Where possible, Sanlam discourages ARC from setting up direct competitors to the Bellville behemoth. However, there is African Rainbow Life (ARL), which, in spite of its name, is a Sanlam subsidiary; ARC and ARL management are the other shareholders. But this was a highly opportunistic move: there was a walkout from Old Mutual headed by Bongani Madikiza, an expert in workplace marketing (sales presentations to employees), where Sanlam is weak.
There are a lot of conspiracy theories around Alexander Forbes. Since US consulting firm Mercer disinvested, ARC has become the largest shareholder in Forbes. And here, it competes with Sanlam: for example, both offer pension administration. Some say ARC co-CEO (and Sanlam chair) Johan van Zyl is working with Sanlam CEO Ian Kirk to merge the Forbes and Sanlam administration businesses. But Forbes can only prosper as an independent, nonaligned business.
ARC co-CEO Johan van der Merwe says that in current market conditions the group will focus inwards. The exception will be the investment into Sanlam Investment Management, in its present form or after a merger, perhaps with Absa Asset Management.
Van der Merwe says that the prices of asset managers — using Coronation and Ninety One as proxies — are now quite reasonable, so it looks forward to an earnings-enhancing deal.
Like many of these investment companies, ARC trades at a hefty discount. Its market cap of about R2.4bn is barely a quarter of its NAV. But Van der Merwe says it won’t need scrip for acquisitions as it has R500m in cash and a further R1bn in debt facilities.
Still, if ARC follows the example of similar businesses, it will come under pressure to realise value — perhaps by listing its largest assets and in due course by selling the rump and closing the head office. ARC could live longer because of Motsepe’s patient approach, however, and most of the other members of the Ubuntu-Botho consortium are likely to follow his lead.
Their wealth will grow so long as Sanlam continues to pay dividends. ARC already has two potential hits in TymeBank and rain. Shareholders should stay for the ride.
Through ARC, the consortium has redeployed some of the wealth from its Sanlam holdings
It sometimes seems as though African Rainbow Capital (ARC) contains such a disparate range of assets that it was named after Noah’s Ark. What do potash miner Kropz, an installer of fibre headed by ex-Absa boss Steve Booysen, mineral supplier Afrimat and digital-only bank TymeBank have in common, apart from being part of ARC?
But ARC shouldn’t be seen as a would-be conglomerate in the vein of the old Barlow Rand or Malbak, or black investment companies such as Thebe and Kagiso.
The chair, billionaire Patrice Motsepe, knows that most of its beneficiaries in the controlling Ubuntu-Botho consortium need to diversify assets.
So, through ARC, the consortium has redeployed some of the wealth accumulated from its Sanlam holdings.
The largest investment so far has been in the rain telecoms business, which is building an LTE-advanced network. It has already caused a stir in the industry with its uncapped data packages, though with restrictions which mean that only insomniacs get the full benefit. But it is milking the increased demand for home-based data.
TymeBank is playing a similar disruptive role with fees of just a few rands a month for most clients. No fewer than 1.1-million people have opened accounts; there are 440,000 active accounts and at least 3,500 new clients join every day.
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