On fast track to success

C APITEC Bank hasdominated the Top 100Companies list in thepast three years, much

like Ferrari once d o m i n at e dFormula One.

The group’s CEO, RiaanStassen, is a devout Ferrari fanand draws his leadership stylefrom the racing team’smanagement principles. It hashelped him build his retail bankinto an outfit that beat all theother JSE-listed companies in therace to the top of the Top 100Companies list.

Capitec was ranked first in 2010and second last year.

An investment of R10 000 inCapitec five years ago was wo r t hR64 597 at the end of Septemberthis year. This represents anannual compound growth rate of45.23%.

Stassen and his team, which hehas led without major changessince the bank’s inception 11years ago, is “driven to perform”.

The bank’s management strivesfor perfection, much like Ferrari’steam on the race track. Stassen,who owns a Ferrari and has beento the factory in Italy, attends atleast one Grand Prix a year. Helauds the racing team for theirconstant support for their drivers.This is something he tries toimplement in his Stellenbosch-based group.

“A hundredth of a second canmake a difference between poleposition or second,” he said.

This philosophy has helped thebank differentiate itself from itpeers. It is regarded as the masterin the unsecured loans segment,beating the traditional big fourbanks to the point that some ofthem started to emulate itsbranch structure and model.

Capitec Bank’s founders are notshy to say they spotted anopportunity caused by the

On fast track to success■ TOP COMPANY: C A P I T EC

CEO strives for perfection, writes THEKISO ANTHONY LEFIFI

Share price, weekly (cents)

Graphic: FIONA KRISCH Source: I-NET BRIDGE

CAPITEC BANK2007: R10 000 | 2012: R64 597

TOP 100 COMPANIES

Number

1

0

5 000

10 000

15 000

20 000

25 000

20122011201020092008

mainly by informal contractors,making it difficult for traditionalbanks to assess their propertyva l u e .

Capitec is of the view thatbanks will effectively be carryingon the old apartheid approach ifthey continue to fo c u s on securedlending.

Stassen expects the unsecuredlending market to grow. Cap i t e ccurrently offers up to R230 000 inunsecured loans and he hopes itwill be able to offer a R500 000non-asset-backed loan one day.

He said secured and unsecuredloans must be viewed differentlyin the South African context,where only 1.6 million houses arem o r t g ag e d .

Capitec Bank, which is signingup about 90 000 new clients amonth, will not be entering thesecured lending market any timesoon, nor will it dip its toes in theinvestment wealth or corporatemarket in the near future.According to the bank, thedifference between a rich andpoor person is in the way theymanage their money, not inbanking needs.

Stassen has hopes of seeingCap i t e c go into markets such asIndia. He would like to enter otherregions with partners who willprovide lower cost of access todistribution, like a retailer or atelecommunications company.

He does not fear Post Bankwhizzing past Capitec, despite ithaving the largest footprint inSouth Africa. He said he has notseen a successful post bankanywhere in the world and addedthat having a large footprint doesnot guarantee dominance in them a r ke t .

Capitec has an active clientbase of more than four millionand a national branch footprint of534, 128 of which are located inmalls. Over 30 reflect the newbranch layout and corporateidentity. Another 28 branches aredue to open before the end of thefinancial year.

Cap i t e c ’s revenue stream forthe first six months to end-Augustgrew by 61% year-on-year toR583-million.

Headline earnings grew by 43%to R700-million and headlineearnings a share grew by 35% to702c. Income from credit grew by37% to R3.6-billion.

Last month, Stassen had todefend his decision to sellR88.4-million worth of shares inCap i t e c at a time when theinvestment community rated theshare as a buy.

He said he was “embarrassed”at the public reaction after thenews broke. At the time he was atpains to explain his personalinvestment strategy, whichinvolves reviewing his investmentbi-annually and offloading sharesif necessary.

He remains the bank’s sixth-largest shareholder, holdingR400-million worth of shares.

The differencebetween a rich and

poor person is in theway they manage

their money

apartheid regime. Before 1994,most underprivileged groups hadto fund long-term assets by acombination of savings and short-term loans, which led to most ofthe houses or property in SouthAfrica not being securable in atraditional bank’s framework.Most rural houses are on triballand and without title deeds.

In urban townships, houseshave been renovated over time,

■ FERRARI FAN: Capitec Bank CEO Riaan Stassen learns lessons fromthe famous F1 racing team PICTURE: KEVIN SUTHERLAND

C O M P A N I E SNovember 18 2012 | www.timeslive.co.za

2 | BusinessTimes November 18 2012TOP 100 COMPANIES

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5

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91

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93

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95

96

97

98

99

100

Capitec Bank

Mr Price

Coronation Fund Managers

Shoprite

Famous Brands

Assore*

EOH

Woolworths

Pinnacle Technology

Aspen Pharmacare

Clicks

Howden Africa

Anglovaal Industries

Ellies

Truworths International

Invicta

PSG Group

Kumba Iron Ore

Oceana

Foschini

Value Group

Brimstone Investment Corp -N

Spur Corporation

Cashbuild

Spar Group

Remgro

Metrofile Holdings

Naspers -N

Santam

Resilient Property Income Fund

Metair Investments

Capital Property Fund

Massmart

Vukile Property Fund

Imperial*

Tiger Brands

Discovery

Exxaro Resources

Growthpoint Properties

Acucap Properties

Hyprop Investments

RMB Holdings

Mediclinic International

Sycom Property Fund

Sanlam

SABMiller plc

Compagnie Fin Richemont

FirstRand

MMI Holdings

Premium Properties

Trencor

Clientéle Life

Nedbank

Liberty

MTN

Fountainhead Prop Trust

Netcare

Hudaco

Redefine Properties

Bidvest

Hospitality Property Fund - A

Datatec

Emira Property Fund

Kagiso Media

Pick n Pay Holdings

Nampak

Lewis Group

Cipla Medpro

Omnia

Foord Compass

Brait

Steinhoff International

Tongaat-Hulett

Octodec Investments

Mondi plc

Mvelaphanda Group

Advtech

Bowler Metcalf

Sasol

SA Corporate Real Estate*

Illovo Sugar

Italtile

Wescoal Holdings

African Bank Investments

Absa

ELB Group

City Lodge Hotels

Zurich Insurance

African Rainbow Minerals*

Datacentrix

Delta

Reunert

Standard Bank

Palabora Mining

Wilson Bayly Holmes - Ovcon

Gold One

HCI

Old Mutual plc

BHP Billiton plc

Astral Foods

3 945

2 625

870

3 750

1 726

7 360

940

1 790

460

3 370

1 642

999

2 075

190

3 140

2 930

2 600

23 000

2 265

5 200

229

720

1 005

6 350

5 499

17 800

145

19 278

11 600

2 579

1 300

610

8 416

1 191

12 750

18 400

2 650

8 410

1 610

3 150

4 650

3 303

2 210

1 880

2 225

19 358

4 521

2 190

1 515

1 351

3 450

825

12 525

7 388

10 281

675

1 179

8 600

825

13 500

1 400

3 600

1 213

1 430

1 490

2 130

5 652

401

8 050

850

2 575

1 995

10 200

1 853

6 515

990

471

660

30 000

401

2 418

608

66

3 150

12 250

2 120

8 110

19 500

13 200

502

1 451

6 800

9 905

9 003

12 120

281

7 450

2 232

25 112

12 200

22 400

12 599

3 100

16 834

7 250

32 970

3 900

6 079

1 795

14 300

5 788

2 900

5 976

690

9 400

8 170

6 750

50 292

5 400

12 651

570

1 000

2 200

15 500

12 800

14 525

395

51 497

18 979

4 800

2 790

1 059

16 691

1 799

18 751

27 312

5 550

16 094

2 487

4 660

7 160

3 700

4 100

2 700

3 757

36 176

5 006

2 789

2 119

1 770

5 345

1 100

18 299

9 925

16 021

809

1 790

11 180

935

20 600

1 585

5 265

1 339

1 925

2 041

2 860

7 151

665

12 500

815

2 940

2 608

13 975

1 900

8 419

210

575

800

37 229

360

3 050

639

95

3 305

13 850

2 550

9 195

25 500

16 298

489

619

6 895

10 563

8 900

13 775

348

8 740

2 284

25 785

10 400

64 597

60 111

54 324

52 355

51 407

50 523

47 696

46 465

46 048

43 259

41 674

40 121

38 096

38 068

36 714

35 665

33 384

31 956

31 893

31 517

31 078

30 624

29 197

29 191

28 614

28 468

28 129

27 764

27 281

26 153

25 750

25 429

24 222

23 838

23 610

23 275

23 150

22 702

22 501

21 745

21 709

21 306

21 295

21 233

21 129

21 089

21 020

20 042

19 712

19 275

19 172

18 360

18 308

18 235

18 169

18 106

18 063

17 776

17 706

17 704

17 565

17 360

17 315

17 307

17 214

17 174

17 170

17 149

17 101

16 530

16 140

15 749

15 699

15 451

15 349

14 979

14 944

14 858

14 773

14 673

14 667

14 554

14 394

14 360

14 276

14 089

13 929

13 903

13 835

13 660

13 437

13 096

13 033

12 949

12 790

12 384

12 167

11 971

11 962

11 817

45.23%

43.15%

40.28%

39.25%

38.74%

38.26%

36.68%

35.96%

35.72%

34.03%

33.04%

32.03%

30.67%

30.65%

29.71%

28.96%

27.26%

26.16%

26.11%

25.81%

25.46%

25.09%

23.90%

23.89%

23.40%

23.27%

22.98%

22.66%

22.23%

21.20%

20.82%

20.52%

19.36%

18.97%

18.75%

18.41%

18.28%

17.82%

17.61%

16.81%

16.77%

16.33%

16.32%

16.25%

16.14%

16.09%

16.02%

14.92%

14.54%

14.02%

13.90%

12.92%

12.86%

12.77%

12.69%

12.61%

12.55%

12.19%

12.10%

12.10%

11.93%

11.66%

11.61%

11.59%

11.47%

11.42%

11.42%

11.39%

11.33%

10.57%

10.05%

9.51%

9.44%

9.09%

8.95%

8.42%

8.37%

8.24%

8.12%

7.97%

7.96%

7.79%

7.56%

7.51%

7.38%

7.10%

6.85%

6.81%

6.71%

6.44%

6.09%

5.54%

5.44%

5.30%

5.04%

4.37%

4.00%

3.66%

3.65%

3.40%

Share name Open (cents)

Close (cents)

Final value (R)

Compoundgrowth 5

yrsShare name Open

(cents)Close (cents)

Final value (R)

Compoundgrowth 5

yrs

TOP 100 COMPANIES OVER FIVE YEARS

Graphic: FIONA KRISCH Source: I-NET BRIDGE * denotes where a dividend due at period end has been accrued.

T HE winner of the Sunday Times Top 100Companies is Capitec, which has shakenup the financial services industry. It isranked first based on its extraordinary

growth in value over the five years to end-September.

We also recognise the Business Leader ofthe Year — decided by CEOs of the Top 100Companies — the Lifetime Achiever, and acompany which has made a meaningfulcontribution through corporate sociali nve st m e n t .

This year’s Business Leader of the Year isAspen CEO Stephen Saad.

Th e Lifetime Achievement award — wh i c hrecognises someone who has made a significantdifference during his or her career — goes toBobby Godsell. The decision was made inconsultation with a panel that included BusaCEO Nomaxabiso Majokweni, David Shapiro,director of Sasfin Securities, and AndrewMcGregor, MD of Who Owns Whom.

The winner of the Corporate SocialInvestment award is Sappi — based onresearch on CSI done for the first time by WhoOwns Whom.

