Alec Hogg meets Lindsay Williams – Steinhoff, Ramaphosa and New Media

JOHANNESBURG — Having both spent many years in the financial journalism space, any discussion between Lindsay Williams and Alec Hogg will be valuable to the listener. Lindsay, the producer and presenter on Fine Business Radio on FMR101.FM in Cape Town, will on a weekly basis host Alec, where they’ll be discussing all things South African markets. The first of these discussions is transcribed below, and touches on Steinhoff, and the two big names around the debacle Markus Jooste and Christo Wiese, Cyril Ramaphosa, and one of Alec’s favourite topics, online media. Enjoy. – Stuart Lowman

One of the first things I do when I wake up in the morning is go to Biznews.com. The man behind Biznews.com has forgotten more about journalism, business journalism, and business broadcasting than I will ever know. His name is Alec Hogg and he’s on the telephone now. Alec, we’ve been around quite a lot if you combine our two careers in terms of years, but you’ve been around longer and I don’t know; you just seem to reinvent yourself all the time. Tell us about Biznews.com and where you are at the moment please.

Well, I don’t know how to follow what you just said but it’s great talking to you. Well, when I left Moneyweb in 2012, I had a years ‘gardening leave’ to think about things and realised that there was a lot that I wanted to do when I first started Moneyweb and never got around to – listing on the Stock market got in the way etcetera. It was a decision then to start again and that’s where Biznews was founded. We kicked it off on the 4th of August 2013 and it’s really gone beyond my wildest dreams. We’re now in the process of globalising. I’ve been in the UK for two years. My big focus now is on a huge deal we’re about to do with a global group that we’ll be bringing in and that we should be announcing in the next couple of weeks (so that will be lots of fun) and also podcasting. I’m starting to apply my mind to making world-class podcasts for the South African audience, but trying to – almost – expand our views and understandings from the outpost at the Southern tip of Africa into what’s happening in the rest of the world.

You kind of have to be in Europe or in a global financial centre to feel that energy, that pace, and to have access and that’s what I’m doing. I must tell you that I’m having the greatest time, but we’ve got a very strong team in South Africa and some of my old Moneyweb colleagues are playing a huge role now. Felicity Duncan, who was our Head of Editorial (and she was a Fulbright scholar) is running our Biznews Premium section and Jackie Cameron, who is well-known to many people and particularly in the Cape, where she spent most of her life; she is working for us here in Europe as well as Stuart Lowman who was with Bloomberg TV and Gareth van Zyl. Gareth was with Fin24. He was very senior there so we’ve got a really sharp team and we’re having a lot of fun doing what we’re doing.

Very good. It’s very encouraging to see that although we are bombarded with a proliferation of different mediums, the fact is that good journalism always shines through and it’s also very encouraging to see that despite the fact that you’ve relocated, you are maintaining a South African bias, but with an international flavour and that’s exactly what’s happened over the years to so many South African companies. Indeed, a couple of them that have externalised their earnings must have been keeping you busy in the last five or six weeks.

Steinhoff, oh my word yes, what a story. I saw Markus Jooste 18 months ago. I had quite a lot to do with him during the years that I was breeding and racing racehorses. I was on the board of Phumelela and also of the Racing Association and he was, of course, the heavy hitter for SA racing for the past decade. So, I knew him pretty well and I had the last, I guess, in depth interview with him, which was 18 months ago (the last time I saw him). I haven’t spoken to him since but it appears as though he has gone off track in some way, it happens – we’ve see it time and time again. That people go on these acquisition trails. They then have to somehow justify the prices that they’re paying for the assets that they’re acquiring but even so, with the whole Steinhoff debacle it’s caught a lot of people by surprise, not least Christo Wiese, which again people in the Cape will be well aware that he was Markus Jooste’s mentor. He was the funder, if you like, of a lot of the international expansion plans and he’s lost €3.5bn. Lindsay, it rolls off the tongue but my word that’s more money than many people make. You could put a thousand people together in SA and get them to work for a lifetime or maybe ten-lifetimes and they won’t see that much money and it’s gone – he’s wiped it out.

Was it ever there though, and that’s the point and I think that’s what most people would say? I’m not saying that Christo Wiese isn’t a skilled businessperson, a clever man, and has not managed to put together that amount of money in whatever way, but some people might say, ‘well, it wasn’t really theirs because it was acquired by dubious means.’ Is that a valid argument?

No, in Wiese’s case definitely not because it was all acquired through the build-up of Pepkor over 30 to 40 years so he started with Renier van Rooyen in Upington I think it was, where Christo comes from, with one store and they literally built Pepkor into this retail giant – not only in SA but around the world. He took the decision really badly and stupidly, with hindsight. Well, he was conned and that’s really what happened, and he took a decision to put Pepkor into Steinhoff to merge the two companies. He swapped his Pepkor script, which was a very valuable script, for a Steinhoff script, which was pretty worthless. The banks own the company now. People are still punting the shares but essentially, the banks are going to determine whether or not the equity holders get anything, and Christo Wiese lost all of that. So he spent a lifetime building up Pepkor and his other interests.

