LONDON — In almost four decades of journalism, you get to meet many people. Most drift on after their 15 minutes or little longer of fame. But a few make such a major contribution that they are never allowed to stray far from the public arena. My long-time friend David Shapiro is one of those rare souls. He is now approaching a major milestone, a 70th birthday which he intends celebrating by running the New York marathon. In this week’s edition of The Old Firm, I used the opportunity of a trip to Johannesburg to visit with him and broaden our usual agenda. What transpired was just what you’d expect from a deeply generous and highly principled man – a treasure chest of life lessons and advice. No wonder David is South Africa’s favourite investment markets commentator. – Alec Hogg
I’m in Johannesburg with my good friend David Shapiro. David, lovely coming to these offices in Melrose Arch. You’ve moved to the other side of the highway now.
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Yes, we’re on the rich side of the highway now and we’re in Melrose Arch and this is where I like to think I’m the mayor of Melrose Arch. I love to walk up and down and greet people as they sit outside doing nothing during the day. It’s beautiful in summer and there’s some lovely places here for coffee and for lunch.
You might recall, my Moneyweb offices were here as well in Melrose Arch and I loved it. It was great for the staff because it’s very safe and lots to do but you have interesting neighbours.
We have. We’ve got Glencore, we’ve got Trillian, we’ve got lots of people around here so, you can choose who you want to be friends with in this neighbourhood, there’s all kinds of people but it’s fun – it’s really nice. Starbucks are opening up here as well so, we’ve got Paul’s, we’ve got Tasha’s, (still my favourite place), The Grillhouse has come here now so, lots of activity here.
Well, that completes it, bringing the Grill House to Melrose Arch certainly does.
Yes, you can’t beat the smell of The Grillhouse when you walk past, that’s not if you’re a vegetarian.
David, I’ve been away for 8 months and arriving back in SA one thing hits you, certainly in Johannesburg, with both Rosebank, Sandton, and this whole Johannesburg’s Northern suburb area is the amount of construction that’s going on. It’s like there is a boom happening yet when we read the media or you talk to people about the mood and it’s completely the opposite. How do we explain this?
If you look at those buildings, and this is the worry, not one of those buildings is owned by a company that produces things. It’s owned by Discovery, by Cliffe Dekker, by all the lawyers, and by Ernst & Young. It’s owned by service businesses rather than production companies. Although, I must say Sasol has got a magnificent building there as well. Alec, the problem is not the building, not the buildings they’re moving into, it’s the buildings they’re moving out of that we have the issue. I think we can’t hide the fact that we’re growing in decimal points – we’re not growing at 1% or at 1.5%, which even so is too low. The concern is that we are a very low growth country and we’re still relying on the mining commodities. We haven’t quite developed other areas, which I think are going to see us through into the future so, I still remain very concerned. We can do it but I think we need to make a lot of changes here. I think it’s a country that needs to look at itself in the mirror and give a new direction or a new sense of confidence. We are very low on confidence, which I think is politically led.
Yet the buildings are still going up. Now, I understand what you say about the new head offices for services companies. Maybe not such a bad thing because you’re going into Africa but I met this morning with a gent we both know well, Ivan Epstein. He tells me they’re redeveloping, him and some partners, the fire station in Rosebank. It’s going to be a tall building (12 storeys). There was other types of office accommodation and residential accommodation that’s going up as well. Somebody must have some confidence, because, in a country in which you look into the future and you are worried as you are led to believe, there wouldn’t be this investment surely?
I wish I could give an explanation to that because if a country is growing at, let’s say at 1%, there are those that are efficient that are going to grow at 2% – 4% and there are those that are less efficient that are growing or not growing at all and then in the middle you get the mean. It still means that there are pockets of excellence here and there. There are certain pockets where people are making money. The problem is that we don’t look at the country as a whole, which I think is under a lot of pressure and there are a lot of areas here, which I think are in deep recession and that’s what worries me. When you’ve got 17 million people on social grants like we’ve got (I don’t know what the number is) and we’ve got 27% unemployment.
