‘Anarchy in SA poses no threat to EasyEquities investors’ – Charles Savage

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Last week’s anarchy left some BizNews community members wondering about the safety of their EasyEquities investments. To address these concerns, BizNews founder Alec Hogg went straight to the source and invited Charles Savage – Purple Group CEO and EasyEquities CEO and founder – to join the BizNews Power Hour. EasyEquities investors can breathe a sigh of relief, and with the number of the platform’s customers having surpassed one million – it’s sure to be a collective sigh. Savage explains that with the ‘virtualisation’ of stock ownership – the civil unrest recently experienced in the country poses no risk to offshore investments and money invested with EasyEquities. Savage – a self-proclaimed ‘massive South African bull’ – admits that last week ‘was the worst week in his life as a citizen of South Africa.’ While he maintains his belief that South Africa can have a great decade ahead and that the events of last week might be a tipping point for the unification of the country, he states that – if he were in his thirties – his thinking and decisions would be different. – Nadya Swart

Charles Savage on EasyEquities reaching one million customers:

It’s a big number and it feels great. Looking back, it’s taken us six and a half years to get to a million customers and we’ll get the next million in the next 12 months. So, you know, it’s funny (how) these things – it happens slowly and then suddenly it happens very fast.

On whether the anarchy experienced in South Africa last week poses a risk to offshore investments and money invested with EasyEquities:

I think it’s a good question. And to be honest, I’d be asking the same. So I think it’s a question from your listeners. You know, fundamentally – our offshore business is exactly that. It’s 100% offshore. So the fact that we’re a South African business providing access to international assets doesn’t make it riskier for those international assets. Our clearing and custody and the brokerages through which we trade are all offshore. So they’ve got absolutely no risk to South Africa at all. And in fact, you know, if this kind of unrest continues – then I think our business will benefit because obviously you’re just going to see a flight of capital from South Africa to offshore markets and it presents zero risk (the fact) that we are a South African institution.

On whether South Africans that leave the country will still have access to the money that they’ve invested with EasyEquities:

As I think you know Alec, the business is entirely virtual and online and there’s no gatekeepers. It’s not like you have to walk into an office in Sandton to unlock your funds and get access to the safe. So it’s all of the same procedures and processes that they use now, i.e., they would log on online. They would probably want to change their banking details because potentially, let’s just say, that they didn’t want the cash to come back to their South African bank account and then wanted to move to an offshore bank account, so they would have to go through a verification process to change the banking details. And then, to the extent that they wanted to withdraw their funds, they would give us the instruction, we would verify the bank and the money would flow to that bank account. So nothing changes.

I think the risk is not to your online assets or to your virtual assets, because everything in the stock trading world has been deritualised. So the risk is your physical assets; your title deeds to your property in South Africa and your assets that you store in a bank vault in South Africa. Those are the assets that are at risk. I don’t like to use the word virtual assets for things like shares – but essentially stock ownership has been virtualised. The registries are all online. The custody and clearing and settlement is all online. So, you know, it’s as secure as anything else. Just because we’re a South African registered business doesn’t make any difference to the security of those assets.

On whether EasyEquities has seen an increase in demand stemming from the riots and looting:

100% it has. Demand just ticked up overnight. Lots of customers who hadn’t thought about a US stockbroking account [were] suddenly thinking about it, wanting to understand how to open it and what they need to do. I think we’re all a little bit ‘deers in the headlights’ for the last seven days. Certainly that’s how I felt about it. I think we’ve started to unpack or started to understand what’s happened – not really understand it, but I think get a glimpse of what may have occurred. And I think as certainty around the events unfold, you’re either going to see resilient capital staying and backing government and the political framework. Or alternatively, I think you’re going to see South Africans take their capital and move them offshore.