File Photo: Christo Wiese exits after listening to the mid-term budget speech in Cape Town. Photographer: Waldo Swiegers/Bloomberg

Fortunately, for him, he had a non-recourse loan. Otherwise he would have been completely out now because what happened was that in September last year, after the acquisition trail, when Steinhoff had bought Mattress Firm in America, and Poundland in the UK they needed to raise more capital to strengthen the balance sheet and he took a decision then to take another €1.5bn loan and to put-up his existing shares, which were worth €3.5bn, at the time. So, he doubled up or not quite doubled up but he took another bet. Of course, he bought the shares in Steinhoff at R75 and they are today worth less than 1/10th of that. The shares he put up as security, when the Steinhoff share price collapsed, the banks grabbed all of his stock so, everything that he’s put in there, including the money that he had made over those decades with Pepkor, and they would have taken another €1.5bn from him because all his shares were only worth about 1/3rd of the money that he borrowed. So, they would have taken another €1.5bn from him but he had put in there, very smartly, that this was a non-recourse loan so, even though he lost everything he didn’t lose another €1.1bn – the banks had to take a knock on that. Different, we believe, to what happened with the other Steinhoff staff, who did the same thing that Wiese did but now instead of owning, in Danie van der Merwe’s case, being worth R100m as he was, he now owes something like R100m to the banks and I don’t know how they’ll ever get that.

What a story. Oh, what a tangled web we weave when first we practice to deceive is a phrase that comes to mind and of course, there’s a tabloid angle to this as well, Alec, if you look at your website. There’s a story today about Val de Vie – it says here, “Steeped in luxury, set in midst nature – this magnificent farmland of 2.94 hectares is the space you will have the freedom and pleasure of calling home,” and that’s the description of Markus Jooste’s house, which is apparently on the market for a knockdown R15m. It’s not going to go away this story, is it, not for years I don’t think?

No, and Lindsay that’s just land that he owns at Val de Vie, it’s not his home. He has a home in Hermanus and I think many others but certainly, this is 7-acres, in old-fashioned terms. A beautiful strip of land in Val de Vie, going at R2m an acre and that’s very cheap in Cape terms. I think it reflects what’s happening to Jooste in that he is now having to find a way to repay the banks. Again, this is what he did but strangely, and again getting back to your web, Sanlam lent him R800m on the security of Steinhoff shares and like with Wiese, the Steinhoff shares collapsed and Sanlam then recouped those shares and of course, could only recoup a very small percentage of the loan that it had made to him. So, he’s in debt. It’s not clear whether he also had a non-recourse loan in the same way that Wiese had.

As far as Wiese is concerned, you can put a line under it, he’s lost the money, but he can take a deep breath and go onto his other assets, which are housed in Brait and continue life. On Steinhoff’s perspective, Jooste owes all of this money. He has lost his Steinhoff shares, they’ve gone. If it’s a non-recourse loan then Sanlam and Absa are going to take a big hit, and Investec are in for about R200m. I think the numbers are R800m – Sanlam, R250m – Absa, R200m – Investec, they’re going to take a hit on it. If it is a full-recourse loan, which I suspect it is, I don’t think that those guys would have given him the facilities otherwise. Then they’re going to come after his assets so, clearly, you have to raise as much money as you can and as quickly as possible, and this asset was put on the market yesterday for R15m, in pretty much a fire sale, in the same way as his racehorses are now being offered on the market. I know his racing manager says, ‘it’s not a fire sale.’ I wouldn’t believe that for a minute.

R15m, a drop in the ocean, given the numbers you’ve just been talking about. There is a way that you can follow this story in greater detail with you and David Shapiro because you have a weekly broadcast called ‘The Old Firm.’ The Old Firm is something that I associate with Glasgow Celtic versus Glasgow Rangers football match but you’ve got ‘Old Firm’ but this is a Premium subscription-based offering. Can you tell us how we can subscribe please?

Yes, Lindsay, thanks. The whole media business is changing. It’s transforming dramatically and when you sit in Europe or the UK you get to see this much more closely. The old advertising-based model is not sustainable long-term because you can’t get something for free indefinitely, and the cost of advertising on the internet, or in fact anywhere, is continuing to trend downwards as players like Facebook and Google take 80% of the market. So, to make quality journalism sustainable you have to find an alternative business-model and the business-model that is now starting to have shown itself to be the one for the future is the Premium model.

What we decided to do at Biznews was to make is as affordable as possible. We went with Steve Job’s view that you should charge no more than $5 per month. Well, we’re charging £5, which is pretty close to $5, and then try and go for volume. So, in essence, we have a lot in the Premium section. The main work and the main quality work that we do goes into our Premium section. We’ve still got the free to air area, which about half-a-million people come to every month but in the Premium section that’s going to keep Biznews going into the future and I’m delighted to say that it’s gathering really good momentum and of course, the deal that we’re going to be doing soon will add a huge bonus to that and at no cost. So, I would encourage people to signup for £4.99 (we call it a fiver). I’ve had a few people saying, ‘but why are you charging us in Pounds when we’re South Africans?’ The unfortunate thing about this is that the vast majority of our costs are actually in hard currencies.