We’ve got worries there and how do we ever address that? We can only address that with a lot of growth and I haven’t got the plan. I know where we need to go and I know where we need to direct this economy, which is towards technology. In other words, we’ve got to become or we’ve got to start moving towards a skills-based economy rather than the kind of economy that we are at, at the moment. So, I wish they would listen to me. I wish I had a voice or I could at least sit around a table where one could discuss this and contribute to it. But the politics is so bad here that we reject it. Nobody wants to listen to our story.
I think I’ve worked it out. A little while ago Bloomberg did an analysis of all the countries in the world and in the last 100 years the best performing stock exchange in the world was SA. Now, when you think about it, it completely doesn’t make any sense until you work out that SA was always on the brink, even from Jan Smuts’ days. When you have a country that is supposedly on the brink you don’t get foreign investment. So, those who are in the country are making money hands over fist because they don’t have to be that competitive. You don’t have the forces from competition coming in from abroad and capital inflows, which lifts the whole game. As a consequence, if you happen to be one of the incumbents making lots of money what are you going to do with it? Make buildings.
They do. They make buildings and they make investments here. I don’t think you’re far wrong. If you go into Sandton City now, and I travel the world, to me it’s one of the best malls that I have ever seen. It shows you that there are still people that are coming in from the rest of Africa and shopping here. Our hotels are still very good. Our game parks are still superb. I wish I could get to the bottom of it. I wish I could actually find what we need to do, in one simple formula, to turn things around, because what you say is absolutely right. We’re blessed with an array of assets (if that’s the right word) and opportunities here that you don’t have anywhere else in the world.
What I like to use as an example, and without being Zionistical. (This has got nothing to do with Zionism or being Jewish or anything like that.) I always look at Israel and I look at Israel, which is a desert. Why do I look at Israel? It’s the same size as SA – in terms of economic size. Economically it’s the same size so, we’re both 0.4%. I say, ‘how can that be?’ Â
Is that of the world GDP?
Of global GDP, and I say, ‘how come?’ They’re regarded as a developed nation and why are they at the level that they are now? Why is their GDP per capita $40 000 versus our $5 000? The reason is that they were in a situation, they were in a siege situation, but what happened? They got the best brains that they could get to develop military technology, medical technology, and communication technology – all the technologies. As I spoke to an Israeli professor I said, ‘how come are you so clever?’ She said, ‘well, we’ve got nothing else to do – we can only learn.’ It was a nice way of putting things. Why I use this as an example is that that’s the way we’ve got to go. We’ve got to start building up those technologies. Israel had nothing, and I don’t want to be brought into the political side of Israel, I’m not commenting on that, merely the business side. I think if you look at Africa – Africa needs that technology and we are perfectly placed here to start to develop things like that that we can take into Africa. We took MTN, we took Vodacom, and we’ve taken Shoprite. We’ve taken a lot of businesses into there so, there is hope to shift into that area. I see that as what I call ‘closing the gap.’ Doing something like that, something innovative like that that we can take to Africa. Africa has got one billion people, undeveloped.
The problem though is that business seems to have gone in there, many, and have burnt their fingers. Take FirstRand – they tried in Nigeria and it didn’t work out. What are they’re doing now? They’re spending £1bn on a bank in the UK, which is a completely and almost counter-intuitive again strategy. What do you make of this deal that they’re wanting to put together?
Everybody wants to go Fintech now. We want to go to a Capitec type of bank, except more sophisticated, because the younger generation don’t want to walk into a bank. They don’t want to walk on the granite floors and the marble pillars and so on. They want to do it on their phone and they want any bank that can provide them the easiest access on a cellphone and that’s where banking is going. That’s where financial service is going so, that’s the way that FirstRand are thinking. How do we get in and in the cheapest way, without having to build bricks and mortar? They might have picked up something. It seems to be a very good opportunity. I think they are reaching out in the same way as Sanlam reached out to EasyEquities. Start making the investments in those kinds of businesses but that’s the kind of business I think we need in Africa.
