A weird ménage-à-trois
Many of the original BEE tycoons are quiet these days. Whatever happened to Stanlib’s BEE partner Saki Macozoma? And remember that Alexander Forbes’s partner was Cyril Ramaphosa.
It is intriguing to see that in all the speculation about the potential buyer of Absa Asset Management (Abam) Tokyo Sexwale’s name never comes up, even though his consortium was Absa’s original BEE partner.
The tycoon with the most staying power has been Patrice Motsepe. He might well be a member of the ANC, but he is first and foremost a businessman. He has made his fortune the oldfashioned way, by earning it.
African Rainbow Capital (ARC) has been set up to diversify his UbuntuBotho consortium away from its highly successful investment in Sanlam. But the two businesses are joined at the hip. ARC owns 25% of Sanlam’s third party asset manager, which includes the Satrix index fund manager, alongside the old-school active Sanlam Investment Management (SIM). And, in turn, Sanlam now owns 25% of ARC Financial Services — though it has opted not to take a stake in TymeBank, arguably the most promising financial operation in the ARC ecosystem.
I gather that some of the asset managers who sold a chunk of their businesses to ARC in order to stay independent aren’t impressed.
Costa Economou, founder of Colourfield, which specialises in liability-driven investments, is distinctly cool about the prospect of finding Sanlam’s blue hands squeezing his business. Sanlam might be well run these days but it still thinks and acts like a big business. A niche asset manager such as Lima Mbeu might prefer a few more years of independence before joining the Sanlam fold.
As for Alexander Forbes, in which ARC is the biggest single shareholder, it has been trying to escape the clutches of Sanlam for the best part of 30 years. Perhaps it should have been excluded from the Sanlam/ARC crossholding. It would not be in the interests of the public if the Forbes and Sanlam umbrella pension funds were to merge, for example, leaving just four large players.
Long-distance relationships
ARC co-CEO Johan van der Merwe will now play a dominant role in the strategy of Sanlam Investments. He needs to consider buying back full control of Denker Capital, Sanlam’s aggressive equity boutique, in which it holds 49%. It puzzles me that Denker’s founders, Claude van Cuyck and Kokkie Kooyman, were allowed to leave the fold.
Were Sanlam to buy 100%, it would be a much less messy merger than one with Abam, as the Denker offices are just a few hundred metres from SIM in Tygervalley, while most of Abam’s staff work in Sandton.
Granted, taking over Abam would bring SIM some much-needed skills. Absa’s shop is fourth in the Large Manager Watch over the 12 months to August 31; SIM a rather feeble eighth out of 10. But a merger of large managers rarely works, especially when they are 1,600km apart. Think of the disastrous marriage of Syfrets and UAL. Even in the Zoom era, physical proximity is vital for a successful investment process.
Of course, ARC’s investment allows SIM to tick many more BEE boxes. But it will never be treated the same way as an organic BEE manager such as First Avenue, Perpetua or Balondolozi, founded by black entrepreneurs.
It might get more credibility if it ditched the Sanlam brand and called itself something cute like Rainbow Nation.