But certainly, we saw an immediate increase in requests to say; ‘OK, so I’ve got a South African account. What do I need to do to get my US account set up?’ So sadly, there are no boundaries on capital anymore, and we even exchange controlled – the hurdles are so low or so high that the average user doesn’t apply. So, yeah, I think our users are going to be watching very closely. You know, the rand is telling a little bit of a different story. I ended up having coffee on Saturday with one of the senior guys at a large bank – head of securities at a large bank – and it was interesting. He was saying that international capital – we’re not fazed by this at all. In fact, his comment was; ‘We priced these kinds of events into investing in South Africa. And sure, we’re going to sit on our hands a little and just watch that unfold. But frankly, this is part of our investment thesis and case.

And we think the response so far has been good. And this isn’t a coup and this isn’t anarchy and the government is taking steps to resolve it. Might you see the weakness as an opportunity to invest more?’ So it’s interesting how people see it from other sides. You know, here in South Africa, we do get Stockholm syndrome. We see it for what it is. And, you know, our reference and context is what was it like yesterday? And it’s been getting worse for a long time, but international have priced this kind of risk in. So it’s interesting to see how this is going to unpack, but certainly retail investors are saying; ‘I need to be ready if anything continues to happen.’ 

Whether people in KwaZulu-Natal in particular have been requesting greater investments via EasyEquities:

I think they’re shell shocked. I mean, I – funnily enough – met somebody at your conference who was telling me about how her and her kids had to be airlifted out by helicopter. You know, that’s a very different context to sitting in a Sandton home [where] everything sort of works. Social media brings it closer and makes it very real for all of us, so I can’t say we’re unaffected. I was seriously affected. It was the worst week in my life as a citizen of South Africa, as someone who staunchly supports South Africa – by far. But my context is very different. And definitely, if I was sitting in the epicenter of it, I probably would have been making more rash decisions.

We haven’t seen that in the data. It’s not like our Natal clients are showing any different behaviour to anyone else. So, it would seem that the social media context is having the same impact for everyone. But I do feel like last week is a case of us being deers in the headlights. I think people are sitting there going; ‘This was a radical onslaught of my beliefs in South Africa, my commitment to the country, my senses, my sense of security, everything.’ And I think it’s going to take us a little bit of time to digest and see what the real impact is going to be. I mean, I think we’re definitely going to see more immigration than we’ve ever seen before. You know, it’s you and I are a different age group and have a very different context on this.

If you’re 35 and you were wondering about whether you’re going to stay or go, you know, I don’t think you’re wondering anymore. I think you’re going to say; ‘Well, why don’t I just watch from the other side of the world for a while rather than sit here and watch it from here?’ So I think age is a big determinant of how people will take the news and the impact. And I think that assets – for the last ten decades – have been going offshore. Most of the wealth managers are sitting at 60% assets offshore. That’s going to ratchet up a bit more now. You know, you’re going to see probably 70% of assets move offshore.

People will take advantage of a strong rand and let their capital sit from the outside and look in – rather than the other way around, which is probably… How do you defend that? I mean, I’m a massive South African bull. I think we can have a great decade ahead of us. I think there were signs of light at the end of last week that give me cause to think that this might be a tipping point for the unification of the country. I think the middle is going to get stronger and that the left and right will become weaker as a result of these events. So, you know, I’m positive about the future, but I’m not 30 years old. And if I was, I think I would be making different choices. 

On the recent deal concluded with Purple Group:

Yeah. So the deal (I think) went through SENS last week. The deal is completely completed. 200 million odd shares have changed hands, and it’s a very satisfying event for me because, you know, what you’re seeing is a little bit of a changing of the guard. We’ve had, as you know, the most incredible shareholders for a long time. Specifically in Lubner and [Mark] Barnes, who stood by us in really tough times, 2008 and beyond. And what they did is exited it at good prices for them – relative to where they got those shares. But I think the important part, and that’s sort of looking back, the really important part is [that] for a big exiting group of shareholders, you have to find capital that is confident about what the future looks like.

They bought in at R1,10 – which is 300% above where we were just a year ago. And they’re buying in at those prices with a strong sense that the future is going to be far greater than the past and that R1,10 is a good entry price. I’m also very pleased to say that Mark and the Lubner family are also staying in – it’s not like they’ve sold everything and they’re going away. Mark has been a massive part of this organisation. He’s been the backbone of the shareholder group for a very long time. And Mark deserved a good exit on his shares, and I’m glad that he got those. But he also still wants to play a meaningful role in the future. So it’s not like they’re abandoning ship. It’s a positive statement. And I think the key thing for me is that both the Lubner grouping and Barnes grouping, they wanted to ensure that a shareholder of reference came in who bought into management strategy and the future of the group.

