Jonathan Oppenheimer: SME loans, where the billion went and his forever home, SA. LISTEN!

When the country experienced its unprecedented lockdown in March this year, the Oppenheimer and Rupert families were the first of the country’s wealthy to pledge a whopping R1 billion each to contribute to mitigate the financial woes that would inevitably follow. The Motsepe and Bekker families and another Oppenheimer, Mary, and her daughters soon followed. Most of this went to the Solidarity Fund, but Jonathan Oppenheimer and Johann Rupert decided to make their funds available for small, micro and medium enterprise loans. In an exclusive interview, Jonathan Oppenheimer told BizNews where the billions that he and his father donated have been spent and how different branches of the family do their own thing. Plus, he delves into the future of mining and tells us where home is. – Linda van Tilburg

The journey of SAFT (South African Future Trust) was some of the best I’ve ever seen of South Africa, it is truly amazing. My father, my children and I had the opportunity to talk as it became apparent that Covid-19 was something that was going to impact the globe and our immediate response was, we had to look to do something in South Africa. Your emotional first reaction is to provide some money to support government, do food parcels or something. We paused, which I think in the end was a very good pause and said, hang on, money is not the issue here. Governments globally are able to access money and actually private money, regardless of its quantum, is not going to be sufficient to really move the dial.

When you look at the government support South Africa has with a R500 billion package, it just dwarfs anything that anyone else could do. So, we stopped, we paused and said, ‘hang on, where are the channels that are going to collapse and no longer exist that support people?’ Actually, as we examined South Africa, we are pretty pleased that there were very good channels, both within government, within society and within business to support a lot of South Africa.

There were channels around the social grant system to support those who were outside of formal economic activity, there was the UIF (Unemployment Insurance Fund) and there were the feeding programmes that had been developed with the schools and the church groups. You actually felt pretty proud to be a South African at that moment, but the small and medium sized business space was a glaring hole. Many of the people employed in that space had semi-formal or informal contracts with their employers. Many were paid weekly. It was very unclear that they were going to get UIF money or social grant money, and they were supporting a lot of people.

So, our ‘a-ha’ moment was, that we could create a channel which was administratively very light touch to support the SME community and more importantly support the employees of the SME community.  Having had that sort of ‘a-ha’ moment, we put our heads together and I had some incredibly smart people working with me. We came together with a scheme, we’ve created a trust, a public benefit organisation. What we would do, is we would pay directly to the employees, but to control who put people on the list, we wanted the SMEs themselves to have skin in the game and the way they had skin in the game is, they took a subordinated interest free five-year loan to fund those direct payments.

So, subordinated to all existing debt, very concessionary but that meant that they had to think about who they put on the list. On that basis, we didn’t have to administer who was put on the list. We didn’t sit there with huge teams to try and verify that Joe Bloggs actually existed. Then we went to the banks and we said to the banks, hang on, guys, you know the SME community best. Can you act as – call it a referee – in terms of the quality of the SMEs and they jumped at the chance because this way, they could support their strongest SMEs.

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What’s amazing, is literally from the idea, to having government-supported PDO status and setting up a trust, took eight days. I mean, I talk to people in Singapore and they just look at me gobsmacked. They don’t know how to respond. Eight days from idea to having a fully formed trust. Wow! Then six or seven days after that, we had our first – I don’t want to call them clients – beneficiaries in the system and being paid. It took 34 to 35 working days, I think it is about how long it took, to receive through the banks 40,000 applications for SAFT.

We signed up to 10,000 companies,  just under 9,900-odd and effectively had just shy of 100,000 beneficiaries signed up to the programme. The last fifteen weeks after that, so the last three months has been paying these people the R750 a week, which means that they can feed themselves and their families. It’s been a truly remarkable journey. I mean, it’s just been amazing how efficiently it’s happened.

What’s truly extraordinary is, we’re busy catching up with the paperwork. As you can imagine, a lot of this ran ahead of us. So far and I touch wood, we found mistakes in the processing of this and you would expect that, but we haven’t found malfeasance and fraud across the organisation. I reserve the right to change what I say, because I’m sure we’ll find something somewhere. But I’m encouraged that whatever’s happened is very much at the margin and irrelevant in the grand scheme of things. So just under 100,000 supported, most probably supporting 500,000 South Africans in total. It has given them a chance to now get on to the formal channels and formal programmes, that can support them in the long term, help the SMEs to position themselves from a cash flow position, so that they can bounce back when the economy starts to open. I’m so proud!

The next thing that we’re doing – which is where your question really was pointed – is what next? This money was given to the South African Future Trust by our family, and we were able to raise additional funds from interested parties across South Africa. We had some incredibly generous gifts and as a consequence of that, that money is going to be used as it returns through the resettlement of those loans, to support future business development in the SME sector for a period up to 2040. When we finally get to 2040, the trust needs to have dispersed all of its moneys to the SME community and development funding and hopefully it’ll die.

