Alexander Forbes will have its supporters when the financial services group re-lists on the JSE next month. Having generated operating profit of over R1bn in each of the last two financial years, it is certainly no lightweight. And with US-based giant MMC having acquired a 34% stake and identified the group as its vehicle for a drive into Africa, there is no shortage of ambition. We hosted CEO Edward Kieswetter in the CNBC Africa Power Lunch studio today to talk about the company which has long since shed the negative reputation around its “bulking” scandal which required compensation payments to clients of around R500m. – AH Â
GUGULETHU MFUPHI: Alexander Forbes will list on the Johannesburg Securities Exchange later next month, after delisting from the JSE almost seven years ago. The company’s CEO Edward Kieswetter, joins us now for more. Edward, I think I should be saying congratulations on the relisting. Can you discuss or elaborate on the involvement now – the 34 percent stakeholder who comes from the U.S. – the kind of innovation or change they might bring.
EDWARD KIESWETTER: Firstly, I think it’s a great vote of confidence, both in our organisation (Alexander Forbes) as well as in South Africa as an investment destination. For Mercer, it’s clearly the attraction of the emerging market action, through a company that is well reputed and established. Firstly, for us it gives us access through the institutional investment into the global footprint, which brings a rich tapestry of experience and other knowledge and talent, which quite frankly, just enhances our value proposition to our clients.
ALEC HOGG: Why relist, though? You guys were on the market for just over ten years. You delisted as we said, in 2007. Why do you need to relist now, particularly when you have Marsh & McLennan with that 34 percent stake?
EDWARD KIESWETTER: Firstly, the delisting in 2007 was as a result of the taking private by the Private Equity Consortium – that was what triggered the listing. Now we had to find an orderly way for the current shareholders to exit their investment and when the board mandated me 18 months ago, to start the process, it was in fact to consider all options. We did, as we had publicly announced, considered everything from a straightforward trader sale by a local or international player, through to a vanilla listing. Where we found ourselves, as a result of having gone through the process, is in fact, the best of both worlds where we get the benefit of a long-term investor with the international ilk of Mercer and we give South African and international asset managers an opportunity to invest into a great company.
ALEC HOGG: It was interesting. I had the same conversation with Piet Mouton from PSG and he said the bare view in the PSG Group – because I think they’ve now listed four different subsidiaries with the PSG Konsult last week – is that Usain Bolt runs much faster in front of a packed grandstand, than he does in practice. Do you think it’s the same thing with you, that you’re going to sharpen up a little if you are listed?
EDWARD KIESWETTER: I think the dynamics do change. The dynamic during the Private Equity Consortium, which was beneficial to us is the close involvement of your shareholder through a private equity holding, has sharpened our pencils in terms of stronger buys for execution, clarity of intent, as well as around managing our cash and being very close to the cash, in fact. Those disciplines have made us fitter and stronger. We’re under no illusions that in a listed environment where we have other shareholders, we would have an accountability to them. We will take the lessons learned out of being private, which bought us some space and patience capital and clearly, we now have to run as fast as we can.
ALEC HOGG: You’ll be with us every six months at least. You’ll do deals etcetera. This Marsh that has a big office in Johannesburg in Sandton, is that the same company? Do they have a big presence here?
EDWARD KIESWETTER: Let me explain. The New York-based organisation is a group of companies called Marsh McLellan (MMC) and they are four subsidiaries. Marsh is one, and that’s the international list-broking business. Then Mercer, which is their consulting/employee benefits and investment business, which mirrors ours. Then they have Guy Carpenter, which is a reinsurance broking business and tailored risk solutions, and then they have Oliver Wyman, which is a business that does consulting – much like your big consulting firms. The organisation that we’re aligning with through this investment is Mercer, and they have taken the interest.
ALEC HOGG: Do they have a presence in South Africa?
EDWARD KIESWETTER: There’s an entity called Mercer Africa, which is a subsidiary of Mercer International.
ALEC HOGG: How big are they?
EDWARD KIESWETTER: They’re not very big. They’re small, which is why the investment in Alexander Forbes creates a wonderful platform for them to accelerate their interest in Africa.
GUGULETHU MFUPHI:Â Potential synergies between the two.
EDWARD KIESWETTER: Wonderful synergies – yes.
ALEC HOGG: So you’ll be driving not only your own agenda, but also a big part of a massive international group based in New York.
EDWARD KIESWETTER: Well clearly, their interests are aligned with ours and therefore, when we do well, they will do well.
ALEC HOGG: Just one last thing: do you miss the days with Pravin Gordhan at SARS?
EDWARD KIESWETTER: It’s interesting. I’m always asked that question, Alec. I will always miss the role at SARS and working with great leaders like Pravin, Trevor, and our current Minister Nhlanhla Nene. I will always miss that. I do think though, that there are elements of my job now, which has allowed me to grow and to make a different and bigger contribution towards the overall wonderful tapestry of Mzansi.
ALEC HOGG: And we look forward to seeing you more often in future. We certainly do, don’t we, Gugu?
GUGULETHU MFUPHI: Indeed. He’ll be blowing the kudu horn some morning, downstairs here at the JSE.
