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Ben Bernanke's bis SA payday

SINCE the birth of the new South Africa in 1994, high-growth entrepreneurs have created thousands of jobs, made billions of rands for themselves and their stakeholders, and have modernised the economy.

Some have created corporations with market capitalisation in excess of R100-billion by listing on the stock exchange, which enabled them to raise capital for growth.

These “listed-free’’ companies have shaken up numerous industries, particularly healthcare, mining, financial services, telecommunications, property and retailing.

They have succeeded by not offering “me-too” products. They came in boldly, offering differentiated products and unique business models; by exploiting the changing landscape, and creating new market segments and industries. They consolidated industries.

Healthcare opportunities abounded at the dawn of the new SA. With the public health budget being spread equitably, gaps were opening up.

Public sector hospitals and clinics were taking strain, creating opportunities for private hospital groups such as Netcare, which listed in 1996 and now has a market value of R32.9-billion. It operates 55 hospitals in SA and 65 and in the UK. Current CEO Richard Friedland, together with his predecessors, notably Jack Shevel, grew this company mostly by acquiring small hospitals and clinics. Though Netcare has had problems in the UK in recent years, it remains a formidable brand with 29 000 employees.

Netcare, with more than 7 700 beds, competes in SA with BEE-influenced Life Healthcare and Remgro-controlled Mediclinic International, which has a bigger market cap of R55.9-billion.

SA private healthcare is regarded as world class, but is marred by complaints that it is too expensive.

Also taking advantage of changes in the healthcare sector were billionaire Stephen Saad, together with Gus Atteridge, who entered the scene in the mid-1990s and listed Aspen Pharmacare in 1998. It rode the move to cheaper generic medications very well, and now boasts a market cap of R128.3-billion.

They accomplished this by acquiring off-patent drugs from global pharmaceutical companies and manufacturing them in large factories, employing economies of scale as a competitive tool. The business, which includes branded and nutritional products, is now global with R21-billion in revenue.

In the medical insurance sector Adrian Gore has made an impact with Discovery Holdings, which now boasts a R46billon market cap and has budding Asian operations that could redefine the group in the years ahead.

Gore innovated in the early 1990s by offering a solution to the abuse of medical aid schemes when he tackled the “use it or lose it” behaviour that allowed customers to have savings in their schemes. He topped this off by delivering unheard of service in areas such as processing claims. Years on, Discovery introduced Vitality — a rewards programme innovation — that gave it an even greater advantage over competitors and put it on the global map.

In another sector, Steinhoff International has moved from a value of R2.6-billion at listing in 1998 to R108.2-billion. It has become a global, integrated furniture group with diversified industrial and manufacturing holdings. This has been accomplished through acquisitions and financial engineering.

Mining has also created riches for bold entrepreneurs. Post1994 miners, including numerous BEE groups, have benefited from the super cycle of the 2000s.

Entrepreneur Sipho Nkosi, starting with a small coal operation in the 1990s, has created in Exxaro a group worth R53-billion on the JSE. He has been helped by buoyant iron-ore prices through Exxaro’s 20% shareholding in Kumba Iron Ore, and by its massive coal operations feeding Eskom’s power stations.

Commodity prices have been tepid lately but Exxaro’s coal production will be boosted when Medupi comes on stream.

Patrice Motsepe has made an impact in the sector with African Rainbow Minerals (ARM), worth about R47.6-billion on the JSE. ARM made good profits from the iron-ore and manganese operations it manages in partnership with listed Assore Ltd and ARM’s other operations.

Royal Bafokeng Holdings — the investment arm of the Bafokeng tribe ruled by King Leruo Molotlegi — holds R20-billion worth of shares in Impala Platinum (from converting mineral royalties into a shareholding in 2007). The company’s own Royal Bafokeng Platinum was listed in 2010.

The financial services industry has its fair share of top entrepreneurs even though the majors have managed to hold on to their territories. Listed in 2002, Capitec Bank, with R22.3-billion in market value, was backed by PSG Group and founded by Michiel le Roux. It has created waves in low-cost banking. PSG’s Jannie Mouton and his son, Piet, are now shaking up the private education market through Curro Holdings.

Together with the currently troubled African Bank, Capitec consolidated and modernised the loan-shark industry by offering banking products to the poor.

Founded in 1998, short-term insurer Outsurance has redefined the sector. Assisted by Rand Merchant Bank at its founding, this company cut out intermediaries, enabling it to charge cheaper premiums. Its exemplary administration — from contracting to claim processing — has given it a competitive advantage. It is the second-largest short-term insurer, after Santam.

Coronation Asset Manage- ment was founded in 1993, listed in 2003 and now manages R500billion in assets. It is worth about R31.3-billion on the JSE. Though founders such as Leon Campher have long since left, Tony Gibson is still around. The company has continued to thrive under generations of executives, including current CE Anton Pillay, because of its - investment prowess. It competes head-to-head with giants such as Old Mutual and Sanlam in the investments business.

Brait (now a holding company) is one of the companies that brought private equity to SA, and is still run by co-founder Anthony Brait. It is capitalised on the JSE at R25-billion, having listed in 1998. Its investment returns have been about 30% a year since its founding more than 20 years ago.

Mobile telecommunications have created significant wealth for stakeholders — including the BEE fraternity — in the past 20 years. MTN and Vodacom have a combined market cap of more than R500-billion.

Alan Knott-Craig (now linked to Cell-C) and current CE of Vodacom Shameel Joosub were in the team that played a major role in the creation of this industry and connecting millions to telecom services.

Some of the large property groups were created in the 2000s through consolidation, and numerous property portfolios have been brought to the JSE by entrepreneurs.

Redefine Properties, led by Marc Wainer, was founded in 1999 and listed in 2000. It was created through acquisitions, and competes with Growthpoint, which is valued at R50billion and has a 50% stake in the V&A Waterfront in Cape Town.

Black property companies such as Rebosis, Ascension and Delta — with market caps of between R2-billion and R4-billion — and mainly assisted by government-leased properties, have come into their own on the JSE. It remains to be seen how they will diversify into retailing and other sectors.

In leisure and entertainment, notable entrepreneurs are Marcel Golding and Johnny Copelyn, who took control of listed HCI around 1997. HCI leveraged the investment and proceeds of the R1.5-billion it made in Vodacom to branch aggressively into other sectors that benefited from BEE in the 1990s.

HCI now holds a major share in hotel and gaming group Tsogo Sun Holdings and e.tv television channels.

Entrepreneurs will continue to thrive as they serve the burgeoning black middle class, delve into infrastructure (including renewable energy) and technology, and enter the rest of Africa.

Lediga is a specialist strategy writer and businessman