In the context of the future South African Future Trust, kind of chapter two, we’ve been able to recruit an extraordinary board of trustees who will be able to support us on that. The generosity of South Africans across the board who helped to support us, whether it was the pro bono work done by the lawyers or the selfless work done by the banks in facilitating the implementation. Whether it’s the likes of the trustees who’ve joined us, the Archbishop of Cape Town, Thabo Makgoba, Graça Machel, Thandi Orleyn and Barend Petersen, we’ve just got people who really are prepared to go above and beyond the call of duty. It’s just amazing.

My next question was about the big names who are trustees. You have the endorsement of Graça Machel and the Archbishop of Cape Town, that’s incredible. When you saw in the news that corruption has again creeped in with the procurement of Personal Protective Equipment did you take special measures to ensure that would not happen with the Future Trust?

So my mother’s a very keen follower of Maria Montessori, who developed the Montessori teaching method. There is this idea of a control of error, which is that you create a tension in whatever is happening, so there is really only one right answer. So, I described an early control of error. The fact that the SMEs nominated the recipients of the money but the SMEs did not receive the money, but took on a loan, was a control of error. In that context, we didn’t have a credit committee. The banks acted as their credit committees because it wasn’t their money. The burden there was really thoughtfulness and commitment to the project and amazingly, we were able to do this in an incredibly administratively light way.  What’s neat so far – and as I say, reserving the right to find that I’m lying through my teeth – is the lack of administrative burden has not meant that things have been done improperly. If anything, it meant things were done really quickly, efficiently and well and – touching wood again – in a very constructive and non- corrupt manner.

It is not only you and your father Nicky who have donated money to help with Covid-19, your aunt Mary and her daughters have donated and have given the racing industry substantial support. 

Yes, Mary, my aunt and her daughters do their own thing. We are very separate in our activities. Nicky, my father and I believe in building businesses and that’s what we’re doing. Mary and her daughters are very active in the spaces that they participate in and drive their agendas.  We very efficiently and effectively as a family manage the gentle and very painless separation of the two halves. So, while I watch with interest, I’m very much a third party as you are looking at what’s happening and I wish them all the luck in terms of saving the South African racing industry.

There was this outpouring of goodwill and billions donated by your family and other wealthy South African families, but then you are vilified in some quarters in South Africa.  How do you respond to that? How do you feel when that happens? 

It would be easy to say that it’s like water off a duck’s back, but it isn’t. At the same time, I think that the question is, can I sleep with myself at night? It’s not what others have to say and even prior to SAFT, I could very much sleep with myself and I think my family can sleep with itself at night. With the stories, that we’ve seen coming back from the Future Trust, the entire journey that is taking place and what we’re doing in terms of our investment philosophies and everything else, I have no issue whatsoever and people are entitled to say and to act as they see fit and I think history will be the judge.

When you say history would be the judge. Sorry, that I’m still on this topic, but there are people who say, but history would judge your family to have benefitted from apartheid, from the migrant workers who worked in the mines. How do you respond to that?

That’s a conversation which could go on a long time. The reality of it is that it is always in hindsight, you can see that you could do have done things better, but on balance and through the examination of our efforts through time, I think that the family were always pushing for the rights of individuals. You go back to when my grandfather gave a speech when he was still a member of Parliament, so I guess that was before my great grandfather died in 1957, where he effectively called for the rights of all South Africans to be recognised as fully blown South African citizens. At the time, he called for a qualified franchise based on education and regardless of race.  That position in the context of its time, was way ahead of pretty much most places in the world, including the United States and the movement led by Martin Luther King, a little later. That’s one example.

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The letters and records that I’ve seen of the fights that we had with the apartheid government as a company, as Anglo American around housing, with the development of the Free State Goldfields, show that we were always trying to push the boundaries of well-being for our employees and Anglo was the first company to recognise black unions, the role that Bobby Godsell played in increasing the wages of employees, the role that we played through the whole processes. Yet, I fully agree, we could have done more. We could have done better. It’s something of a balance.  In the round, I’m very comfortable with who and what we are and the history we carry.

The Oppenheimer name has for so long been associated with mining and diamonds. And yet you sold De Beers to Anglo American. How do you see the future of mining, in general and in South Africa?

Mining provides essential natural resources to keep the world working. However, at this point there is a global psyche which sees mining as at the forefront of environmental harm. This creates a sympathetic environment for aggressive regulation against mining. If you think about the amounts of investment that you need to make and the time horizon with responsible mining to get your money back, it’s very hard to make a case for very long-term investment in the mining industry against the backdrop of the regulatory environment, which is moving against extractives.