When we pay Bloomberg they don’t say, ‘pay us in Rands.’ They want it in Dollars. When we pay other service providers, like where we host, or when we buy software for the site, etc, that’s all in Dollars or Pounds so, it’s a reality of the world if you are paying in hard currency then you need to be charging in hard currency as well, just to make it a more sensible thing. But South Africans, of course, won’t be complaining right now, given the way that the Rand has improved since Cyril came through at the elective conference.

Yes, in deed and, also boosted by the Commodity Research Bureau Index, which shows that commodities have had a really good start to 2018 so you’ve got the Cyril factor and the fact that we are a commodity currency, but that’s for another chat, maybe next week, Alec. Of course, just going back very quickly to the premium model that is being adopted by media houses, such as Biznews.com, it’s also if you go to the Telegraph.co.uk newspaper that I used to get free. Everything is now premium and I think it’s only the Guardian that is left with no costs at all and eventually, they will have to change their model as well. Before we close, let’s just talk about one other thing and set the scene for Cyril Ramaphosa. Are you impressed with the noises he’s been making so far?

Lindsay, I’ve been one of those, I think few, who have believed that the ANC would rectify itself. That good would triumph over evil, and that there are more good people within the ANC than evil people. So, I have, at times, felt like being a complete minority but I think perhaps the benefit of distance has given me a difference perspective. Continuously, Cyril – what I know of him, and the engagement I’ve had, not necessarily directly with him but much more importantly, the people around him and people like Roelf Meyer, who I know very well, who have engaged with him closely over the years. He’s a man of integrity, and more than anything, he is a man who reads. Now, if you think of the big problem that both Donald Trump and Jacob Zuma have is that they rely on anecdotal information to make their judgements. They don’t read, by their own admission, they don’t assess. They don’t have rational brains, which are fed by information that they’re getting from various sources.

Cyril, and I’ve watched him closely over the last few years – one of his favourite things, and it’s not a high-profile thing and it’s not something that you’ll see trumpeted in the media but one of his favourite things is to go and open libraries in underprivileged areas. The reason he does that is because he’s a man of letters. He’s a man of books and he knows that the future of SA, or indeed of any nation on earth, is to do with education so, he’s plugged-in where it really matters. He’s open-minded. I’ve heard him talk about Elon Musk and how he could contribute to SA, I heard him say that in Davos last year, which was a great surprise because I doubt that Jacob Zuma even knows who Elon Musk is. Of course, Americans say, ‘he’s the greatest entrepreneur in the world and we know he’s South African.’ So, there are these things that will be coming through. I also believe that he’s a great negotiator and that’s what Roelf Meyer tells me. He will be biding his time and his timing is impeccable. He’s not going to rush into something and blow it, and blow his foot-off. He’s waited a long time to get to the point that he’s at now. I anticipate that he will be making very sensible moves into the future and SA’s future is bright.

I just hope he’s allowed to and I just hope he has a long-term vision as well as a short-term populous vision in order to make himself part of SA political, and indeed, ANC political history because if you look at a country like South Korea after the war only 22% of the population was literate. Now this is now very close to 100% because of their education drive and because of the hard work of the pupils. It’s a rigorous regime they have over there and whether we can replicate that I don’t know but it can be done. Alec, we’re going to leave it there but perhaps we could make this a regular chat on a Monday and review what you’re looking at for the week and, also we must infringe upon you to talk to us from Davos because of the World Economic Forum coming up. I think this will be your 20th or 25th year attendance?

I went, for the first time, 25-years ago, in 1993. Then I didn’t go for another 10-years, but I’ve gone since so it will be my 15th year but it will be a quarter-century, can you believe it, since I met people like Trevor Manuel, Tito Mboweni, Ebrahim Patel, and Kader Asmal – they were all in opposition then. Well, they were just recently unbanned so, it was very exciting to see them there and to see that spirit. Lindsay, I saw the spirit last year, when Cyril Ramaphosa came off the bench at the last minute to replace Jacob Zuma, and Pravin Gordhan was with him. You saw that spirit of the excitement of a young democracy that was growing. I’m expecting to see exactly the same this year, if not a little bit even more emphasised. So, Cyril will be there. Zuma was originally supposed to go, we heard last week that Cyril will once again replace him, I think that’s a very sensible thing, and he’ll presumably be bringing along Pravin and some of the other enlightened people into whom SA’s future will be entrusted. I will be talking to you with absolute pleasure next Monday, when I’ll be in those chilly slopes of Davos.

Very good, Alec, great to talk to you again after all these years. That’s Alec Hogg and you can follow his and his teams’ work, both Premium and, also free to air, if that’s the correct phrase, by going to Biznews.com.

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