I don’t want to harp on it but we must start to provide cheaper internet or start to provide them with the kind of services where they can use. As we’ve seen with the cellphone, that’s the bases of growth. I wish we could work along those kinds of lines. We’ve shown in the past, I mean, if you look at SA doctors, lawyers, even businessmen, (Elon Musk), just look at the mark we’ve made from a very small country. Why can’t we do it? Our schools are good, we’ve still got some (and I’m talking of private schools here) which are still very good and I’m sure there are some good public schools as well. Our universities can still hold their heads up, for the meantime so, I think we’ve got to shift. In other words, we’re shifting too much towards the left, in other words, instead of moving…
Making everyone more equal?
Yes, lifting up the skills. Rather lift the skills than be concerned about how the other areas of the economy are.
But it is interesting, David. This is a country with enormous wealth, mineral wealth, human resource wealth (as you were saying) but it’s almost like that past is keeping it hostage. The past means that it continues to be on the brink as it has been for the last 100 years so, those who are in a position of privilege retain that privilege. Whether you talk about the colour of your skin, where you talk about the education that you’ve been privileged to have, or you talk about the business that has a position here that you’re not being challenged from abroad. I suppose the problem that we face there is you get new players in the political game and say, ‘let’s smash everything and start from ground zero again,’ and of course, there’s got to be a better way than that.
I think you’re exactly right. Don’t smash the legacy. I think rather build on it.
Be smart and use it in a way.
Yes, be smart because over time the shear demographics will ensure that you reach the kind of goals that you want. The more you educate people the more you lift people. When I look on my Twitter account, which you helped me with almost 9 years ago because I’m @davidshapiro61 and I’m nearly @dshapiro70 so, it’s 9 years ago, which you helped me. When I look at the people that follow me there’s a wide array of people and I always try and educate. I always try and put things out there, etc. I’m always fascinated by the people and the response of the broader population. People do want to learn and they do appreciate when you give them guidance and when you help them. I’m saying that there is a thirst for that. What happens and what stands in the way, though, is politics. They won’t allow the natural progression of that. I think if they would just allow that to happen. Yes, there are people, like I would love to help. Ask me to speak, I will speak. I’d never refuse.
And you never charge either.
In fact, when I do charge – when people insist on paying then I always give it to charity. I always choose a charity that I give to, etc. Tomorrow I’m doing on as well where the money will go to charity and that. I’m doing one on Thursday too so, I don’t charge and if they don’t want to pay or they can’t afford it – it doesn’t matter. As long as somebody is getting a benefit from my time. I’ve got plenty of time. I know we all say, ‘we’re busy,’ but I’ve got time.
David, where did that come from?
What’s that?
That altruistic attitude of yours, of giving your time away.
In fact, I’ll always remember what Buffett said and I come from a family where, my Uncle Simon worked for the Jewish Helping Hands his whole life. He was a man who gave up his time and I always remember what Buffett said. Buffett said, ‘he’s a wholesale giver.’ He’s a wholesale giver, and writes out a cheque to charity, that’s easy. He said that his sister is a retail giver. She gives up her time and in fact, in his mind, she gives more to charity than he does, by him simply writing out a cheque. I think it’s easy for businesses to write out a cheque. It’s very easy for us. Especially if it’s the shareholder’s money, it’s very easy to give it away but where you give time and you actually go out and talk to people, and help them, and guide them – I think that is far more gratifying than just writing out a cheque, etc. I’m always happy and I say, ‘phone me up or send me an email – we always respond.’ We never turn people away. If you’ve got R1 000 or R100m we treat you the same. We give you the exact, same advice.
That’s different to most.