How we calculate theTop 100 companies

T HE Top 100 Companiesawards acknowledgethose listed companieswhich have earned the

most for their shareholders.The share-price

performance of everycompany listed on the JSE iscalculated on the basis ofR10 000 invested over fiveyears — from October 1 2007to the end of September 2012.

The winner is the companythat earns the most for itsshareholders in terms ofshare-price growth, aftertaking into account normaland special dividends andbonus shares reinvested.

Where there is an

unbundling, the proceeds ofthe unbundled company aretreated as a special dividend.

Apart from being anaccurate measurement ofshareholder fortunes, theshare price, plus the amountof income returned toshareholders, is an indicatorof the soundness of ac o mp a ny ’s operations — if oneaccepts that share-priceperformance is generally anaccurate barometer.

All calculations are carriedout by I-Net Bridge, thefinancial services informationcompany that is part of TimesMedia Group, the owner ofBusiness Times.

We exclude suspendedcompanies (although they areincluded in some one-yeartables), preference shares andloan instruments.

If prices declined at the endof September as companieswent ex-dividend, we haveaccrued the dividend.

Companies with a secondarylisting on the JSE are included.

In previous years, weexcluded companies which didnot meet the minimum valuetraded of R10-million a year.

Last year, however, weincreased the minimum valueto R20-million due to highertrading volumes over theyears, and to exclude penny

st o c k s .This qualification does not

apply to the Top 100 one-yearand 10-year tables, whichhave a minimum value tradedof R10-million.

We have also included aTop 40 table to show theperformance of the blue-chipcompanies in the JSE’s Top 40i n d ex .

The Top 100 over 10 yearsreflects the performance ofcompanies that have shown atrack record for investorswith a long-term view.

Certain information usuallycontained in the Top 100survey can be found in thiswe e k ’s Business Times.

JSE-listed firms’ share performance has been tracked over the past five years

Bank newcomertakes top spot

Companies which were

in the top 20 over the

last three years.

Assore

Capitec Bank

Kumba Iron Ore

Howden Africa

Mr Price

Shoprite

Clicks

Pinnacle Technology

Famous Brands


Coronation Fund Managers


THE ROYALS

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

1979

1978

1977

1976

Assore

Capitec Bank

Basil Read

Basil Read

Distribution & Warehousing Network

Mittal Steel SA

Grindrod

Grindrod

Mvelaphanda Resources

Mvelaphanda Resources

East Daggafontein

Dimension Data

Adcorp Holdings

Profurn

Nu-World

Dimension Data

Q Data

Ellerine

Investec

Investec

Investec

M & A Investment Corp.

M & A Investment Corp.

National Bolt

Waltons

Waltons

Metair Investments

Metair Investments

Toyota SA

Toyota SA

Toyota SA

Gold Fields of SA

Otis Elevator Co.

Metro Cash & Carry

Metro Cash & Carry

Metro Cash & Carry

PREVIOUS WINNERS


I T was a particularlydepressing Monday morningwhen we met former AngloAmerican executive and

business leader Bobby Godsell.Across the country, thousands

of mineworkers had downed toolsin the most violent strikes since1987, with 34 protestors dyingbrutally at the hands of police. TheEconomist had called us “SadSouth Africa” in a scathing leadarticle, dissecting all SouthAfrica’s challenges and missteps.M o o dy ’s and Standard & Poor’shad just downgraded the country’sdebt, triggering a number ofdowngrades in the private sector.

Times are tough, said Godsell,who played a crucial role, withCyril Ramaphosa, then leader ofthe National Union ofMineworkers (NUM), in endingthe 1987 strike. “But don’t talkabout a problem if you’re not alsogoing to talk about a solution. Theproblems are well k n ow n . ”

Godsell, who helped to convinceHarry Oppenheimer toacknowledge NUM at Anglo’soperations when black unionswere still illegal, is optimistic thatunion leaders and miningcompanies will find a new set ofrules that will guide labourrelations, just as they did in 1987,when Ramaphosa led nearly halfa million miners on a three-weekstrike — during which Anglo fired50 000 workers.

The strike led to an agreementbetween NUM and Anglo aboutthe union’s right to picket, marchand hold meetings, illegal underapartheid laws but tolerated as ittook place on Anglo’s privateproperty. Dismissals couldsuddenly be queried and appealsbrought to an external arbitrator.

“That code is still in existence.That was 25 years ago. Now thereare new workers and newleaders,” said Godsell. “Th echallenge now in the industry, fo rall the leaders of all the unions, isto bring them into a room andsay, Look, the old rules don’tappear to work any more, let’swrite some new rules. And hell, ifwe could do this in 1987 in themidst of a state of emergency andthe regular imprisonment withouttrial of political activists, surelywe can do it now.

“The leadership has got to dothis. Leaders must lead. And it’snot only in government.”

It is time for a new politicaldispensation in South Africa, saidGodsell, who was involved in theanti-apartheid movement throughthe Methodist Church and theProgressive Party’s youth wing.He chaired a public anti-apartheidprotest meeting in the DurbanCity Hall at the age of 16.

“All I can really say to youabout political leadership is Ithink it’s time for new wine andnew wine skins. I think we’re stillcaught in a time warp; I think theANC often falls back on what itdid during the struggle, and it didvery good stuff. But dwelling onthe past doesn’t help you to seizethe future,” he said.

“There are political challenges.I think we’re dealing with thea n a c h r o n i st i c structures of thepast and we probably need a newpolitics, certainly a new dialogue,a new sense of sharedresponsibility. But you know, thatdoesn’t let citizens off the hook.Citizens should lead by example.You have to be sweeping yourown back yard.”

He refers often to the line, “We

sweep and keep clean our yard”,from the Vision Statement byAntjie Krog and Njabulo Ndebelethat features in the Nat i o n a lPlanning Commission’s NationalDevelopment Plan.

Godsell, who described the timehe spent on the commission asthe “very best thing in my life”, isconfident that the NationalDevelopment Plan, which has wonpraise from many quarters as theway forward to solve SouthAfrica’s many challenges, enjoyssignificant political and publicsu p p o r t .

Implementing it will requireenergy from the government andpressure from citizens, Godsellsaid. “I simply do believe thatwithout concerned, active parents,we can’t get 27 000 public schoolsright. Will we expect our kids towork hard? Will we insist thatteachers are in class on time andteaching? So I think with theimplementation — the question isalways: are you prepared to startwith yourself? You’re much morecredible when you hold thegovernment accountable whenyo u ’ve swept your own backya r d . ”

There is a need for business tobe “c o u r ag e o u s ” and to play amore active role in highlightingproblems and proposing solutions,but it’s not always easy to get

business to cohere and agree, hesaid.

“Businesspeople are engaged inmaking money. Every pizza storeis in competition with every otherpizza store, and they’re competingwith McDonald’s. Business startsfrom a principle of competition;labour starts from a principle ofunity. A lot of business things areabout making money; they don’tsit well on T-shirts. We don’t havean equivalent to ‘an injury to oneis an injury to all’.

“Having said all of that, if yourcountry is in crisis, and we areindeed in crisis now, everyindividual and every part ofsociety, including business, has aduty to say we can’t run a goodbusiness in a failing society. If thehouse is burning, everybody hasto drop whatever else they’redoing and help — t h at ’s thechallenge to business,” saidGodsell.

Business and governmentshould also work hard toovercome the “trust deficit”between the parties, partly rootedin the ANC’s communist past.

“I must say, speakingpersonally, if you are a patriotand you want the best for yourcountry — I can’t think of a singlesituation I’ve been in, including bythe way, my Eskom experience, inwhich my bona fides have been

questioned. I think the realchallenge is to love your country,demand your rights and the rightto criticise everybody, but to workfor solutions,” he said.

Godsell, who resigned asEskom chairman during a boardmeeting standoff with then CEOJacob Maroga, who was in chargeduring the rolling blackouts of2008, was accused of racism. TheNUM and ANC came out in hisdefence.

He is not one to ask about thehighlights of his career, thementors, the lessons learnt. “Ihonestly don’t dwell in the pastvery much.”

His wife, Gillian, recalled: “Inthe late ’70s, the fledglingindustrial relations department[at Anglo] was a group of young,formidably intelligent people, whowere sent out on some rather oddtasks. To value achievementswhich, looking back, may seemrather trivial, it is important toremember how vicious racerelations were in those days, howdeep the lack of respect for blackmineworkers, how terrible thewages, living conditions, fatalityrates. Sometimes when Bobbylooked back on his career and gotdespondent, he would say: Well, atleast I made them put doors onthe black mineworker toilets atWestern Deep.”

■ LIFETIME ACHIEVER: BOBBY GODSELLTimes of crisisrequire afundamental shift inthe nationalmind-set, BobbyGodsell tellsJANA MARAIS

■ TALKING TOUGH: Bobby Godsell PICTURE: MOELETSI MABE

Let’stalkabout asolution

1952: Born in Boksburg toBritish immigrant parents1973: Graduated from theUniversity of Natal with a BA(philosophy and sociology)1974: Joined Anglo Americanin what was to become theindustrial relationsdepartment1981: Wiehahn Commissionrecommended thelegalisation of black tradeunions; Godsell helpedconvince Harry Oppenheimerto recognise NUM at Anglo1985: Completed a master’sdegree in comparativereligion at the University ofCape Town1986: Appointed groupindustrial relationsconsultant at Anglo1989: Became a director ofAnglo1991: Appointed chairman ofthe Chamber of Mines1992-99: President of theChamber of Mines1995: Appointed CEO ofAnglo’s gold and uraniumdivision1998: Appointed CEO ofAngloGold2001-2002: Chairman of theWorld Gold Council2004: AngloGold mergedwith Ashanti Goldfields2007: Godsell retired as CEOof AngloGold Ashanti2008-09: Served as chairmanof EskomCurrent Positions:Chairman: BusinessLeadership South AfricaMember of economicadvisory bodies in SouthAfrica, Mali and TanzaniaMember of the NationalPlanning Commission.Co-wrote ‘A Future SouthAfrica’ and ’Do It! EverySouth African’s Guide toMaking a Difference’, andauthored ’Shaping a FutureSouth Africa: a citizen’s guideto constitution-making’.Married to Gillian and theyhave three daughters, Megan,Sarah and Abigail.

BobbyGodsell

■ NEW WAY: Cosatu’s first president, Elijah Barayi, its generalsecretary at the time, Cyril Ramaphosa, and Godsell in the 1980s

‘The challenge now inthe industry, for allthe leaders of all theunions, is to bring

them into a room andsay, Look, the old

rules don’t appear towork any more, let’s

write some new rules’

BusinessTimes | 3November 18 2012 TOP 100 COMPANIES

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39

40

Mr Price

Shoprite

Assore*

Woolworths

Aspen Pharmacare


Kumba Iron Ore

Remgro

Naspers -N

Massmart

Imperial*

Tiger Brands

Exxaro Resources


RMB Holdings

Sanlam

SABMiller plc


FirstRand

Nedbank

MTN

Bidvest


Mondi plc

Mondi Limited

Sasol

Absa


Standard Bank

Old Mutual plc

BHP Billiton plc

Anglogold Ashanti

Gold Fields

Investec plc

Harmony Gold

Investec Limited

Impala Platinum

Anglo American plc

Capital Shopping Centres plc

Anglo American Platinum

2 625

3 750

7 360

1 790

3 370

3 140

23 000

17 800

19 278

8 416

12 750

18 400

8 410

1 610

3 303

2 225

19 358

4 521

2 190

12 525

10 281

13 500

1 995

6 515

8 197

30 000

12 250

13 200

9 905

2 232

25 112

30 350

12 126

7 049

7 952

7 215

24 050

47 000

15 705

109 100

12 599

16 834

32 970

6 079

14 300

9 400

50 292

14 525

51 497

16 691

18 751

27 312

16 094

2 487

3 700

3 757

36 176

5 006

2 789

18 299

16 021

20 600

2 608

8 419

8 453

37 229

13 850

16 298

10 563

2 284

25 785

29 242

10 675

5 128

6 983

5 110

13 900

24 466

4 380

42 800

60 111

52 355

50 523

46 465

43 259

36 714

31 956

28 468

27 764

24 222

23 610

23 275

22 702

22 501

21 306

21 129

21 089

21 020

20 042

18 308

18 169

17 704

15 749

15 349

14 604

14 773

14 276

13 835

13 033

11 971

11 962

9 950

9 708

9 083

9 041

8 816

6 752

5 548

4 355

4 250

43.15%

39.25%

38.26%

35.96%

34.03%

29.71%

26.16%

23.27%

22.66%

19.36%

18.75%

18.41%

17.82%

17.61%

16.33%

16.14%

16.09%

16.02%

14.92%

12.86%

12.69%

12.10%

9.51%

8.95%

7.87%

8.12%

7.38%

6.71%

5.44%

3.66%

3.65%

-0.10%

-0.59%

-1.91%

-2.00%

-2.49%

-7.55%

-11.12%

-15.32%

-15.73%


Close (cents)

Final value (R)

Compoundgrowth 5 years

TOP-40 INDEX COMPANIES OVER FIVE YEARS

Graphic: FIONA KRISCH Source: I-NET BRIDGE* denotes where a dividend has been accrued.

