Empowerment success: How RMB Ventures helped Amsol transform

JOHANNESBURG — In 2016, a consortium comprising dealmakers at RMB Ventures, Pan-African Capital Holdings, MIC Capital Partners and Smit Amandla Marine employees acquired Smit Amandla Marine from a Dutch maritime group. Known as African Marine Solutions Group (Amsol), the new venture that emerged from this deal embarked on a journey of transforming the maritime business into a South African owned entity that would seek to empower its workers as well as driving transformation. In this interview, Mbongeni Madonsela, a private equity transactor at RMB Ventures and Paul Maclons who is the CEO of Amsol talk about their journey thus far. – Gareth van Zyl

It’s a pleasure to welcome Mbongeni Madonsela, a private equity transactor at RMB Ventures, and Paul Maclons who is the CEO of African Marine Solutions Group, also known as Amsol. Thank you very much for taking the time to chat with me today.

We’re going to be talking about Amsol and the transaction that you guys did back in 2016, and how that has played out especially from an empowerment perspective. But to set the scene, Paul, can you give us some background on what Amsol does exactly?

Amsol is a specialist marine services company and we provide risk management, marine expertise, and solutions to the private and public sectors. Now, that’s a mouthful but it basically means that we provide services to the oil and gas sector, i.e. we play a role in their value chain. We provide services to oil, international oil managers and refineries insofar as their marine business is concerned. We provide port and marine services as well so that ships can enter and exit ports safely. Lastly, we provide integrated bunkering services, which means fuel logistics. Our role is in the maritime sector where governments have marine business, and obviously the private sector. We’re a medium-sized company with approximately 680 people, 18 assets and a footprint across all of Southern Africa, including Namibia, Mozambique, Angola and the rest of the Africa Continent.

Here’s a question for Mbongeni. You obviously did this transaction back in 2016 as RMB Ventures, so just to trace back to that, can you explain the nature of that transaction and what the rationale behind it was?

The deal was very opportunistic at the time. The business was foreign owned and RMB Ventures saw an opportunity to first ‘South Africanise’ the business. Bring it back home, so to speak. Secondly, we saw an opportunity to introduce appropriate empowerment to position the business to benefit from opportunities in SA. The executive management team presented a very attractive ‘rest of Africa’ growth strategy and we bought into that. To sum it up, we saw an opportunity to buy a foreign-owned company, introduce the right empowerment, and back the management team into the rest of the Continent.

There was also an employee share Trust. Can you tell us more about that and how you have integrated that within the broader deal as well?

This is probably one of the unique features of Amsol. At the time we bought into the business, it was majority-owned by Dutch owners, and the staff owned around 12%. We felt this to be a good thing in the context of the economy that we trade in. Our view was that we cannot do this deal without rolling the trust into our shareholding, going forward. We decided, alongside with management, to retain the employee’s Trust at the same level of shareholding and we continued with the employees as a key component of our shareholder body. I don’t know whether you’ve any view on that Paul?

Gareth, if I may add. We obviously looked at the BBBEE Act (Broad-based Black Economic Empowerment act), and its requirements, and decided that including employees as part of the ownership (structure) is giving effect to this broad-based focus, and not just simply to focus on equity or investors. We found that this approach had a huge and positive impact on morale and sense of ownership by the employees participating in this (company) strategy.

Would you say that incorporating the Trust played a big part in terms of transforming the business into a black-owned business?

Sure, as Paul alluded to. The participation of our staff in the transaction was very important, but in addition to our staff (through the employment trust), we have two other empowerment shareholders in the form of Pan African Capital Holdings (PACH), as well as the MIC (Mineworkers Investment Company). It is a combination of these two institutional shareholders, our staff, our management team, as well as empowerment through RMB Ventures, which we enjoy as a function of the FirstRand shareholding. That’s how we got to the broader majority black ownership for the business.

Paul, the business has also continued its transformation since the deal. Can you explain what that entails exactly?  

Transformation for us is more than just changing from white to black, in a manner of speaking. It’s also transformation in terms of businesses processes and alignment to doing business in Africa. Then, most importantly, it’s the ability of the company to now be 100% SA- owned, enabling us to achieve our government and private sector clients’ imperatives in terms of enterprise and supply development, and including them in mainstream economic activities. As you know, the maritime sector has, for a long time, been a very closed and isolated industry. But we’ve been able to change the profile of our suppliers quite significantly, both before and after the transaction, to currently having upwards of 60% black suppliers in our supply chain. We have over 5000 suppliers, of which 3000 are used regularly. Of that 60% – 80% are women-owned and that’s why we believe transformation has really taken off. Previously transformation decisions would have been subjected to the vagaries of the majority shareholder, which was the Dutch company.

Paul, why is it important that the business also has 100% SA ownership?

There are a number of reasons. About 35% of our business is with government and they have a real requisite for 100% SA ownership. Secondly, our key clients in the private sector, namely the oil majors, are themselves subject to preferential procurement requirements in terms of enterprise and supply development. They want to see black ownership. Then thirdly, being a 100% SA-owned company means that we can now aggressively target business in Africa, since most African governments and companies want to do business with an SA or African company. So, those are the two key drivers: government and business sustainability, and our growth into Africa.

Here’s a question for both of you – in terms of any other contributing shareholders. How have they stood to benefit from the deal years back, and subsequent developments?

Other than the financial benefits that come with the deal, shareholders get a defensive cash generative portfolio company into their portfolio. From an empowerment perspective, I think it’s a good South African story to tell your investors – to say: ”We have deployed our capital into a niche, unique, one-of-a-kind SA maritime business”. So, over and above the economic benefits we can tell investors that they’ve invested in a pure, SA business.

Mbongeni, as a final question. How do you view the future of private equity funding in SA, and even the rest of Africa, with the likes of this deal in mind?

The funding of private equity is not going to face any dramatic change similar to other financial services products, where you’re seeing a lot of disruption from Fintech’s. I think private equity models in SA are secure for now. The growth that you’ve seen in the last 10 years, in terms of the amount of capital that’s available to the market and the number of players that have come onboard, – you’re going to see that remain intact for the foreseeable future. I think there is an emerging market story that foreign investors buy into. There’s also the growth in the pool of SA assets that are available, thus creating more capacity for SA Pension Funds to invest in private equity. From a captive perspective, which is where we play – with a single shareholder in terms of FirstRand – I think our risk appetite will encourage captive funds to continue deploying money into this space. To summarise, you will see growth in a number of funds, as well as the amount of capital available in the medium to long-term. The structure of the transactions will largely remain the same. Empowerment will be a key driver of future deals, more so than what you’ve seen in the past.

Great, thanks very much for chatting to me. It’s been interesting finding out more about the journey of Amsol. 

Thank you, very much.

Thank you, Gareth.

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