Yes, for me it doesn’t matter and we give you the same time and you can test us on that. You come here because those few thousand rands to you is worth the same as the R100m to someone else. It’s hard earned cash. We’ll give you guidance. We might not buy the same shares but we’ll give you guidance, etc, and that’s what I’m saying. That’s the kind of thing we love to give to people and to teach them the benefit of saving because we’re not in the saving generation here. We’re not in a saving culture here and that’s going to cost us down the line.
Do you think you’re changing lives when you go out and do those talks?
Oh, yes, absolutely. I’ll never forget I read in Ferial Haffajee’s book. She wrote a book and she mentioned my name and I went ‘huh!’ Do you remember Reg?
Reg Rumney?
Reg Rumney, of course. So, Ferial was working for Reg and he was starting the Mail and Guardian, which was in those days ‘The Mail,’ and he sent her to come and interview me. She was going to get hold of this broker and tear him apart and she came always dressed like a communist, etc. She came into my office and she wanted an interview and she wanted to attack us because of the very poor holdings of blacks on the stock exchange. I said, ‘no, you’re wrong.’ I explained something to her. I said, ‘if you go into the PIC and the pension funds there’s a huge exposure that the common worker has to the economy.’ It’s as much in their interest for the economy to grow then it is in ours. I forgot about the conversation and years and years later she’d remembered that and had mentioned me in the book for that and it was like 20 years later. So, you don’t change and those kinds of things do make an impression.
You’re planting seeds all the time and you don’t know how they’ll germinate.
Yes, but treat people with respect. If they come in here and I’ve got a wonderful story of a man who came in here as well and he was so embarrassed. He had heard me on the radio with you. In fact, he always spoke about it and he listened to it every night. He came in here with his friend and he was a fireman, etc, and when we started to discuss his portfolio and that. I just spoke to him about investments and it turned out he had millions, he had saved up millions. One would have just brushed him aside as being a fireman without anything. He never dealt with me at the end, I don’t know what happened to him but those are the kinds of things. I’ve got wonderful stories like that where you treat people with the utmost respect, and give them guidance, and you’ll see that you get the rewards much later.
Isn’t that something that maybe all of SA needs to learn because the one thing that, from an external perspective that really drives you batty is that people aren’t sitting around a table talking to each other. It’s accusations, it’s politics of hate, it’s pointing fingers at everyone else rather than yourself and, as a consequence, going nowhere?
I think so. I think you can build along those kinds of lines. As long as you bring yourself down to the level. I’m very interested because I’m a runner and I run for miles every day. Whenever I see people on the side of the road digging holes or laying pipes I’ll always stop and say, ‘what are you doing – who are you doing it for – what’s this for, etc?’ And you’ll be surprised at how people respond to you. They don’t respond to you with hostility. They’re actually interested that you’re taking an interest in them and I think that’s where we’ve got to start as well. I mean it.
David, I know this from personal experience. During our years of travelling around on road shows and often we would get separated in the aeroplane and you would always end up next to somebody who would grill you for the whole 2 hours down to Cape Town, and made a friend.
People always remember that and I think it’s a source here. I’ve got no political axe to grind at all. I don’t walk around with a sore head. What does bother me is we’re not building from a base here.
How do you elevate your emotions because, really, the world is as you perceive it and if you go into the world grumpy and shouting at people in the traffic – it’s impossible. How do you do it for yourself?
Low expectations – that’s another Buffett story. Remember, what’s the success to a good marriage? Low expectations. I think genuinely, if you go in, don’t expect anything from people. I don’t mean that in a negative way, but if you give to people you get a lot back and especially if you’ve got something to give them. If you’ve got something to give then you’ll see how they appreciate it. They might sit there surely. They might sit there embarrassed and when I meet young people, especially young people who want to go into the market – I know they don’t know anything and you’ve got to extract that from them. They might be embarrassed because of their level of education but help them in a way to elevate themselves and that. I think it’s a way that we try, certainly I do at the firm here, and it’s always an open invitation to anybody to come here. If you want guidance we’ll always give it to you. If you want to know how to handle your money I’ve got plenty of time, Alec. The fact, that we’re sitting here, chatting, and having a cup of coffee – it’s great.