British American Tobacco and Vodacom havenot yet been listed for 5 years on the JSE .

S TEPHEN Saad sawthe opportunity todevelop affordable,quality medicines,

and in less than 15 years hastransformed the localpharmaceutical industry andcreated the world’s ninth-largest generic drugsc o mp a ny .

Aspen Pharmacare hasmade medicines moreaffordable, and sells one ofevery four medicines inSouth Africa.

Under Saad’s leadership,Aspen has grown into amultinational operating outof South Africa, during aperiod when mostpharmaceuticalmultinationals have soldtheir plants.

The group has doubled insize almost every threeyears, and recorded revenueof R15.3-billion for the yearending June.

Saad, 48, developed acollaborative approach withglobal companies — wh i c hsaw generic companies asrivals — to the point wherethe world’s fourth-largestpharmaceutical group, GSK,is Aspen’s largestshareholder, with an 18.6%st a ke .

Along with Aspen co-founder Gus Attridge, Saadset out to change theperception that genericswere inferior to brandedproducts.

The pair started whatthey intended to be a smallbusiness from a two-bedroom house on the Bereain Durban.

But then they saw anopportunity to take over thebiggest and oldestpharmaceutical company inthe country, SA Druggists,and Aspen Healthcare wa sborn in a deal described as amouse swallowing anelephant.

After the takeover, thegroup signed agreementswith multinational drugcompanies to m a n u f a c tu r elicensed versions of theirdrugs. It bought companiesaround the world, fromLatin America to Australia.

Initially, AspenHealthcare wanted to closedown the SA Druggistsfactories and movemanufacturing to Asia, butSaad changed the strategy:he believed the SouthAfrican plant was the heartof the business.

To improve standards atthe Port Elizabeth site, hevisited about 40 plantsworldwide and in March2005, Aspen became thewo r l d ’s first genericsproducer to receive approvalfrom the US Food and DrugAdministration (FDA) tomake certain ARVs.

Today, more than1.5 million HIV/Aids patientsin Africa use Aspen’s basketof ARVs every month.

The SA Druggiststakeover was the first ofmany for Aspen, and showsSaad’s ability to translatebig dreams into r e a l i ty .

But deal-making, growingbusinesses and

entrepreneurship is inSaad’s blood.

In the early 1990s, heworked for QuickMed andmerged it with Covan toform Zurich, which waseventually sold forR75-million.

With a restraint of tradeand R20-million in hispocket at the age of 29, hegot involved with VarsityCollege, a private tertiaryeducation institution. He andAttridge turned it aroundand sold it to LeisureNet forabout R100-million.

Colleagues say Saad hasan ability to develop arapport with anyone. Anddoes not care aboutmaterial things.

Nonetheless, he is inninth position on theSunday Times Rich List,with his share in Aspenworth R6.4-billion — thec o mp a ny ’s market captoday is R70-billion.

Aspen has 18 factories onsix continents and Saad’srole now is more strategicin terms of risks andop p o r tu n i t i e s .

However, he continues toworry about the detail,from the molecularrequirements of drugs tothe company’s financials.

He has also managed tonavigate the tricky watersof the government, wh i c hoften accuses the p r ivat ehealthcare industry ofprofiteering at the expenseof consumers. Whereothers have taken on thegovernment in public, Saadhas always dealt withissues behind closed doors.

Aspen played a crucialrole in the roll-out of cheapARVs — which has not beenwithout commercial benefit.The high volumes allow thecompany to reduce the costof production.

Saad said: “We have

what benefits you deliver tosociety. I don’t know if itwould be as easy doingsomething that would notadd such value.”

He enjoyed “proving theconventional wisdom wrongthat you can’t manufacturecompetitively in SouthAfrica. We have 18 sitesaround the world . . . butthe South African site is theb e st .

“The lovely thing aboutliving in South Africa is youcan make a tangibledifference.”

the best from his staff.“I say to my kids: ‘If you

lose and you try yourhardest, there’s nothingmore you can do. You canhold your head up withpride. But even if you winand haven’t tried your best— don’t look in the mirror.’ ”

Obsessive about work/lifebalance, he exercises aboutsix hours a week, and lovesthe bush.

He combined his love ofexercise with socialupliftment. He recentlyc o mp l e t e d a 240km cyclingrace in 16 hours — ridingfor a while with HealthMinister Aaron Motsoaledi— to raise R10-million toimprove paediatrichospitals in South Africa.

Senior executive StavrosNicolaou said: “Stephenlikes to test boundaries.One of the worst things youcan say to Stephen is that itcan’t be done, like we couldnever become marketleader in Australia — he’sbound to prove you wrong.”

Aspen is now Australia’snumber one generic playerand is responsible for onein seven scripts.

The sports-mad Saadwent to Durban High School,and then studied to be achartered accountant, eventhough he knew it wasn’t forhim.

However, he did manageto take a gap year to playrugby in Ireland.

A partner at the firmwhere Saad did his articlesdescribed him as a birdwith clipped wings.

Saad has no plans toleave Durban, and is not agood traveller unless he hashis whole family with him.

He calls his wife and fourdaughters “the big five”.

■ BUSINESS LEADER: STEPHEN SAAD

From two rooms to R70bnADELE SHEVEL meets a genial,rugby-mad Durbanite who finds itmore rewarding to run hismultinational drug business from SA

‘The lovely thing about living inSouth Africa is you can make a

tangible difference.’

■ WORK/LIFE BALANCE: Aspen Group’s CEO Stephen Saad has entrepreneurship in his blood PICTURE: TEBOGO LETSIE

delivered sustained,unbroken compound growthin sales and headlineearnings a share of over40% for 14 years, and wehave successfully globalisedthe group, selling morethan 50% more offshorethan we do domestically.”

He proved the scepticswrong when Aspensuccessfully bedded downSigma’s pharmaceuticalbusiness, which was boughtin 2009 in Australia forR5.9-billion. Within 18months, pre-tax earningshad doubled toA$140-million.

But his passion and focusremain in South Africa. “Ithink our biggestachievements are the hopewe give South Africa.

“We ’ve built aninfrastructure, we workpassionately, and we showit can be done.

“Our job is made somuch easier when you see

He enjoys wat c h i n gexperts from overseas walkinto the F DA - ap p r ove dplant, or watching thepeople on the ground dealconfidently with regulatorsand m u l t i n at i o n a lc o mp a n i e s .

Saad comes across as aregular guy from Durbanwho loves sport and a goodl au g h .

He hates bureaucracyand wants people to takeresponsibility for their owndecisions and the divisionsthey run.

He hates being stuckbehind a desk, and believespeople spend too much time“managing up”: worryingabout what the layer aboveis thinking.

So the group head officein Durban is small — 40people deal with 6 000employees around the world.

Saad may appear genial,but don’t be fooled: he’scompetitive, and expects



■ CSI AWARD

Tree farming branches out

MAMELLO MASOTE

F ROM school to aprofessional career — theShanduka Foundation isinvolved in all levels of

e d u c at i o n .The foundation, which was

started in 2004, has taken secondprize in the corporate socialinvestment category of the To p100 Companies survey.

The foundation is part ofShanduka Investment Holdings, acompany founded by businessmanCyril Ramaphosa.

The foundation’s flagshipproject is Adopt-a-School wh i c h ,says executive director DonnéNicol, started off as aninfrastructure project.

However, as the educationcrisis worsened, the foundationrealised more needed to be doneto boost literacy and numeracy.

“Over the years, we’vedeveloped the school developmentmodel. . . [which] looks atinfrastructure, academics, thesocio-economic environment ands e c u r i ty .

“So, we go in and we do a needsanalysis of the school and thecurriculum needs of the teachers,and also include the needs of thepupils,” said Nicol.

Part of the foundation’s successhas come from working with thegovernment at district level,

rather than with the nationaldepartment.

The programme also includesother structures such as non-governmental organisations, localgovernment and other companies.The foundation works with anaverage of 15 other organisationsat any given school.

Nicol said 167 schools had been

adopted so far, and around 450 000children had received tangibleeducational benefits as a result.

Another project is ShandukaBlack Umbrellas, an initiative toincubate entrepreneurs who mayhave ideas, but who lack theresources to get started inbusiness.

Entrepreneurs in small to

medium enterprises are trained,mentored and, for a subsidisedmonthly fee, provided with officefacilities such as telephones,desks, access to the internet andt r a n sp o r t .

The foundation has fourincubators — in Johannesburg,Pretoria, Durban and Cape Town— “but we are aiming for 10 ove rthe next two years”, said Nicol.

The foundation’s target is tohave half of all businesses that gothrough the incubators becomingsustainable within three years.

The foundation has also starteda “black pages”, which listsSMMEs and small black-ownedbusinesses. The book isdistributed to procurement officesaround South Africa.

Then there are the bursariesthe foundation distributesthrough the Cyril RamaphosaEducation Trust to disadvantagedstudents. The focus is onbusiness-related qualifications,and so far 47 students havereceived support. An internship

programme has helped 33 pupils,graduates and work seekers injust over two years.

At the foundation’s creation in2004, R100-million was committedby Shanduka Investment Holdingsfor 10 years. About R67-millionhas been spent so far.

“The commitment fromShanduka really helps, and is alsoattractive to donors because theyknow that the money they put indoesn’t go towards the running ofthe foundation, but to the actualprojects,” said Nicol.

To keep the project sustainable,Adopt-a-School is a 10%shareholder in logistics andshipping company Grindrod SA.

Nicol said: “Grindrodapproached us and we gottogether with its BEE partners . . .

“Grindrod has become moreinvolved with us and particularlywith the schools in Durban. Forus it’s wonderful, because it’s asustainable way going forward.”

The Shanduka Foundation itselfhas adopted a primary schoolcalled Olifantsvlei, in southernJohannesburg, and everyShanduka member makes amonthly contribution to thei n st i tu t i o n .

“We are very proud of our schooldevelopment model. I think it’s amodel that has great potential . . .and as we’re learning it’s gettingbetter and better,” said Nicol.

S APPI’S Project Grow has allthe features of anaggressive permanent jobcreation and

entrepreneurship developmentprogramme, despite it being acorporate social responsibilityprogramme.

The project, which helped Sappiwin the Top 100 CSI award, can beused as a best practice example ofwhat works for the government’srural development strategy.

