‘Founder-led businesses tend to take risks established businesses can’t or won’t’ – Steven Nathan

10x founder Steven Nathan joined the BizNews team to discuss an array of financial results as reporting season draws to a close. JSE heavyweights Aspen, Impala Platinum and Discovery were all on the agenda, with the medical insurer turned conglomerate the hardest hit after announcing plans to raise R1.5bn in order to increase its stake in Chinese insurer Ping An. Other topical investment and political related discussions centred around the withdrawal of the green paper for the state pension plan and whether Nathan favours investing in businesses that are founder-led. – Justin Rowe-Roberts

Steven Nathan on the withdrawal of the green paper for the state pension plan:

It obviously caused a lot of concern amongst citizens in terms of the government having much more control over another very important area of our lives. Enormous concern whether this could be another form of nationalising our pension funds or a 12% increase in tax. What is remarkable is that social development has pulled this paper. One of the comments from the minister was that the paper was being misinterpreted and they want to clarify that. But another issue is that the National Treasury said it wasn’t properly consulted and the National Treasury is the funding arm. So social development could say ‘Yes, we want this. These are the reasons why we think it’s beneficial, but someone has to fund it.’ And the National Treasury said we haven’t been consulted. And in the past, I mentioned previously that this is not new. Social development has promoted this very same national fund many years ago – starting in 2002 and then again in about 2007/2008.

On investing in founder-led businesses: 

I think that people who found a company are passionate and determined. They’re not professional managers. We spoke about the government – it’s not like a cabinet reshuffle where I was the minister of health and now I’m the minister of public affairs. And to some extent – it’s not a completely fair analogy – but you do get professional business managers who kind of go from company to company and they may do a good job as a professional manager. There’s always something unique about a founder, they tend to be contrarian. They tend to take risks that established companies can’t or won’t take. That’s where disruption and innovation and outsized returns come from. If you look in a South African context, we could say Naspers outsized returns came from an innovative investment they made. Capitec – a completely new business model that’s giving you incredible returns. That’s where you’re going to get those returns. At the same time, there’s always risk associated with these companies and they’re not all going to succeed. So you definitely do want to find great founders, but you don’t want to only bet on one. You would like to have a few of them in your stable.

On whether pharmaceutical companies should be profiteering from vaccinations and booster shots:

I think Aspen did give a number – they said R400m of revenue came from vaccines. So they have only just started that program and their total revenue is R37bn. So it’s an immaterial number for them. First and foremost, you want companies and institutions to find solutions to important problems. And the Covid pandemic and a vaccine is one of the biggest problems we’ve faced. If you didn’t have a motivated private sector that was there for profit, it’s unlikely that we would have made any of these strides. So I think that one’s got to see it in that context. But you can say, ‘Yes, the social good outweighs any profit motive’ but if there was no profit motive – Moderna, Pfizer and Aspen (for example) wouldn’t have invested the money into R&D, so they wouldn’t have had the capability and the technology in order to do it.

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