Should I stay or should I go now?
| SA’s competition rules have forced him to move his investments offshore, says Christo Wiese
RETAIL tycoon Christo Wiese is angered by suggestions that the planned merger of Steinhoff and Shoprite supposedly to create an African retail giant is part of a larger strategy to transfer his wealth out of South Africa.
Wiese, South Africa’s richest person — worth R81-billion according to last year’s Sunday Times Rich List — is the chairman and largest shareholder of German-listed retailer Steinhoff and controlling shareholder and chairman of Shoprite.
The announcement before Christmas that the two companies were in talks about combining their African operations to form a continental retail giant fuelled speculation that Wiese has lost faith in the country and is getting his money out at every opportunity.
He sold his Pepkor group to Steinhoff two years ago. If the Steinhoff/Shoprite deal is approved then most of what he owns will be housed outside South Africa.
He concedes that this is “fair” comment but says it is “nonsense” to suggest the merger is part of a deliberate disinvestment strategy to transfer his wealth out of the country for political reasons.
“This is nonsense that I have to deal with all the time about divesting from South Africa. It is just nonsense. Steinhoff is listed in Frankfurt but it is also listed in Johannesburg. So why is the emphasis on the Frankfurt-listed Steinhoff? I don’t quite get it, what the point is that people want to make.”
The limited size of the South African economy and strictness of the competition authorities leaves him with no choice but to move his investments offshore, he says.
“We are by far the dominant retailers in South Africa and Africa. So if I want to expand those businesses I am against the wall of the Competition Commission. There is no way that I can buy additional retail businesses in South Africa.”
This is why, when his investment holding company Brait, in which he owns a 35% controlling stake, was looking for acquisitions in the retail space it had to go offshore.
Brait bought UK clothing chain New Look and health club company Virgin Active.
He points out that although Virgin Active is based in London, more than 60% of its earnings before interest, depreciation and amortisation are generated in South Africa.
“So is Virgin Active South Arican? It’s all about jargon and tags. It doesn’t take account of reality.”
A large chunk of his money is also invested in the UK-based property investment company Tradehold, which he owns. Tradehold is focused on UK real estate but it has just bought a South African-based property portfolio for R6.2-billion, he says.
“Does that indicate a transferring of wealth out of South Africa?”
The story that he is moving his wealth offshore “has a ring to it which is not evidence based or factually based”, he says.
The reality is that he cannot afford to be parochial if he wants to grow his businesses.
“All over the world you have antitrust situations, and taking note of the size of the South African economy you run into that brick wall pretty early on.
“What must I do if I want to grow these groups?”
Why, then, is Wiese so acutely sensitive about the matter when he’s only doing what any hardheaded business mogul would regard as a no-brainer?
And they don’t come more hard-headed than this Upingtonborn lawyer who took a small discount clothing store in the dusty northern Cape town and turned it into the Pepkor/ Shoprite empire.
“Because I, hopefully, have the reputation that I’m very positive about South Africa and Africa. And what I do is I walk the talk. We’re opening hundreds of stores across the continent all the time.
“We’re employing additional people. But people continually come with this story that ‘Ja, it looks as though Wiese is talking out of one side of his mouth but doing another thing’. “It’s just bloody annoying.” Maybe. But the fact is that he has been getting his wealth out of the country at a rate of knots as the Zuma era has taken its toll.
Even the international investors he’s trying to lure to South Africa have remarked on the fact that while talking the country up, he — or at least his money — is leaving it. That’s the truth, isn’t it?
“It’s one of those old tricks of people talking the truth, because the truth is self-evident, but not telling the whole truth,” he says. “So let’s just get this in balance here.”
He would not be serving the interests of his shareholders if he confined himself to South Africa, he says. So why is he so defensive? “I’m not defensive. All I am saying is, why do people continually make that such a point?”
Some people have even gone so far as to accuse him of being a traitor, he says.
Even the international investors he met while on a roadshow to London, Boston and New York last year with Finance Minister Pravin Gordhan said to him: “Wait a minute, you’re encouraging us to invest in South Africa but what are you and other top South African businessmen actually doing?”
He has to spell it out to them, he says.
“I think in most cases they understand and accept it.”
He tells them: “There are huge opportunities here.”
Does he pretend that things are rosier than they are?
“There’s no reason to pretend. If people will just look at the full picture and not just focus on the negative.
“Where in the world is everything so rosy?
“I made huge investments in the UK through Brait. And then they go and vote for Brexit.”
The pound lost a third of its value. Brait wrote off between R30-billion and R40-billion on its share price.
“Because of a vote by the British electorate that was unexpected. So if you have a place you can recommend to me where you don’t have these kinds of shocks, please do.”
Sipho Pityana, AngloGold Ashanti chairman and leader of the Save SA campaign, says business leaders like Wiese are sacrificing their credibility by giving assurances to the ratings agencies that the government ignores.
“Not necessarily,” says Wiese. “I think they understand that we give government certain advice which we think is in the best interests of the country, but it is government that must make the decisions and implement the policy changes.
“One of the great myths is that business has this enormous influence vis-à-vis government. That has never been my experience.”
Given how frighteningly high the stakes are, shouldn’t business be trying harder to leverage the indispensable contribution it makes to government in terms of taxes and jobs and infrastructure development more effectively?
“How can business be more clear with government than it continually is that one of the huge impediments to economic growth is policy uncertainty?
“How do you expect people to invest billions in a mine when they don’t know what the rules are? What more can business do to make this clear to government?”
Wiese admits to feeling endlessly frustrated by the behaviour of the government, but says he is in good company.
So is Virgin Active South African? It’s all about tags. It doesn’t take account of reality The commodity cycle seems to have started turning, there are green shoots in the economy
“You pick up similar frustrations from business leaders around the globe.”
He does concede, however, that their presidents and prime ministers are not at war with their finance ministers.
“That is true. That is a very, very unfortunate impression. Very unfortunate. But we keep on saying that. And we say it openly and very robustly.”
Wiese, who at 75 is still going flat out — “What else would I do?” — believes “things are looking a bit better” than last year.
“The commodity cycle seems to have started turning, there are green shoots in the economy.”
He agrees that this will be small comfort should Gordhan be fired.
But this is not something that keeps him awake at night, he says. “My mother told me not to worry about things I can’t change.”