Project Grow was established in1983 with three people on 8ha ofland. Communities have sinceidentified the economic spin-offsof the project and it has grown somuch that there are now 2 500growers on about 15 000ha andcreated 9 700 jobs. The tree-farming scheme is managed byS ap p i for subsistence farmers whohave access to between one and20ha of land each.

Communities make their landavailable for planting eucalyptustrees while Sappi gives farmersfree seedlings, interest-free loans,technical know-how and an off-take agreement when the treesare harvested after 10 years.

While the trees are growing,S ap p i gives farmers advances tokeep going and at harvest timethe company will buy the timberfrom the farmers and pay themafter subtracting the advancepayments made.

The project was piloted inKwaZulu-Natal and covers areasfrom Manguzi near Kosi Bay inthe north to Port Edward in thesouth and inland areas in Ixopoand Nongoma.

It was recently introduced inthe Eastern Cape — near Bizana,Lusikisiki and Umzimkhulu.

S ap p i ’s head of corporateaffairs André Oberholzerattributes the success of Project

G r ow to collaboration andpartnerships which encompassthe creation of contractorbusinesses and jobs.

He said Project Grow hasbenefits for the company becauseit is strategically aligned as itprovides fibre for Sappi, andbuilds positive relations withneighbours and communities.

Project Grow provides Sappiwith almost 130 000 tons of timbervalued at more than R50-million aye a r .

“There are high barriersassociated with timber farming.There are high costs of seedlings,fertiliser, harvesting and transport,in addition to the long periodbefore trees are felled.

Project Grow helps smallfarmers offset all of these,”Oberholzer said.

The interest-free loans cover allfarming input costs, including theannual maintenance ofp l a n t at i o n s . The communities alsor e ap the rewards of timber priceswhich keep on rising because ofthe increasing demand from thetelecommunications andelectricity industries.

Between 1995 and 2010, Sappiinjected R305-million into theproject. “When we started the

project, we said we are going tostay with the communities andsee the project going forward. Atthe same time we said let thecommunities do it themselvesrather than us doing it for them,”said S ap p i ’s general manager forforestry, Terry Stanger.

More than 80% of the farmersare women. More than 100 smalland micro enterprises and over1 100 job opportunities have beenc r e at e d .

“We have seen people creatingbusinesses because all the

supporting services to farmingsuch as transportation and fellingof trees are provided bycontractors from the communitiesand others have set up shops inthe communities,” said Stanger.

Oberholzer said the farmersbenefit from the expertise such asguidance on environmental issuesby creating awareness ofwetlands, illegal logging,plantation management andwe e d i n g .

“We provide the necessaryguidance around safety duringharvesting and transportation,fire management as well as createan enabling environment forfarmers and communities to enterthe formal economy,” he said.

Sappi and smallfarmers strike it rich asprogramme expandsto other areas, writesLUCKY BIYASE

■ EMPOWERMENT: More than 80% of farmers in Project Grow are women. The tree-planting project has created many job opportunities

‘When we started, we said we are going to staywith the communities and see this forward’

Making its mark in the classroomThe foundation works

with an average of15 other organisations

at any given school

■ BRIGHT SPARKS: Children from Diepsloot Combined School, whichis part of the Shanduka foundation's Adopt-a-School project


THE Top 100 corporate socialinvestment (CSI) award for 2012 wasbased on research by Who Owns Whom.

This is the first year the CSI winnerhas been chosen based on independentresearch into the effectiveness of com-panies’ CSI initiatives.

How the selection process worked

A detailed BEE scorecard wasprovided by 997 of the companiesresearched for the Who Owns Whom SASector database, which profiles 3 200listed and unlisted companies,multinational and state corporations.

The 40 top scorers in thesocioeconomic and economicdevelopment components of thescorecard were identified across theeight major business sectors:agriculture; mining; manufacturing;electricity, gas and water; construction;wholesale, retail and leisure; transport,storage and communication; andfinance and business services.

Those 40 companies were asked toprovide details of their developmentinitiatives for evaluation.

The submissions were evaluated andscored in terms of strategy, structureand size, and took into account factorssuch as legal and financialindependence, duration, focus, sponsorinvolvement and effect.The top 10 for 2012 are:

1. Sappi

2. Shanduka

3. Mondi

4. FirstRand

5. Group Five

6. Lafarge

7. DCD-Dorbyl

8. Neotel

9. Haw & Inglis

10. Sasani Africa

Sappi, the winner of the Top 100Companies CSI award, was chosen by aSunday Times and Who Owns Whomselection panel.

Sappi took first place in the economicdevelopment category for Project Grow,which has created and sustains 9 700subsistence tree farmers.

It ranked second in the socioeconom-ic category for its KwaDukuzaeducation initiative, which annuallyassists over 600 matrics.

How we chosewinners forsocial initiative

C ORPORATE socialresponsibility at Mondigoes further thansimply ensuring all the

boxes on the scorecard aret i c ke d .

“Mondi has consistentlyscored full points for enterprised eve l op m e n t and socio-economic development in thethree years since we beganbeing rated,” said Ron Traill,CEO of Mondi South Africa.

“However, there is anadditional and greaterinvestment made by Mondi inthese development i n i t i at ive sthat are not included in ourBBBEE scorecard.

“This is simply because wealready achieve the maximumpoints and the effort required tocollate the information in themanner required by the BEEverification process isp r o h i b i t ive . ”

Mondi Zimele is one of thesei n i t i at ive s .

The enterprise development

agency provides support for theestablishment and developmentof businesses in Mondi’s forest-growing areas and surroundingcommunities.

Mondi Zimele was launchedin 2007 and has to date helpedto establish 18 businesses inMondi’s value chain with a totalturnover of R306-million a yearand which employ more than2 200 people.

Mondi Zimele is placingspecial emphasis on job-creationprojects.

Mondi’s Food 4 Forestsprogramme started in 2009 aspart of an initiative to i mp r ovethe health and safety of peopleworking in the group’sp l a n t at i o n s .

“A study showed that a lot ofthe workers out in the forestsare nutritionally deficient,”Traill said.

“There are high HIV—Aidsprevalence rates and nutritionaldeficiency just makes thesituation so much more dire.

The Mondi board felt it was theright thing to do to at the veryleast provide a hot meal withsufficient calorie intake for hardl ab o u r . ”

The Food 4 Forestsprogramme provides a dailymeal to about 8 000 forestrywo r ke r s .

These workers are not Mondiemployees, but are employed bycontractors to work in Mondi’sp l a n t at i o n s .

“A recent survey has shownimprovements in the generalhealth and wellbeing of workersand their families,” Traill said.

Forestry is by definition arural operation and Mondi hastherefore had to deal withseveral land claims over theyears. However, the group seesitself as playing a leading rolein the settlement of landrestitution claims on forestryland.

Up until August this year,Mondi had settled 19 landclaims involving around

35 000ha of forestry land.The settlements are based on

a sale and leaseback model.Mondi leases back the land fromthe communities to which it isawarded, manages the forestryoperations and providesopportunities for thecommunities to get involved inthe forestry business.

The agreements are for 20years, after which communitiescan choose to either enter into anew lease and managementagreement with Mondi or takeover the forestry operationst h e m s e lve s .

“Mondi’s land claims modelinvolves business developmentand support for new landowners in order to ensuresustainability of both fibresupply and new forestrybusinesses,” Traill said.

“The support is provided byMondi employees and throughthe Forestry PartnersProgramme, a division of MondiZimele.”

More than just ticking boxesFrom hot lunches to new jobs, communities get to share, writes RENÉ VOLLGRAAFF

■ LUNCH BREAK: Women from the local community benefit from Mondi’s corporate social investment drive

■ MR PRICE

Cut-price canstill offer value



MR PRICE2007: R10 000 | 2012: R60 111

TOP 100 COMPANIESNumber

2

20122011201020092008

0

3 000

6 000

9 000

12 000

15 000



CORONATION FUND MANAGERS2007: R10 000 | 2012: R54 324

TOP 100 COMPANIESCO

Number

3

20122011201020092008

0

1 000

2 000

3 000

Mr Price is best performing retailer for fifth year, says ADELE SHEVEL

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50

Uranium One

Conduit Capital

Purple Capital

Lonrho plc

Indequity

Ingenuity Property

Litha Healthcare

Buildmax

Erbacon

Taste

Thabex

Redefine Properties

EsorFranki

Sanyati

Amalgamated Electronic

Kumba Iron Ore


Basil Read

Alert Steel

EOH

Brimstone

Grand Parade

Stefanutti Stocks

Resilient Property

Adaptit

Orion Real Estate

Raubex

B&W Instrument & Elec

Calgro M3s

Mediclinic

Rockwell Diamonds

Aspen Pharmacare

Mix Telematics

SA Corporate Real Estate

Pinnacle Technology

Onelogix

Hardware Warehouse

Kap International

Assore

Exxaro Resources

Blue Financial Services

African Rainbow Minerals

Grindrod

Afrimat

Rolfes

York Timber

Sovereign Food

Marshall Monteagle plc

Acucap Properties

1time Holdings

2011.12

2011.08

2011.08

2011.12

2011.09

2011.08

2011.12

2012.02

2012.02

2012.02

2011.02

2011.08

2012.02

2011.02

2012.03

2011.12

2011.12

2011.12

2011.06

2012.07

2011.12

2012.06

2012.02

2011.12

2012.06

2012.06

2012.02

2011.08

2012.02

2012.03

2012.02

2012.06

2012.03

2011.12

2012.06

2012.05

2012.06

2012.06

2012.06

2011.12

2012.02

2012.06

2011.12

2012.02

2012.06

2012.06

2012.02

2011.09

2012.03

2011.12

179.44%

170.32%

123.41%

116.62%

96.16%

91.32%

67.96%

61.76%

57.37%

55.15%

54.81%

45.95%

43.48%

42.71%

41.42%

41.19%

40.30%

39.91%

39.24%

38.94%

37.65%

36.96%

36.46%

35.46%

34.82%

33.45%

33.41%

33.10%

32.91%

32.60%

31.80%

30.53%

29.91%

29.58%

27.78%

27.73%

27.22%

25.82%

24.71%

24.01%

23.96%

23.53%

23.47%

23.34%

23.14%

23.08%

22.37%

21.19%

21.16%

20.97%

Share name YearCompound

growth 5 years

TOP 50 GROWTH IN TURNOVER


Coronation CEO happyto ‘quit while at the top’

■ CORONATION FUND MANAGERS

■ ON TREND: Mr Price Group CEO Stuart BirdPICTURE: TEBOGO LETSIE

Hugo Nelson presided over spectacular growth, writes TSHEPO MASHEGO

■ TIME OUT: CEO of Coronation Fund Managers Hugo Nelson

T HE MR Price Grouphas come a long waysince it started as aone-store factory

outlet buying and sellingove r runs in Klerksdorp.

The clothing retailer,which has a marketcapitalisation ofR35.9-billion, has developeda brand that shoppers findtrendy and fashionablewhile still offering goodva l u e .

It has been South Africa’sbest performing retailer,and the second bestperforming share overallover the past five years —showing compound annualgrowth of 43.15%.

The group understandshow to keep its waresrelevant, ensure quick stockturnaround and maintainstrong gross margins. Theperformance has beendriven by innovative and

astute management.The handover from long-

term CEO AlastairMcArthur to Stuart Birdtwo years ago appears to

have been seamless.Sales continue to outstrip

those of its peers, and itsmarket share is 13% — upfrom 10% in 2006. The group

grows margins throughstrong sales performance,increasing tradingdensities, vigorous costcontrol and the closure ofunprofitable space.

The group, which owns360 stores under the brandnames Mr Price, Miladys,Sheet Street and Mr PriceHome, has appeared severaltimes in the Top 10 of theTop 100 Companies.

It has recordedcompound growth of 25% inreturns to shareholders forthe past 26 years.

