City of London’s former Queen resurfaces at Indaba with message about BEE

An article in The Economist described American dealmaker Robin Saunders as the Queen – or at least Princess – of The City of London in the late 1990s and early noughties. But then the thirty-something superstar banker was blamed for some disastrous investments and subsequent substantial writeoffs at her employer WestLB. Ever since, the Business and Dance graduate of Florida State has kept below the radar. Until this week, when she resurfaced at the Mining Indaba in Cape Town, opportunistically sniffing for mining deals. Her presence says much about valuations of African mining stocks – an area she has not previously dipped into. But as Saunders says in this forthright interview, before the billions she controls flow into South Africa, its Government will need to deliver legislative and regulatory certainty. Especially on Black Economic Empowerment where the percentage is not as important, she says, as a guarantee there is only a single round of give-aways. Robin, now 52 and self-employed at Clearbrook Capital in London’s fashionable Piccadilly, was one of the true heavyweight investors at the 2015 Mining Indaba. We caught her as she was leaving, a time when participants are more inclined to speak openly. Hers is a powerful message. – AH

I’m with Robin Saunders from Clearbrook Capital – been to the Indaba before?

Actually, I am here for the first time.  We’ve been looking at Africa for about a year, having migrated from the Middle East, where we’ve made a few investments, and Europe, prior thereto.

How big is Clearbrook?

Clearbrook is an investment manager and we represent a number of sovereign wealth funds, family offices, and even hedge funds, into sectors where they are not currently active.

South Africa is a wonderful destination, in theory, but has issues?

Yes. We have been looking at Sub-Sahara Africa more generally, and we’ve found Ghana to be very-user friendly, as a foreign investor. South Africa we are taking a close look at today, as it relates to power (electricity) investments – which is a focus of ours – mining; service companies to mining; and the oil and gas industry. We are pretty happy with it, but we’d like to satisfy ourselves that there’s going to be stability, with issues such as BEE and the dilution that could cause if in fact, (black) holders of those shares are allowed to sell them, requiring further dilution. At the extreme case, if it were to roll four times, there’s no shares left to give. So we’ll have to wait and see how that is bottomed out before we make any investments in South Africa.

So what do you need is legislative clarity?

Absolutely, I think clarity would be good even if it were a one-time dilution of 35 or 40 percent, where everybody knows where they stand and it is not ‘death by a thousand cuts’ of continual dilution.

Is that what you’re hearing from other investors? 

Yes, this is one of the issues that I’ve heard a number of times over this conference from everybody involved.  All stakeholders in these industries that are affected. The nice thing is everybody believes BEE was a great move and I agree.  The problem is the uncertainty around the future of it and what that does to the investment returns.

Ramatlhodi, SA’s Mining Minister said BEE in the future will be broader based – is that more satisfactory?

Interestingly that transfer of wealth is also a phrase I’ve heard a number of times over on this trip, and in relation to the mining industry specifically.  My understanding is that for every person employed in a mine, there are 10 people supported beyond that.  There’s a way to improve the wealth of the nation more generally, and maybe more democratically, through getting those mines up and running with better, more reliable sources of power, than focused on transfer of wealth at the top side of the equation.

You’ve mentioned power in a different sense; what about Eskom?

This is a sector that needs to be addressed, obviously in South Africa, and right across Africa. To have economic growth, we will need reliable sources of power across the Continent, which is the reason that is our primary focus.

Tell us more about the other parts of the Continent you’re keen to invest in, given that South Africa has issues…

It is somewhat opportunistic and we are very much ‘total return’ investors. So we’re assessing a number of markets on a ‘case-by-case’ basis.  Our first foray is in Ghana, and we will likely replicate our first one with a second in Ghana, because we found it to be a ‘user-friendly regulatory’ environment and the country is well run. They are very dedicated in assisting a number of power generators to get up and going.

On the other end of the scale, there’s Zambia which changed its royalty regime – would you stay away?

We have, so far, yes.

Have you been involved in the sector before, or is it opportunistic because mining is so cheap? 

No, we have not been involved in mining but my background has for decades been in securitization – I must admit I feel like I’m a thousand years old – once you can value the asset pool then mining is eminently securitizable, to use my vernacular. So we’re having a close look.

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