I’ve got a friend who says, there are 2 types of people. The one are the givers and the others are the takers. Do you agree?
Yes, it’s nicer to give. It’s much nicer to give.
Why?
There’s a sense of satisfaction. Once you take there’s always an obligation to give back to that person and especially if you’ve got something to give. I enjoy giving. I come from a family of givers and I’m not rich – I’m comfortable, very-very comfortable, and thank God, I’m okay but I’m certainly not in the class or make any ‘rich-list’ at all, etc, but you don’t need that. I think I get a lot of satisfaction from the job. The fact that we’re sitting here talking, and knowing that this podcast is going to go out to people I think that gives me great satisfaction and a lot of joy.
David, if you were then to pass on some pearls of wisdom, because this has been a philosophical discussion, which is great and it’s nice to have these. If you were brought into the presidency and they said, ‘Mr Shapiro, the economy is not growing. We have lots of antagonism from the white population because we’ve got white monopoly capital, etc.’ All the perceptions that exist within that side of the economy right now where would you start?
I’d start at the bottom. I’ve got a view that if we act poor then people are going to treat us poor. They’re going to treat us and give us charity and not investment. Therefore, you’ve got to start acting rich. I don’t mean that you’ve got to go and buy fancy suits or drive a big car but clean up what we’ve got. In other words, look after what you’ve inherited here. By inherited I’m talking in the much broader sense of a country. You’ve got a wonderful country – look after it and I think that’s where we have to start. If you walk around the roads of Johannesburg people toss litter all over the place, they don’t fix up their homes, they repair motor cars on the front lawn. You’ve got to get rid of that. You’ve got to make it a place where you want to live.
When people are happy, and this is very important. When you are secure and happy in your circumstances you’ll start to give. You’ll feel better about life and you won’t walk around grumpy like we do. Drive with courtesy on the road, these are simple things. You don’t need a big, major plan. You’ve just got to live civilly. Just clean up the little space around you. Even if you can’t afford it, you can buy a pot of paint, paint the gate, clean the garden, and keep it neat in front of your little house, and so on. Come to work neatly, work hard – that’s what you’re supposed to. Work a full day and stop being grumpy, and those kinds of things add up. If you’re employed by government and your job is to issue passports then do it with pride and do it properly. Not with a grumpy face, etc. Look after them and smile at the people that you meet. Smile at every customer and from my point of view, I know it sounds very simplistic but that’s where it starts. You’ll be surprised at how easy it is to turn a country around by just doing very simple things.
We’ve got a big meeting coming up in December, where the ANC is going to elect its next president. Some people say that it doesn’t really matter that there’s going to be a change in government in 2019, but that’s a minority view still. Of the three presidential candidates, if you had an opportunity to sit with them, is that the message you’d say, go for the basics?
Absolutely right. Organise it. Look how they cleaned up New York, use that as an example – Rudy Giuliani. He started by rubbing off the graffiti, by fixing and repairing. Today New York is an incredibly beautiful, wonderful dynamic, vibrant city because you feel alive there. It might not be exactly where we are but it makes a big difference. When you live in a city that’s clean and you drive on a road where you feel safe or you walk in streets where you feel safe then your whole attitude towards life changes. Entrepreneurship will come from that. We’ve got the brains. Just create the environment in which entrepreneurs or businesspeople can thrive.
Okay so, we often ask the leaders, and now we’ve given the leaders some examples. But surely a societal change comes from each person, there’s something that individuals can do.
Sure, we live in harmony in this business here. There are all kinds of people. There’s Indians, whites, and blacks, and there’s everybody, coloureds and everything – no one cares. No one has any gripe against each other. We live in absolute harmony here. There’s great friendships that go down here and we live in a country where it’s pretty easy. I don’t think those are issues. What you have to do is and we keep this place clean. We create an environment here where people can actually do business, and thrive, and almost develop a career so, we give them the environment in which they can thrive and that’s what you’ve got to do – simple.