Bird attributes this to aclear strategy, focus on thecustomer, employing goodpeople, combining fashionand value, and being acash-based retailer.

The group has 73 storesoutside South Africa, 47 ofwhich are corporate-ownedoutlets in Botswana,Lesotho, Namibia, Swa z i l a n d ,

range of items. Bird saidthe online service wo u l dgive Mr Price access to newmarkets in Africa andove r s e a s .

The group is investing instate-of-the-art systems andis developing more cost-effective distributionfacilities and structures tohandle its planned growthin volumes.

For the interim reportingperiod to August, theretailer reported 14.9%growth in sales — of which78.5% were in cash.

Mr Price Group’s apparelsegment, which accountsfor 71.6% of group sales,experienced growth of 15%on a comparable basis. Itsannual results are due thiswe e k .

The percentage of foreignshareholding in Mr PriceGroup at the end of lastyear was 42%.

‘Putting yourbrand intot h i rd - p a r t y

hands bringsreputational risk’

Nigeria and Ghana. The restare franchised.

“Franchising was initiallyconsidered to be a lower-risk approach, but werealised putting your brandinto third-party handsbrings reputational risk andbrand issues,” said Bird.

The group aims to t a keits existing businesses intonew markets and launchother formats. In August, itintroduced an online salesfacility, which p r ov i d e saccess to the group’s full

C ORONATION FundManagers was thethird-best performingcompany over the

five years ended September 30,with a compound annualgrowth in its value of 40.3%.

Coronation runs nearly athird of all assets undermanagement in South Africa,at R339-billion. Th eAssociation for Savings andInvestment South Africa putthe managed assets of thelocal collective investmentschemes at R1.13-trillion atthe end of the third quarter,to September 30.

Coronation posted 6%growth in headline earningsfor the half-year to March. Itdeclared an interim d iv i d e n dof 95c a share.

Despite presiding over thespectacular growth in bothresults and share price,Co r o n at i o n ’s CEO HugoNelson will step down at theend of January 2013 to pursue

personal goals and go onsabbatical for “at least aye a r ”. Chief operating officerAnton Pillay has been

appointed CEO designate.“I’ve been with the firm for

13 years and CEO for five ofthose years. I think thebusiness is in a very goodplace,” said Nelson.

“At the time when I movedfrom a technical role tobusiness leadership, I made aclear commitment to reassessafter five years.

“I felt there was a naturalsuccessor in Anton Pillay, whohad been chief operatingofficer during my tenure asCEO. I felt the business wasdoing well and it’s alwayseasier to do a handover undersuch circumstances.

“I thought this would begood timing to take time off asit wasn’t going to harm theshareholders of the business. Ifelt very much this was a case

of quitting at the top.”Nelson, a medical doctor by

profession, said Coronation’ssuccess was the result ofsticking to its knitting.

“Historically we’ve beenmuch more of a business-to-business service provider —only recently have we grownin the retail space. We try todeliver a good service to ourclients, and that means goodperformance over a period offive years or more. We’vebeen fortunate to have hadtremendous stability in ourstaff and that has enabled usto perform at such a level.”

Nelson said the initialstages of any investment wereprecarious and the companytook great care in communi-cating its strategy to clients.

He said the worst

‘We ’ve beenfortunate to havehad tremendous

stability in our staff’

investments currently weregovernment bonds and certainsegments of developing-market equities — such asSouth African retailers.

“The retail businesses arefantastic. However, their sharevaluations are pricing inabsolutely spectacular futureperformance. From ourperspective, the majoropportunities for SouthAfrican investors are offshore,in both developed anddeveloping-market equities.”


BusinessTimes | 9November 18 2012 TOP100 COMPANIES

T HE JSE All Share index would havegiven you an annualised return of6.6% between October 2007 and theend of September 2012 — but it

must be seen in the context of the economiccrisis of 2008 and 2009.

If you had bought shares at the end of2009, as the crisis was ending, your moneywould have grown at a rate of 16% a yearfor the three years. If you were in it forthe long haul, you would have made 17.6%a year for between 2002 and 2012.

Had you narrowed your focus toresources, over five years you would havelost 2% of your capital on an annualisedbasis. If you were in it for a decade, youwould have seen an 11.7% annualisedreturn, and if you had bought the sharesat the end of 2009, you would haverealised a 5.6% annualised return.

Financials would have been a better betthan resources. Over five years you wouldhave earned 8.1% a year, but over threeyears and 10 years you would have seenreturns of 18.8% and 18% respectively.

Industrials and listed property wouldhave given you far and away the bestreturns. Industrials over five years wouldhave netted you 14.2% a year, and 23.6%and 23.5% a year over three and 10 yearsrespectively. Listed property would have

Economic crisis made adent in investments andfinancials fared betterthan resources, writesTINA WEAVIND

Staying in forthe long haulbrings returns

■ I N V E S TM E N T

Art is surprisinglyrecession-proof and

auctions have shownrecord prices

given you annualised returns of 13.5% overfive years, and 22.1% and 23.6% over threeand 10 years respectively.

If you had sought safety in bonds, youwould have seen a 10.6% annualisedreturn over five years. Over three years,you would have made returns of 12.7%,and over 10 years this would havedropped to 11.3% a year.

Cash would have been a better bet thanresources for all but the 10-year period.You would have seen returns of 8.2% overfive years, 6.3% over three years and 8.8%over a decade.

Houses and art are two other likelydestinations for investment rands.

According to Absa’s data, the smoothedaverage purchase price for approved loanson a medium-sized house (between 141and 220m²) was R941 744 in September2007. The same-sized house would beworth about R1.03-million now, anincrease of a R87 130, which translates toa 9.25% increase over the period.

Because art is something one can enjoyevery day, cashing in can be more difficultthan for other investments. The range ofpossible investment artists is virtuallyendless, so expert advice is vital. However,art is surprisingly recession-proof andauctions before, during and after the globalfinancial crisis have shown record prices.

Cruel shadows, an oil painting by SouthAfrican artist Robert Hodgins, sold onauction for R99 000 in 2007. Five yearslater, Strauss & Co estimate that Hodgins’Three Golem Figures (oil and graphite oncanvas) will go for R400 000 to R500 000.

But there are no guarantees. GregoireBoonzaaier’s 1957 work View of the Capea rc h i v e s (oil on canvas) sold for R385 000 in2007. In a 2012 auction in London, three ofhis works failed to meet their minimumbids and were “bought in” by Bonhams.

Art is surprisinglyrecession-proof and auctionsbefore, during and after theglobal financial crisis have

shown record prices

■ ART ATTACK: Robert Hodgins’s ThreeGolem Figures will be sold on auction forbetween R400 000 and R500 000 thismonth. Buying Hodgins would have beena worthwhile investment five years ago

■ SHOPRITE

Job growth heldback by red tapeWhitey Basson bemoans trading barriers, writes LONI PRINSLOO



SHOPRITE2007: R10 000 | 2012: R52 355


4

20122011201020092008

0

5 000

10 000

15 000

20 000

■ RETAIL: Shoprite CEO Whitey Basson PICTURE: MARTIN RHODES

W HITEY Basson, theman responsible forbuilding one of themost successful

retailers in Africa, says exc e s s ivetrading constraints are putting adamper on intercontinentaleconomic growth and significantjob creation opportunities.

Over the past 33 years Bassonhas grown Shoprite Holdings(Shoprite) from an initialR1-million acquisition of eightsmall stores to a business with amarket cap of R100-billion.Shoprite now has over 1 700stores in 17 countries.

In fact, if you invested R1 000when the company listed in 1986,that investment would havegrown to R1.2-million today.

Shoprite was the fourth mostprofitable investment and thebest investment in the foodretail sector over the past fiveyears. A R10 000 investment fiveyears ago at a share price ofR37.50 would have shown anannual compound growth of39.25% and would today be

worth more than R52 000, with ashare price of R168.34 a share atthe end of September.

Basson and his team havebecome so effective that onaverage the group is able toopen a new shop every weekand now employs 100 000 people,making it one of the largestemployers in Africa.

small things right like exportingour goods and products to otherAfrican countries.

“Currently we have to importmeat for our shops in Africa fromplaces like Argentina and Brazil,while some of the world’s bestmeat can be found right here inSouth Africa,” said Basson.

“If we could convert these importsfrom other countries into exportsfrom South Africa, the countrywould be able to generate thousandsof additional jobs without having tospend large amounts of capital tocreate those jobs.”

Basson said differentgovernment departments had tostart working together to resolvethe issues around exports. “Weneed a central minister to drivethat process. It’s currently beinghandled by too many departmentsand small objections end upblocking the entire process.

“I am very bullish on SouthAfrica, but the problem is we needto work about 20 times faster tomake sure that we benefit from theseemingly obvious benefits thatexist from other African countriesexpanding at a rapid pace.”

Nedbank Capital analyst SydVianello said Shoprite had clearlydemonstrated that “the early birdcatches the worm”, adding that thegroup had captured the first-timeadvantage on the continent.

“Th at ’s a huge advantage tohave, but believe me, Africa was nowalk in the park for Shoprite.

“They lost money in Angola fora long time before it becameprofitable, but the traditionalU-curve has worked brilliantly forthem in that country because Ithink it is either their best orsecond-best performing territory inAfrica.

“S h op r i t e ’s experience has nodoubt taught them a lot aboutwhere the money will be made andwhat ingredients are necessary tomake a country a profitableve n tu r e , ” said Vianello.

Basson said it was alsoimportant to lower entry barriersfor small business in South Africato ensure more robust employmentgrowth. “We had a campaign acouple of months ago, where wewanted to buy about 1 000 ovens to

get people to do homemadecooking for our stores, but it is justtoo hard for the small guys tocomply with excessive regulationin some cases. In the end, we hadto scrap the campaign and all thejobs that would have come with it.”

He said while legislation wasimportant, small businesses wereoften not given a fair chance todevelop in South Africa — acountry with an unemploymentrate of almost 30% according to thelatest census information releasedat the end of October.

“Remember, trading is awonderful and flexible business. Ifyou need to survive, you can sellyour goods on the pavement. Weneed to make it easier for the

smaller people to comply, andprovide them an opportunity toalso supply the bigger companies.

“If I had my life over, I woulddefinitely choose to be in the retailbusiness again. If you have afactory without orders, you just goone way and that’s down, whereas,as a retailer, you can always adjustyour stock levels to be on termswith your suppliers and yourclients,” said Basson.

Av i o r Research analyst MarkHodgson attributed Shoprite’ssuccess to an effectivemanagement team, well thought-out investments, effective sourcingand cost control.

“We like to run a lean, mean andhungry machine,” said Basson.

‘There aresubstantially morejobs if we can get

small things right’

But, said Basson, there weremany more opportunities tocreate additional jobs if onecould cut through red tape andtrading barriers.

“It is easy to set up a newshop and to train a 150 or 200people to work in the shop. Butthere are substantially morejobs for South Africa if we get


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T HE Top 100 is dominated bycompanies in the retail sector,which has outperformed the all-share index, banks, resources and

i n d u st r i a l s .Foreign investors now own about half of

the retail sector on the JSE, up from 24%in 2007.

Theresa Heath, retail analyst at Stanlib,said: “SA retail shares are now bigenough to count on international investorscreens.”

Truworths, for example, is 70% owned byforeign funds, Shoprite 50% and Clicks 63%.

The purchase by overseas funds hashelped the retail index shoot up 108.9%over the past five years compared withthe all-share, which has increased 19.34%.

The profits of some of the listedretailers have grown more than 15 foldsince 2000, and continued to grow throughthe global financial crisis.

Retail is a well-run and competitivesector. But investors are largelyinterested in exposure to consumers inemerging markets, especially Africawhich, according to PwC, is generatingsubstantial consumer demand.