And in Paul Rutherford – who represents a much larger group of shareholders than just himself – we found someone who’s got the venture capital background to really understand the assets. And I don’t say this lightly. I think he understands the business as well as anyone else within the business. He spent a lot of time unpacking it and looking into the data and understanding where this thing might go. He also has the context of international investment landscape and where we could take the asset and how best to manage it, its balance sheet and the shareholding group going forward.

And for me, he’s more aligned with what we want to do with the group, which is to grow it aggressively again. We’ve grown the group out of the income statement of the group in the last 10 years, which has served us well and creates very good discipline. To grow a business out of your own income statement is not easy, but it does create a really good set of disciplines. I think the next decade will be defined about where the opportunity sets are where we can raise capital and go after market opportunities that are greater than our income statements, if you like, and to scale this business sort of 10 times over the next five to 10 years. And Paul will be a great advocate for that and a great resource for us, because, you know, we’re mostly just South Africans who’ve plied our trade here in South Africa. And we need some new skills on board and people that will rationally object to the things that we do or rationally support the plans that we have.

So [it’s] very exciting for the group and certainly for me. I mean, I’m dedicated to staying for as long as they’ll keep me. I don’t want to go anywhere. And I think the most important thing about me in terms of operating the business is I’ve always wanted and enjoyed having strong shareholders who support the vision. And the risk is that over time you can end up with a shareholding group that is disparate and not really strategic and doesn’t support the vision of the group, in which case [as] a CEO – you don’t really have the handle on the direction of the ship. And I can say that I’ve still got that handle on the ship, because the shareholding group are big supporters of what we’re doing and even greater supporters of the things that we want to do in the future. So [it’s] a very exciting time to be CEO of Purple Group and to welcome Paul and the rest of the shareholders who came in. 

On what he makes of all of this and the way forward:

The first part of last week shook me, because I’d actually set lines in the sand around South Africa – about the way the country has to be for me to stay. And it was like we didn’t just walk over the line, we jumped over it and then carried on running past it, really. It is quite personal, but I’ll share it just to contextualise; I got a WhatsApp from my 11 year old daughter at ten o’clock at night on Tuesday to say she was scared, and [asking] if she’s safe and shouldn’t we go somewhere for a while. Now that shook me to my core. And then by Friday, there were signs that we were going to stand together; from every age group, every race group – we’re going to stand together and defend the country because it’s greater. We can’t let the 1% crowd us out. And, you know, maybe it’s not 1%, maybe it’s 2% or 3%.

But I think the thing that gives me the real context to stay and to fight for a better South Africa is that we are the majority, those who want to stand together, protect industry, protect our neighbourhoods, protect our families and friends. We’re standing shoulder to shoulder, and I think we’re going to drive off this insurgency and be stronger for it. And the thing that I’m really looking for, which – I think Cyril in his second speech last week was way better than in his first – there needs to be, if you like, dictatorial democracy. You need a leader that emerges, that gives us the strength to believe that the future is going to be different. And they will be judged on their actions, not their words. And the platform is set for that. And Cyril’s the guy. He’s got to take control and he’s got to take action. And if he does, I think the support he’ll get now will be incredible because we all want it.

We all are looking for that leadership, that someone to believe in again. And I think the platform is set and I think what Cyril has seen is that he’s got more people on his side than against him. He would have been concerned that this could have been his end as well. So, you know, I’m a passionate stayer, but I have to reassess where my lines in the sand sit now and what are the flags that I’m going to watch. And I think the key flag for me is action out of government. I’m not interested in words. I’m not turning on another Cyril Ramaphosa speech. I want to read the headlines. I want people in jail. I want to see them prosecuted. And if I see that, then I’m firmly going to stick around and convince other people to do the same.

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