This week I read about the imminent listing of Transaction
Capital, the investment firm led by Massmart Chairman, Mark Lamberti. It was
reported that the company plans to raise R500 million from next month's JSE
listing. Other than Mr Lamberti at 7%,
the company's shareholders include Ethos, a leading SA private equity firm
at 10% after investing R100 million; and Futuregrowth, which has invested a
whopping R340 million of equity in the venture.
Now, at this point I'm thinking: “Wow, how amazing is
this: a brand new business, likely to create hundreds if not thousands of jobs
in our economy, about to list on the JSE, with THAT calibre of shareholders,
who have committed THAT much equity. This is awesome”.
Think about it, if Ethos' 10% is worth R100m then this is (at
least) a R1 billion business before it even lists!
So, I was intrigued. I wanted know what is it that
could've convinced the stubborn minds of Fricker Road to invest at such levels.
So I did some research, and the activist in me, saw more than I should've.
Transaction Capital has 4 subsidiaries.
Subsidiary 1: MBD Solutions, is a company that collects
debt for retailers such as Woolworths, Truworths, Edgars and Jet, basically the
Wooltru and the Edcon groups. This business turns over R635 million, and
delivers a Profit Before Tax of R91 million. Very nice! I wonder who holds that
much debt in retail purchases.... oh of course it must be 'those people'....
Subsidiary 2: Bayport, is a company that provides
unsecured lending to consumers that were historically ignored by
"traditional" banks. Historically ignored???? By traditional banks???
Mmmmmmm, who could THAT be? Aha! Its 'those people'!
Bayport turnover is R1,4 billion per annum. I couldn't
find any profit numbers but keep in mind that unsecured lending tends to be a
very profitable segment in retail lending (think: High risk, High
return).
And whilst everyone is ranting and raving about the risks
of unsecured lending growth in SA and even comparing it to the US sub-prime
crisis that sparked the global economic meltdown, Lamberti is quoted as saying
"Unsecured lending in the country is about R110 billion and our book is
just under R3 billion, so we can afford to be very selective about who we grant
credit to and how we grant credit".
Translation: "Don't stress my fellow investors, there
are enough Black people in SA who have no assets to place as security but are
responsible enough to pay your loan back with interest (priced just below
uMashonisa rates), simply because they are good, gainfully employed,
responsible citizens of the country who want the best for themselves and their
families. Trust us, not everyone is a Julius Malema. We’ve done the research!"
Subsidiary 3: Paycorp. This is a clever business that
consists of "off-bank" ATM's. You know these. These are the ones you
find at filling stations, with no identifiable retail bank attached to them.
Yes, the ones which you tend to always encounter when in an emergency for cash
and have no time to drive around to find ‘your’ bank’s ATM. Funny how you always
think: "This withdrawal is about to cost me a lot of money”, but you
always withdraw anyway.
Paycorp, puts about R22 billion through its 4,000 ATM's
every year. The business is busy with plans to grow into remote areas to
complement their footprint in forecourts and shopping malls. Who lives in these
remote areas? Yes, you guessed it: "those people"...
And now..... *drum roll please*..... for my personal
favourite:
Subsidiary 3: SA Taxi. Yes, you heard me, the company is
called "SA Taxi". SA Taxi provides lending services and insurance
products to more than 20,000 taxi operators. This business is said to be poised
to benefit from the taxi industry when the national taxi fleet is renewed as
the current fleet is aging. Who OWNS taxis? Who DRIVES taxis? Who RIDES in
taxis? Yes, you guessed it again: "those people".... "I
like your perm, but not on my window". I wonder if Mr. Lamberti has ever
seen one of these?
The Transaction Capital group's overall income is R3,6
billion. Their total loan book is R6,7 billion. In short, if you add up all the
credit they have granted to Black taxi owners and loans to the many Black
families with no assets, plus 'who knows what', these add up to R6,7 billion.