Domestic factors have also helpedretailers’ performance. Shoppers h avespent more because real wage growth hasoutstripped inflation in many sectors;lower interest rates have helped richershoppers; and poorer shoppers h avebenefited from higher social grants.

The growth in unsecured lending hasalso played a role.

■ R E TA I L

Foreign investorsgo berserk overshopping sharesBut the sector, whichhas done better thanthe all-share index, maystart to slide a bit, writesADELE SHEVEL

‘SA retail shares arenow big enough to counton international investor

s c re e n s ’

Shoprite, the fourth-best performer onthe Top 100 over the past five years, hasgreater exposure to Africa than any otherretailer, with the rest of the continentaccounting for 11% of group sales.

The big clothing retailers are all in thetop 20 of top share performers.

Mr Price — in second position over fiveyears — is followed by Woolworths(eighth over five years), TruworthsInternational (15th) and Fo s c h i n i , in 20thsp o t .

But is this the end of the big run fo rretailers? There is some concern they areove r va l u e d .

Heath said: “We think they willcontinue to deliver, but maybe . . . thebiggest quantum of margin expansion ofearnings growth is now behind us. All thesigns are pointing to consumers findingthings tougher . . .”

So which sectors are likely to be thenext strong performers?

Adrian Saville, chief investment officerof Cannon Asset Managers, pointed toresources and i n d u st r i a l s .

“We are flagging resources as a broadcluster, and the domestic-focusedindustrial cluster including building,construction, engineering, domesticmanufacturing and equipment suppliers.”

He said resources were su b st a n t i a l lyunderpriced. “Investors will give you allthe reasons to stay away from the sectorfrom labour action to electricity pricepressure — but the companies are notpriced for difficulty but disaster. To me,t h at ’s where the best opportunities reside.”

■ S T RO N GBUYING:But analystsare nowlooking toresourcesandindustrialsfor growthP I C T U R E:

K AT H E R I N E

MUICK-

MERE

F AMOUS Brands, the ownerof Steers, Debonairs,Wimpy, Mugg & Bean,House of Coffees and other

franchises, has been rewarded byshareholders and analysts withconsistent “buy” r e c o m m e n d at i o n s— because the fast-food groupsticks to a tried-and-tested strategy.

It buys market-leading orchallenger brands that connectwith the public, and provides slicksupport in the background.

Any investor sinking R10 000into the share five years agowould now be sitting on R51 407.

Franchisees have benefited too,because all the attractive marginsare at their end.

So shouldn’t Famous Brandsstruggle if the handsome marginsare at store level, for thefranchisees? It’s all about strikingthe right balance and volumes,said CEO Kevin Hedderwick.

“What has set us apart from ourpeers is that we deliberately choseto get into logistics to service our

franchisees, and to manufacture ontheir behalf. This helps make pricesfar more competitive.

“But it means we have to go forvolume, and that depends on themix — how much we do for thefranchisee and what it does to ourmargins,” said Hedderwick.

“We ’ve just opened a logisticscentre in Nelspruit because wehad enough scale and volume inthat geographical area.”

Famous Brands now roasts itsown coffee, makes juices andsauces, and has brought a varietyof other functions in-house.

Hedderwick said capacity keptcoming, though in a calculated way.

“We buy brands at the front endand build the back end.

“But we won’t get involvedwhere the capital expenditurerequired is excessive. It must below, with a quick payback period.

“Making chips is an example —a huge outlay and a lot of skill isrequired to start making chips, sowe won’t do it. We don’t do

everything the franchise networkrequires.”

It is this cagey use of cash t h atkeeps luring investors.

“Our balance sheet is strong,and we are a highly cash-generative business,” saidHedderwick.

“We pay back debt quickly, andour gearing is sitting at 4%.

“This means we can beacquisitive when opportunitiespresent themselves. We are not atsaturation point yet — if we see acompelling case, we’ll buy.”

While the ability to pay downdebt is attractive to shareholders,the company has no particulardividend policy. When there ismore cash on hand, it simply paysout a smaller percentage tomaintain reserves for acquisitiveag i l i ty .

Famous Brands’s strategy hasalways been to buy brands thatalready lead their segments, or toback potential challengers whocould benefit with a little helpfrom a finely honed organisation.

For example, it is in chicken forthe long haul with Giramundo,even though Hedderwick praisedKFC and Nando’s for the imposingbarriers to entry in this sector.

From essentially a fast-foodtakeaway specialist, FamousBrands is keen on getting itscustomers to sit down byexpanding its presence in family-style restaurants.

First up, pubs. “KEG has beenour flagship, and we’veoverhauled it and made it morec o n t e mp o r a r y , ” said Hedderwick.

“We can show franchisees whatgood looks like and entice them.Pubs that can’t become KEGs willbecome Brewers Guild, which is ahybrid of the old brands. We arein the process of converting four

or five pubs to Brewers Guild —there is no point in having fourdifferent pub brands.”

He said no matter what a SouthAfrican wanted to eat, FamousBrands had to offer options inevery category.

“If it has a food and beveragespin, then we’re interested. Wewant to get into the completefood-service landscape.”

That doesn’t just go for SouthAfricans. “We have been in Africaacross our borders for 15 years orso, and we have planted manyseeds in the last decade . . .” hesaid.

“We are about to embark on anaggressive strategy from 2013; togo deep into our existing presenceon the continent, but notnecessarily into new territories.

“We ought to understand themarkets by now, although the

route to market in Africa and theretail-space aspect presentchallenges. If we can buymanufacturing facilities at criticalmass we’ll look at them too.”

Hedderwick said food servicewas closely linked to the economy,and Famous Brands was poised tobenefit as soon as GDP grew.

“We have to constantly work toremain contemporary and offer astrong value proposition forcustomers — when disposableincome comes under pressure it isthe value proposition thatbecomes compelling.

“It has also been shown thatwhen GDP begins to increase in acountry, because people becomecash-rich and time-poor, morepeople buy food out of home.Food-service profits tend to rise attwice the rate of GDP growth. Ithink we’re in a good space.”

■ FAMOUS BRANDS

See what boys inback room will do

■ ASSORE

The key is slick support of franchisees, writes BRENDAN PEACOCK

E XPOSURE to the rightminerals at the right timehas secured strong returnsfor investors that have put

their money behind base-mineralsminer and marketer Assore.

At number 6, Assore is the onlyresources company to make itinto the top 10 of the 2012 Top 100Companies list.

A R10 000 buy-in into Assore atR73.60 a share five years agowould have grown to R50 523 byend-September, at a share price ofR329.70. Assore’s shares were firstlisted on the JSE in 1950, and haveenjoyed almost 100-fold growthover the past 15 years.

The company’s principalinvestment is a 50% interest inAssmang, which it jointly controlswith African Rainbow Minerals.

Assore chairman DesmondSacco said the company had justreleased all-time-record results,with earnings of R3.7-billion,mainly bolstered by higher iron-

ore prices.“We expanded our iron-ore

business at just the right time. Sixyears ago, when we started ourexpansion at Khumani, iron-oreprices were hovering at $50—ton andsince then we have seen prices ashigh as $185—ton for a shortperiod,” said Assore CEO ChrisCo r y .

In 1929, Sacco’s father Guidostarted exploration for manganesein the Kalahari. The companysubsequently diversified into iron-ore and chrome mining, ferro-

alloys production, and selling andmarketing commodities.

As s m a n g ’s plans for the comingfive years include a manganeseexpansion that will increaseproduction to five million tons ayear. “We believe the rightdirection for us to continue on ourcurrent upwards trajectory willbe to produce and sell moremanganese in the future. Wealready have the plant capacityand infrastructure in place butrequire additional shafts andrelated infrastructure,” said Cory.

The company was consideringits position in ferroalloys as ever-increasing electricity tariffs aremaking it difficult to survive inthis business, he added.

Electricity prices have morethan doubled in five years andstate-owned power utility Eskomis now seeking a further 16%increase in tariffs.

Assmang had to temporarilyhalt ferrochrome production andconverted most of its Machada-dorp ferrochrome furnaces intoferromanganese furnaces.

Cory said increasing powerprices would work againstg ove r n m e n t ’s call fo rb e n e f i c i at i o n .

“The main ingredient that goesinto beneficiating our ores ispower, and the increasesadministered by Eskom aremaking our alloys businessu nv i ab l e . ”

Sacco said Assore had beenaffected by strikes at other mines.“The big concern is customerperception of reliability of supplyfrom South Africa.”

Good timing adds up to profitsBase-minerals minerreleases all-timehigh results, writesLONI PRINSLOO



FAMOUS BRANDS2007: R10 000 | 2012: R51 407


5

20122011201020092008

1 000

3 000

5 000

7 000



ASSORE2007: R10 000 | 2012: R50 523

TOP 100 COMPANIES

Number

6

20122011201020092008

5 000

15 000

25 000

35 000

■ A GOOD SPACE: Kevin Hedderwick, CEO of Famous Brands, whichis moving into family restaurants PICTURE: KATHERINE MUICK-MERE

■ GROW TH:Chris Cory,CEO atAssoreP I C T U R E:

MOELETSI

MABE


T ECHNOLOGY company EOH’sforay into the public sector haspaid off handsomely with thecompany being listed seventh in

the Top 100 Companies survey.Compound growth over the last five

years is sitting at 36.68% and a large partof that is attributed to the company’saggressive expansion into the publicsector, which now accounts for about aquarter of r eve n u e .

If you had invested R10 000 in EOH 10years ago, that investment would beworth a little more than half a millionrands today. This is a reflection of thebuoyant share price that has been on anupward trend for the last five years.

Five years ago, the share price wasabout R9.40 and today it is about R39 andshowing no signs of slowing down,particularly after the positive results fromthe 2012 financial year.

EOH, with the second-largest marketcapitalisation in the technology sectorafter rival Datatec, has leapfrogged overits competitors since it listed in 1998.According to CEO Asher Bohbot it hasgrown “44% per annum compounded sinceinception” and grew revenue by 50% lastye a r .

It surpassed the R1-billion revenuemark in its 2009 financial year. In its 2012financial year, EOH earned income ofabout R3.6-billion and was left with a netprofit of R223-million, after taking intoaccount all costs and expenses.

While government has proven that itcan be great business, it has alsorendered many companies bankrupt dueto non-payment.

However, Bohbot said EOH has faredwell thus far. “We are aware of thechallenges [in the public sector] and caterto them up front. We have propercontractual obligations that are adheredto by both sides and the most importantthing is that we ensure that we deliver.You have to be a lot sharper when you’redealing with government,” said Bohbot.

According to Bohbot, the key to theconsistent performance shown by EOH isthe level of execution, which comes fromthe calibre of talent running theorganisation. “In today’s world we don’tcompete on the right strategy, especiallybeing a public company. The strategy isout there for everyone to see, but the realcompetition happens at an executionlevel. And to execute, you need to attractand retain the right people,” he said.

He admitted that highly specialised ITskills weren’t always available inabundance and this is why EOH hadmade human development a priority.

“This year, in terms of employment, wereached the 5 000 people mark and wealso have 620 interns,” said Bohbot.

One of the things the leader is mostproud of is the level of transformation thecompany has achieved. This was helpedby a black economic empowerment (BEE)deal brokered with Mthombo IT in 2005,which raised the BEE profile of thecompany and resulted in a 25% broad-based black shareholding.

“We are reasonably transformed anddoing well on our BEE scorecard,” hesaid. “Thirty-eight percent of thecompany is under black ownership and57% of our employees are black. We dobelieve that sustainable transformation iskey for South Africa and it will allowbusiness to grow.”

With a cash pile of R452-million, Bohbotsaid, acquisitions were part of the growthplan. “Not to force growth but keep themomentum of the business going andlook at organic growth and acquisitions.”