That has caused us, as our side of the family – Nicky and Jonathan – to step away from natural resources in our direct investing activities. We continue to have exposure to natural resources through money managed by others, but in terms of our direct activities, we are trying to focus on businesses that have a meaningful and material impact on the communities in which they exist. So, we’re looking at healthcare, we’re looking at it from FMCG (fast moving consumer goods), we’re looking at industrial manufacturing, we’re looking at services and we’re looking at ICT (Information and Communication Technology).

I understand that one of the topics close to your heart is the issue of engaged capital. Can you explain?

It actually came out of a long conversation with friends and has developed over a number of years. It looks critically at what money does what and the best way to think about it, is if you can commit to building a factory or commit to training people, that results in additional goods and services being created within whatever sphere one is operating. By contrast, if one simply trades the existing goods and services, at the end of the day, it’s a bit like a game of musical chairs. There’s nothing more in the room. What happens if the number of chairs is reduced? You end up in the transactional space getting into all sorts of trouble. What we’ve seen generally, is a decline in the amount of engaged capital as a percentage of GDP on a global basis. We’ve done some research on this, and it seems that certainly from the days when I was at university and the idea of gross fixed capital formation, which is a poor proxy, but a reasonable proxy for engaged capital, sitting at around about 20, 25 % on a global basis, that has now declined, particularly in the Western world, to sort of low tens.

On the basis that engaged capital investment actually drives the economic growth and transactional engagement or transactional capital drives redistribution and normally drives redistribution to the wealthy, not the poor, I’m greatly in favour of trying to direct money towards growing effectively, the balance sheet of the environment. In South Africa, I would love to see more money going into actually building factories, building skills, doing stuff that makes things and provides services to stuff rather than the stock market and trading bonds and currencies. For me, that doesn’t add intrinsic value to the whole, it just redistributes. So, engaged capital is about finding those businesses, finding that space where you can put money to work for the long term, with the net result that there is more at the end of the period.

In South Africa, you hear and see an accusation levelled at the wealthy families, at the Oppenheimers and the Ruperts, the Bekkers that they have effectively left the country? How do you respond to that accusation?  

It’s hard to respond to that because I haven’t left. I happened to be sitting in an office in London today. But as I said earlier, when we were chatting, I will be back in Johannesburg tomorrow. Home is in Johannesburg. My heart is in South Africa and Africa. Actually, in terms of the family’s direct investing, our vast majority of investing is directed towards South Africa and Africa. I established at the end of 2016, beginning of 2017, Oppenheimer Partners – which is a direct investment controlled vehicle for the family. The few investments it’s made since then – and we’ve been quite cautious – have been in South Africa or in Africa. So, we have investments in South Africa, we have investments in Nigeria. We have various transactions we’re looking at across the continent.

I don’t know about other things, but I mean, go circle back to the site for Future Trust. Who were the people who stood up quickest when South Africa was most at need? It was ourselves. It was Johann (Rupert) and his family. It was my aunt. It was Koos Bekker. It’s not as if we don’t see an absolute passionate need to be South African. I can’t speak for them. Maybe I am, but I shouldn’t be speaking for them.  But if you said to me, Jonathan, where is home? It’s South Africa. I only have a South African passport. I happen to have a couple because I travel quite a lot and the South African Government let me do that. But I am only a South African citizen and I wouldn’t know what to do with myself if South Africa weren’t home.

What other projects are close to your heart? 

Well, it’s a really interesting thing. It feeds back into this engaged capital perspective. What frames Nicky and my thinking for a long time is captured in Ernest Oppenheimer statement of 1954, that we are here to make a profit in such a way as to benefit the peoples and communities with which we operate. That statement has morphed into an even more holistic idea, which is, we need to really understand what the great threats to mankind are.

In our minds, there are two very substantial threats to mankind. There is a threat to the environment and global warming is at the cutting edge of that. So, an idea of how can we exist on this planet, in a way that allows the planet to survive and prosper, is absolutely vital. That’s one aspect of our lives and we focus a lot of our attention on that.  The second aspect is, that man himself is the largest threat to man. Over history, we’ve seen that occur time and time and time again. We’ve come to understand that one of the best ways to have man, not be a threat to himself, is to create prosperity for men. If mankind’s well-being is improving, it will by definition want to keep the rules that result in that improvement.

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So, if the rules of the game allow man to prosper, then man will continue to follow the rules of the game. In the event that the rules of the game cause a man to suffer, at some point they’re going to turn around and start rejecting the rules of the game. In our business, a lot of our thinking is, how do we balance those two parts? How do we balance the ecosystem of the environments we operate in, with creating greater well-being for the people in those environments?  If there is a philosophy for our side of the Oppenheimer family, that is it.

How do we manage and balance that simultaneous equation, of thinking about the ecosystem and about man’s well-being and try to create the best-fit solution, which solves both sides of that equation. That takes up quite a lot of time, whether it’s in the conservation space, whether it’s in the government policy advisory space, whether it’s in how we invest and how we run our business.

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