That will buy you two Avusa's, plus some healthy change to take back home!
I have lots of respect for entrepreneurs. In fact, the
concept of making something out of nothing, other than an opportunity, a great
idea, a conviction, has taken over my life and arrested me and sentenced me to
a life-long dedicated entrepreneur.
I am fascinated by how Transaction Capital has identified
gaps in the market and the markets in those gaps. Look at a business like
Bayport. Most banks have literally fled from these unbanked Blacks with no
assets to put up as security for loans. Bayport is in there and most
importantly is making tons of money doing it. This is good. This is very good.
How about a business like Paycorp? The big 4 retail banks
have had to be forced to create "access to financial services" sites
in remote areas for Black people, who have historically not been considered part
of the economy, except as the necessary "cheap labour" evil. Should
Paycorp succeed in providing ATM services to remote areas, this means our
people in the many remote villages of the country can have access to basic
electronic banking services offered by a simple ATM. This is good. This is very
good.
I, therefore, have great regard for what Mr Lamberti and
his colleagues have achieved to date and I wish them every success in their listing
and beyond. It is no simple feat to build a R100 million business let alone a
R1 billion business. So well done, gentlemen.
However, reading the story I realized something that is
NOT an indictment of the entrepreneurial team of Transaction Capital but a
SERIOUS INDICTMENT for the Black people of South Africa.
The story of: Afrikaans Capital, African Consumption.
Why is it that the largest financier of unsecured lending
is an Afrikaans run bank?
Why is that most Black taxi owners borrow from white run
(and controlled) banks?
Why can't Black people think-up, develop and roll out
these ideas for themselves by themselves.... to themselves?
Is Stellenbosch going to continue to be the economic
capital of South Africa, whilst Africans, in their townships and villages,
remain the systematic consumers of its myriad of goods and services?
Think about where you do groceries? Afrikaans Capital.
Think about where you bank? Afrikaans Capital.
Who grows your food? Afrikaans Capital.
And if Stellenbosch has its way, your children will go to
an Afrikaans capitalized private school, pitched ‘not as expensive as St.
Johns, but not as cheap as Orlando High’. And you and I know, we will send our
kids there. Not because it's funded by Afrikaners, but because it a great idea
developed by great entrepreneurs. Except that these entrepreneurs are not
Black. And yes, Political Correctness aside, that is an issue as it creates a
systematic threat to the continued stability of the democracy we hold so dear.
Black man, wake up! Your 'real' freedom is being
outsourced to the minority, whilst you occupy yourself with meaningless
politics and tenders. You are busy drinking skinny cappuccinos in Melrose Arch,
whilst your markets are being penetrated by those who dare to dream, and do.
Access to capital is a poor excuse. I keep saying, and will never stop saying
“Great ideas, always secure funding”. Transaction Capital has proven it so far,
and I have my money on them to prove it when they list.
So, what is it about Blacks that make us comfortable being
market takers, and never market makers? Why are we not leading in market
segments that sell to our people? We understand the cultural behaviours and
disparities of Black South Africans, more that any research house could, simply
because we ARE the market. Yet, we take this invaluable IP and do nothing with
it.
To borrow from the leader of the Black Consciousness
Movement, Steve Biko, we are sitting and spectating in a game that we should be
participating in.
Asked about how he juggles what must be a very demanding
Chairmanship of leading retailer, Massmart (yes, the one that has just been
bought by Walmart) Mr. Lamberti concludes by stating that Transaction Capital
takes up 12 hours of his day and he is "having a lot of fun".
I'm sure you are indeed, having a lot of fun, Mr. Lamberti.... as you should, you have earned it. I, further
wish you and your colleagues all the best in your business endeavours.
In the meantime, please excuse me
whilst I try and wake up my sleeping brothers and sisters who are more
concerned about Mangaung than Stellenbosch and are too blind to see the
relationship between the two.
AK
Sources: Sunday Times, May 13, 2012