■ EO H

Ex p a n s i o ninto publicsector pays offTech company grows 36%over last five years,writes MAMELLO MASOTE



EOH HOLDINGS2007: R10 000 | 2012: R47 696


7

20122011201020092008

500

1 200

1 900

2 600

3 300

4 000

■ AWARE: Asher Bohbot, CEO of EOHPICTURE: KATHERINE MUICK-MERE


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W HEN Ian Moir becameCEO of Woolworthstwo years ago, he saidhe would fine-tune

strategies that were working well,lose those that were not andimprove decision making.

“We weren’t really deliveringand had become a littleove r c o n f i d e n t , ” said Moir.

Following his intervention,which included direct sourcing,focusing on the core customer,and lowering lead times inclothing, the share price has risensu b st a n t i a l ly .

This has placed Woolworthseighth in the Top 100 Companies,reflecting growth in its shareprice from R17.90 to R60.79.

A R10 000 investment inWoolworths five years ago wouldhave been worth R46 465 at theend of September.

The business has been madesimpler and more profitable. It isusing direct sourcing rather thanthird parties.

The up-market retailer hasbenefited from an absolute focuson LSM 8 to 10 customers in fo o dand clothing. Margins have

improved and increased theprofitability of the business.

And the market approves. Aninvestment in Woolworths hasshown compound annual growthof 35.96% a share over five years.In the last year alone its shareprice has shot up 73%.

“We ’re more commercial,decisive, simpler. We’ve taken alot of complexity out of the

business and made decisionmaking easier,” said Moir.

The opportunity in food is stillabout getting more people to shopwith focus on price, and theexpansion of its product offerings.

One of Moir’s favourite imagesis getting consumers to shop withtrolleys rather than baskets.“We ’re behaving more like asu p e r m a r ke t . ”

The food division has had salesgrowth ahead of the market andgained market share over the pasttwo years, and there’s room formore growth. Woolworths has a25% share of the local fresh fruitand vegetables market, but it hasonly a 2% share of other goodsfrom cereals to coffee to cleaningm at e r i a l s .

Its food business is forecast todeliver strong same-store growththis year as higher LSMconsumers increase theirspending with a benign interestrate environment and rising foodi n f l at i o n .

The clothing division has beengaining market share with the re-

launch of its brands RE andStudio gaining favour with ayounger customer.

The retailer continues to takeout franchise operators andconvert them into corporatestores. It has bought back about80% of its franchisees at a cost ofR700-million, giving Woolworthsgreater control of its brand.

Analysts see further potentialin operating efficiency, which isstill low compared with its peers.

Woolworths reported 2012financial results marginally aheadof expectations. Headline earningsa share were 260.6c, a growth of24.4%. Group sales rose 11.8%.Sales growth in South Africanclothing was up 12.6% and in foodup 11.9%. Australian operationstook strain and sales contracted2.6%.

The retailer has made a biginvestment in Australia. CountryRoad, its 88%-owned subsidiary,bought 40-year-old fashion retailerWitchery Group for aboutR1.5-billion.

“The first signs are incrediblypositive. The Australian businessis nearly two-thirds the size ofour South African clothingbusiness,” said Moir.

But Australian tradingconditions have been tough forthe past two years and is expectedto remain so for another 18 to 24months. The group has investedheavily in online retailing and istaking the strategy forward overthe next three to five years.

Africa contributes a relativelysmall percentage to Woolworthsat about 3% of turnover, but Moirbelieves that it might account for7% of group sales in five to sevenyears, and 10% of group profitover the next 10 years.

■ WO O LWO R T H S

Greater control ofbrand brings results



WOOLWORTHS2007: R10 000 | 2012: R46 465


8

20122011201020092008

500

1 600

2 700

3 800

4 900

6 000

C EO ’s interventions bolstered share price, writes ADELE SHEVEL

■ SIMPLER: Woolworths CEO IanMoir PICTURE: HETTY ZANTMAN


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P INNACLE TechnologyHoldings retained its ninthspot in the Top 100Companies rankings. Its

compound annual returns toshareholders rose just over onepercentage point from theprevious year to 35.72%, perhapssignalling the effect its most recentacquisitions have had on profits.

CEO and founder Arnold Fourieagreed, attributing the group’simproving performance to goodacquisitions.

In the year to September, theIT c o mp a ny ’s various subsidiariesbought out the remaining sharesin partly-held subsidiary Explixfor R3.5-million; a majority stakein infrastructure company MerquCommunications for R3-million;and the entire business ofinternet security distributore-Secure for R5.1-million.

“These are small acquisitionsand are not currently making thatmuch money, but they’re strategicacquisitions,” said Fourie.“Th ey ’re providing the group withaccess to market spaces that weh ave n ’t been in before.”

The purchases follow last year’sR16.8-million deal to buy out theremaining shares in its 60%-heldcabling and related ICTinfrastructure distributor DataNetInfrastructure Group, as well asthe R11.3-million deal for 39.2%more of its ICT-sector financierCentrafin; and the 2010acquisition of the Axiz

Technology Group at R151.2-million. Centrafin was generatinga lot of revenue for the group.

Daniel Isaacs, an equity analyst

at 36One Asset Management,which owned 6.9% of Pinnacle atthe end of June, said the mostnotable buy was Axiz.

“This was an excellentacquisition as Axiz had very littleclient and product overlap withthe existing business,” saidIsaacs. “The Axiz business hasbeen seamlessly integrated, whichis testament to management’soperational excellence.”

In its results to June 2011, thecompany said revenue grew by57% to R5-billion, and more thanhalf of that came from Axiz andCentrafin. The following year’s setof results showed the integrationof the Explix and DataNetpurchases helped cut operatingexpenses. Indeed, efficiency is oneof Pinnacle’s competitiveadvantages, said Fourie.

This helped it a c c u m u l at eheadline earnings of R280-millionin 2012, a major boost from R104-million just four years ago.

The secret was “continuous

profit growth, and keeping thec o mp a ny ’s balance sheet robust.We remain efficient,” said Fourie.

Said Isaacs: “Pinnacle will nowlook to grow more through non-distribution channels which isevidenced by its ‘Projects andServices’ segment and its recentacquisition in this space, MerquCommunications. Merqu focuseson data-centre design andinstallation which are an integralpart of the cloud computingi n f r a st r u c tu r e . ”

Fourie said Pinnacle was now ina position to provide all thehardware and software needed tobuild the data centres that cloudcomputing depends on.

I N the past five years Aspen’stotal return to shareholdershas been 34% — c o mp o u n d e d— a year. In the period, the

pharmaceutical company hasexpanded from being an almostentirely local operation to one thatoperates in more than 150countries.

Aspen ranks number 10 in thisye a r ’s Top 100 Companies.

Investec asset managementanalyst Neil Stuart-Findlay saidmuch of the company’s successcould be attributed to theoutstanding leadership andinsight of CEO Stephen Saad andhis deputy Gus Attridge.

From the late 1990s, whenAspen was founded, until 2007, thecompany fo c u s ed on generic drugmanufacture and distribution inSouth Africa. Because of the shiftin demand towards cheaper off-patent generic products, themodel proved to be a superbearnings provider.

But it wasn’t enough for topmanagement, which began an

acquisitive drive that has madeAspen one of the biggestpharmaceutical companies inemerging market economies. Inaddition to being beneficial froman earnings and share-priceperspective, the global expansionhelped the company diversifyregulatory and currency risk.

As the rest of the world began tobuckle under the global economiccrisis in the third quarter of 2008,

Asp e n ’s earnings moved upwards.Having just concluded its first dealwith global drugs manufacturerGlaxoSmithKline (GSK), Aspen hadnot only acquired new products, italso had a pipeline into newterritories through which it couldintroduce its own products.

Importantly, it had alsoacquired GSK’s knowledge of theregulatory lay of these new lands.GSK’s primary objective is toresearch and develop newproducts and bring them tomarket under patent, whileAsp e n ’s is to manufacture genericalternatives, which it markets anddistributes. The strategiccollaboration between the twocompanies involves Aspenacquiring the rights to GSK-developed products nearing theend of their patent, which Aspenthen markets. Where appropriate,it creates a generic product.

Despite Aspen issuing a 16%equity stake to GSK in 2009 —GSK now owns a 18.6% stake —most of the deals it has done have

been debt funded. With thecompany being such a strongcash-flow generator, these debtsare quickly paid up, leavingAspen sufficiently capitalised toseek out new deals.

Attridge said part of Aspen’sstrategy was to reach moremarkets instead of getting biggerin existing markets. He said itmade more sense from a riskperspective to do five small dealsin five different countries thanone big deal in one country. Thisstrategy also gave the companythe opportunity to groworganically and not justa c q u i s i t ive ly .

However, as the company

grows, so the deals need to growto have any real effect on thebottom line.

And they have. In January 2011,Aspen concluded its acquisition oflisted Australian drug makerSigma, which was strugglingfinancially. Sigma was turnedaround operationally and Aspen isnow the biggest genericpharmaceutical manufacturer inAu st r a l i a .

Stuart-Findlay said the effect ofcost cutting and improvedefficiencies is likely to furthereffect Sigma’s bottom line in thenext 18 months to two years,which will result in an earningsuplift for Aspen over the period.

■ PINNACLE TECHNOLOGY

New acquisitionshelp cement positionCompany’s efficiency gives it the edge, writes MOYAGABO MAAKE

■ OPTIMISTIC: Arnold Fourie,CEO of Pinnacle P I C T U R E:

