with foreign talent from SABMiller.

Foreign in this context means anything that is not second- or third-generation Stellenbosch.

While this quaint town has developed a reputation for its cutting-edge banking and IT talent, it hasn’t done quite as well in the liquor industry. Not that Distell management didn’t perform exceptionally well in propelling the company to the global number two slot in the cider market, but other than that, it hasn’t quite managed to realise its potential.

There are good reasons for its subpar performance, chief of which is its control structure. Divided almost equally between Remgro, KWV and SAB, the Distell business was something of an orphan. While it wasn’t free to do whatever it liked, its three shareholders weren’t prepared to invest resources to support its growth. It was trapped in a sort of corporate limbo where little was demanded.

Over time, Remgro and KWV got together, but even together, they seemed incapable of providing the sort of direction and investment Distell needed.

There was always the uncomfortable fact that anything they did would benefit SAB. For its part, SAB didn’t seem one bit interested in Distell.

Most industry watchers assumed the 27% stake would be sold soon after SAB’s 1999 move to London. It wasn’t. What happened was that in 2013, Richard Rushton, a SABMiller executive, was appointed group MD. Rushton brought in some SABMiller marketing talent, but nothing seemed to work.

At last, the control structure has been sorted out. The next few years will reveal whether or not it’s too late.

Mark Bowman, the latest SABMiller transplant, should be extremely useful, assuming he has maintained his cutting-edge performance. But Remgro, which got cheap access to control, will have to up its game if Distell is to realise its potential.

The economy might still be dangerously becalmed — but small- and mediumsized enterprise funder Business Partners has managed to deliver a solid performance.

Formerly known as the Small Business Development Corporation, Business Partners provided more funding for fewer projects in the year to end-March 2017, but also amassed higher arrears in repayment obligations.

Although Business Partners is unlisted, the company is controlled by investment giant Remgro with a 42.8% stake. Remgro’s latest annual report offers a glimpse into the operational aspects of Business Partners. In Remgro’s financial year to end-June, Business Partners chipped in R54m to Remgro’s headline earnings – up 12.5% on the R48m contribution in 2016.

In its financial year to endMarch, Business Partners hiked turnover 12% to R613m and operating profit by the same margin to R292m. Headline earnings were 12.4% higher at R127m. Remgro indicated that the increases were due mainly to higher investment income and property revenue — partially offset by higher credit losses.

Remgro noted that risk in the investment portfolio had grown in the trading period. Investments with repayment obligations in arrears increased from 15% of the investment portfolio at March 31 2016 to 20% at March 31 2017. Remgro said this was a reflection of the adverse economic and difficult trading conditions experienced by smalland medium-sized enterprises.