KATHERINE MUICK-MERE

■ ASPEN PHARMACARE

A fuller medicine cabinet



PINNACLE TECHNOLOGY2007: R10 000 | 2012: R46 048

TOP 100 COMPANIES

Number

9

20122011201020092008

0

500

1 000

1 500

2 000



ASPEN PHARMACARE2007: R10 000 | 2012: R43 259

TOP 100 COMPANIES

Number

10

20122011201020092008

1 000

3 800

6 600

9 400

12 200

15 000Acquisitions boost pharmaceutical firm, writes TINA WEAVIND

■ HEALTHY: Gus Attridge, Aspendeputy CEOPICTURE: TEBOGO LETSIE

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Capitec Bank Holdings

PSG Group

Brimstone Investment -N

EOH Holdings

Mr Price

Shoprite

Kumba Iron Ore

Cashbuild

Invicta

Naspers -N

Assore*

Premium Properties

Value Group

Truworths

Aspen Pharmacare

MTN Group

Woolworths

The Foschini Group

Wilson Bayly Holmes - Ovcon

Distribution & Warehousing Network

Octodec Investments

Grindrod


Massmart

Santam

Clientéle Life Assurance

Phumelela Gaming & Leisure

Astral Foods

Hyprop Investments

African Bank Investments

Clicks Group

Kagiso Media

Digicore Holdings

Spur Corporation


Distell Group


Hudaco Industries

Acucap Properties

ELB Group

City Lodge Hotels

Trencor

Omnia

Tsogo Sun

Remgro

Redefine Properties

Datatec

RMB Holdings

Italtile

MMI Holdings

Metair Investments

Tiger Brands

Mediclinic

Rainbow Chicken

Netcare

Sasfin

Fountainhead Prop Trust

Adcorp

FirstRand

Sanlam

Discovery

PPC

Brait

Imperial*

Sycom Property Fund

Absa

Peregrine


BHP Billiton plc

Group Five*

Bidvest Group

Datacentrix Holdings

SABMiller Pplc

Reunert

Pick n Pay Holdings

Foord Compass

Oceana Group

Illovo Sugar

SA Corporate Real Estate Fund*

Standard Bank Group

Tongaat-Hulett

Bowler Metcalf

AECI



Aveng

Caxton & CTP

Amalgamated Appliance

Sasol

JD Group

Altron

Sun International

Liberty Holdings

Argent Industrial

Iliad Africa

Barloworld

ArcelorMittal SA

Nampak

Altech

Investec Limited

160

495

50

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650

3 710

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450

1 880

1 420

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456

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850

36

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1 520

3 180

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1 060

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20

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456

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1 410

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1 365

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6 610

244

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975

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540

448

7 201

774

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226

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668

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805

785

930

4 900

815

2 995

220

1 545

4 926

510

4 322

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6 969

1 880

530

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1 540

800

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2 870

5 000

220

2 220

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3 705

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505

85

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1 600

775

2 658

4 832

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205

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2 030

1 395

2 151

2 412

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6 750

1 000

3 900

12 599

16 834

50 292

15 500

8 170

51 497

32 970

1 770

570

9 400

14 300

16 021

6 079

12 651

13 775

650

1 900

1 420

1 059

16 691

18 979

1 100

885

10 400

7 160

3 305

5 788

1 925

192

2 200

2 487

9 313

5 976

11 180

4 660

2 550

9 195

5 345

12 500

2 000

14 525

935

5 265

3 700

639

2 119

2 790

27 312

4 100

1 345

1 790

3 090

809

2 800

2 789

3 757

5 550

2 900

2 940

18 751

2 700

13 850

1 120

5 006

25 785

2 540

20 600

489

36 176

6 895

2 041

815

5 400

3 050

360

10 563

13 975

800

8 184

2 608

16 298

3 129

1 730

295

37 229

4 650

2 295

8 500

9 925

630

520

7 190

4 100

2 860

4 350

5 110

1 900 427

672 132

550 038

504 855

389 896

353 807

337 266

319 734

303 066

297 265

279 841

272 589

268 217

245 949

244 524

231 113

229 783

213 068

205 763

205 266

192 975

180 422

164 274

162 570

157 177

156 100

148 444

146 444

142 473

139 024

131 128

130 621

130 452

126 638

122 399

120 341

119 487

116 713

115 402

113 281

106 779

103 571

101 124

100 137

99 786

97 503

97 330

93 828

92 698

92 093

90 695

88 179

86 324

85 522

85 049

83 995

83 539

82 839

80 227

79 081

77 520

76 717

75 186

74 757

73 078

71 372

70 949

70 694

68 436

68 392

68 294

68 218

66 701

61 875

61 016

60 251

59 408

56 725

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54 592

53 665

50 838

50 607

50 449

49 290

48 278

47 685

46 692

45 487

43 335

43 256

41 086

38 012

37 184

36 111

35 496

34 278

33 658

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33 320

69.00%

52.32%

49.29%

48.02%

44.24%

42.85%

42.17%

41.41%

40.65%

40.38%

39.54%

39.17%

38.95%

37.75%

37.67%

36.89%

36.81%

35.79%

35.31%

35.28%

34.45%

33.55%

32.30%

32.16%

31.72%

31.63%

30.97%

30.79%

30.43%

30.11%

29.35%

29.30%

29.28%

28.90%

28.46%

28.25%

28.15%

27.85%

27.71%

27.47%

26.72%

26.34%

26.03%

25.91%

25.87%

25.57%

25.55%

25.09%

24.94%

24.86%

24.67%

24.32%

24.05%

23.94%

23.87%

23.72%

23.65%

23.54%

23.15%

22.97%

22.73%

22.60%

22.35%

22.28%

22.01%

21.72%

21.65%

21.60%

21.21%

21.20%

21.18%

21.17%

20.90%

19.99%

19.82%

19.67%

19.50%

18.95%

18.53%

18.50%

18.30%

17.66%

17.60%

17.57%

17.29%

17.05%

16.91%

16.66%

16.36%

15.79%

15.77%

15.18%

14.29%

14.03%

13.70%

13.51%

13.11%

12.90%

12.88%

12.79%

Share nameOpen (cents)

Close (cents)

Final value (R)

Compoundgrowth10 yrs

Share nameOpen (cents)

Close (cents)

Final value (R)

Compoundgrowth10 yrs

TOP 100 COMPANIES OVER 10 YEARS

Graphic: FIONA KRISCH Source: I-NET BRIDGE * denotes where a dividend due at period end has been accrued.

Ec o n o m i cpenduluminfluences listBRENDAN PEACOCK

T HE list of top performers over 10 years reveals justhow difficult it is for companies to maintain highreturns for shareholders. Not only that, but asurprising number of seemingly impregnable

companies fall by the wayside.To maintain a compound annual growth rate in share

price of over 40% for ‘ 0 years is unthinkable in the face ofchanging market conditions, leadership overhauls and stiffcompetition. Athough the companies in the top 10 of thelong-term list almost certainly have capable leadersguiding them, the same can be said of many of the bottom10.

Shaun le Roux, portfolio manager at PSG AssetManagement, said the list illustrates the importance ofbeing in the right industry with the right managementteam.

“Owning a well-managed company in a fast-growingindustry can be extremely rewarding for an investor —there is not one company on the list of top 10 p e r fo r m e r sthat has not had an above-average management team. Atthe same time, all the dogs have one [or both] of twoingredients: being in a challenged industry or having amanagement team that allocated capital poorly.”

Le Roux said the standout sectors on the JSE over thepast decade have enjoyed the benefits of growinghousehold incomes and aggressive expansion into informaland under-served markets.

“Capitec has led the way in micro-lending and banking,Shoprite in food, Mr Price in clothing and Cashbuild inbuilding materials.”

However, he said, not all companies exposed to theconsumer have done well — especially those thatmanufacture or distribute consumer products and havehad to compete directly with cheap Chinese and Asiani mp o r t s .

“A relatively strong rand has seen companies likeCeramic [tiles] and Nu-World [appliances] battling tomaintain profitability.

“It is interesting to note that mining shares can be foundamong the best and worst performers. Kumba has benefitedfrom the very sharp appreciation in the iron-ore price, whilemost miners have failed to capture the benefits of risingcommodity prices thanks to rampant cost pressures.

“One characteristic that the top four performers have incommon is that they were quite small companies 10 ye a r sago — all of their market capitalisations were significantlybelow R1-billion.

‘‘It is much easier for a small company to quickly growits profits or asset value than it is for a very largebusiness. Smaller companies are typically more nimbleand have many more opportunities to maketransformational investments to grow their business.”

Adrian Saville, chief investment officer at Cannon AssetManagers, said while only one producer found its way intothe top 10 — Kumba — the bottom 10 was largelypopulated with producers and miners.

“Perhaps producers will come off a low base now, butthere’s a possibility that there could be a protracted periodof pain ahead. It isn’t a good economic direction.

“Service companies can ‘m a ke ’ things, for example ininformation technology, but if you’re a retailer . . . yourvalue-add hinges on consumer spend. This is not

sustainable if nothing is being made. There has to be aproduction underpin to the economy.”

He said recovery in production was an economici mp e r at ive .

“This table shows that South Africa has not had a strongproduction underpin, and we see that in the manufacturingdata over the past few years. I think that’s unlikely to

repeat for another 10 years.”Looking at Top 100 lists from decades gone by, Saville

said, it wasn’t often that a company managed to stay insuccessive lists.

“Invariably there is an almost zero chance of onecompany repeating that kind of performance over the longrun. After five years, most fall out of the top 10.”

Juniors in mining plunge to end of listJANA MARAIS

INVESTORS in junior mining compa-nies have had a tough time of late,with share prices falling by up to95% in the 1‘ months to end-Septem-ber.

Seven of the 10 worst performerson the JSE were small mining com-panies, mostly with projects in explo-ration or development stage, that raninto operational or funding troublesover the period.

Great Basin Gold, which suspend-ed operations at its Burnstone minein September after its cash dried up,was the overall worst performer,with its share price dropping fromR13.50 to 70c. The company, whichalso owns a mine in Nevada in theUS, entered business rescue inSeptember.

Weak platinum prices, safety stop-pages, labour unrest and rising costscaused troubles in the industry,making it difficult to raise capitaland turn around loss-making opera-tions. Aquarius Platinum, EasternPlatinum and Atlatsa Resources allfeature on the list of the 10 worstp e r fo r m e r s , with Aquarius share-holders losing 77%, Eastplats 74%and Atlatsa 68%.

Shareholders in Wits Gold, an ex-ploration and development companythat pulled out of a bid to buy Har-mony Gold’s Evander mine, lostnearly 60%, while First Uranium,which sold off assets to AngloGoldAshanti and Gold One, declined 7‘ %.

Shareholders in Coal of Africa,who faced losses of 67% over theyear, have more reason to smile af-ter the company found a Chinese in-vestor early in October. The compa-ny was under pressure to find capitalto develop mines at Makhado andVe l e in Limpopo.

However, one junior miner made itto the top performers’ list over theyear. Shareholders in Central RandGold, an exploration and miningcompany with operations in thesouth of Johannesburg, saw returnsof 150% over the year. Its share priceof 10c at the end of September is stillhowever, a long way from the R10.69the company listed at in ‘ 007.

The worst performers’ list in-cludes struggling airline 1Time Hold-ings, which has announced the liqui-dation of its main operating sub-sidiary; investment holding companySherbourne Capital; and industrialgroup Dorbyl, which warned in Octo-ber that it was in distress and “rea-

sonably unlikely” to pay all itsdebts. Trade in Dorbyl shares wassuspended this month.

The top performing company overthe period with returns of ‘ 9‘ % wasCalgro M3 Holdings, a housing de-veloper. Its share price jumped fromR1.‘ 0 to R4.70 at the end of Septem-ber. Electrical products and televi-sion aerial company Ellies was insecond place with returns of ‘ 78%.

Three technology firms made it tothe top 10: Adapt IT Holdings, whichoffers consulting and software de-velopment services, was third withreturns of 156%. Fourth wa sFoneworx Holdings, which offershosting, disaster recovery and busi-ness continuity services and thetechnology platforms used for vot-ing by SMS in programmes likeIdols, returning 150%.

Pinnacle Technology, which dis-tributes hard- and software, was10th with returns of 93%.

The rest of the top 10 consists ofprivate school group Curro Hold-ings, Taste Holdings, which ownsScooters Pizza, St Elmo’s, Maxi’sand NWJ Jewellery; engineeringgroup Howden Africa; and SAFrench, which distributes towercranes and hoists.


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Calgro M3

Ellies

Adapt IT

Foneworx

Central Rand Gold

Curro

Taste Holdings

Howden Africa

SA French

Pinnacle Technology

Conduit Capital

Mr Price


Interwaste

Investec Property Fund

Imperial*

Invicta

Super Group

Metair Investments

RMI Holdings

Woolworths

Spur Corporation

Rolfes

Old Mutual plc

Famous Brands

120

185

65

95

4

655

115

1 421

5

949

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6 729

3 233

37

1 030

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4 590

840

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1 251

3 500

1 300

216

1 491

4 249

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690

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1 629

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1 795

108

12 599

5 976

70

1 780

18 751

8 170

1 535

2 790

2 153

6 079

2 200

370

2 284

7 250

39 167

37 767

25 625

25 013

25 000

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23 781

21 728

20 000

19 329

19 286

19 268

19 189

18 919

18 588

18 486

18 474

18 274

18 020

17 962

17 913

17 788

17 712

17 679

17 677

291.67%

277.67%

156.25%

150.13%

150.00%

148.70%

137.81%

117.28%

100.00%

93.29%

92.86%

92.68%

91.89%

89.19%

85.88%

84.86%

84.74%

82.74%

80.20%

79.62%

79.13%

77.88%

77.12%

76.79%

76.77%


Close (cents)

Final value (R)

Compoundgrowth 1

year

TOP 25 COMPANIES OVER ONE YEAR


* denotes where a dividend has been accrued.

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