Glencore’s Master Class in PR as it prepares to list on JSE

There's plenty excitement in my hometown about the triumphal return by its business community's most famous son, Ivan Glasenberg. The billionaire who runs the R700bn Glencore group – and regularly raids Johannesburg's top schools for fresh talent – last week told the world his group intends applying for a secondary listing on the JSE. Put in perspective, Glencore's market cap is virtually twice that of the local exchange's stalwart Anglo American, and is a lot higher than other heavyweights listings like SABMiller, Richemont and Naspers. But this week's UNDICTATED column suggests it's hardly a sentimental homecoming. During the same event where the JSE listing was announced, Glasenberg tore into Xstrata, a business created by fellow South African Mick Davis. Glencore, which before its London listing was a secretive Swiss headquartered trading operation, claims to be the antithesis of Spin Doctors. It likes to be regarded as a group where staff work hard, management harder and a spade is a bloody shovel. But perhaps it's precisely this culture which gives rise to the kind of conclusion I reached after watching last Tuesday's Investor Day presentation. Here's my take in the weekly column which appears in Business Day newspaper on Monday mornings. – AH

By Alec Hogg*

Businesses provide fertile soil for all man's character defects.

Greed and lust are endemic. Arrogance not restricted to boardrooms. Envy, the dumbest of all, is everywhere.

The most unfortunate trait, though, is deceit. An act of deliberately misleading. Misrepresenting the truth. A defect so ingrained that some argue it has evolved into an actual business process.

There is a thin line between deceit and Spin Doctoring, the art of re-inventing reality. Something that flourishes in corporations worldwide. And booms during periods of turbulence. Like after a change of the executive guard.

I saw it up-close in the mid-1990s when perceptions created ahead of arriving for my brief spell at ABSA were turned on their head.

Those who were to become my new colleagues had loudly praised the group's founder and CEO Piet Badenhorst. Expressing pride of in their fearless leader's tackling of vested interests. He was the man to follow. One who demanded absolute loyalty. And got it.

My arrival at ABSA Towers came just months after Badenhorst had been shown the door. The switch in sentiment was astonishing. Nobody had a kind word for the departed boss. Publicly or privately. Least of all his imbongis of months before.

Over the years I've seen other examples of the corporate animal's dexterity in switching alliances. But few quite so blatant as at Glencore's Investor Day in London on Tuesday.

Sitting through six hours of webcasted presentations was beyond my level of tolerance. There's only so much self-congratulation one can stomach.

But there was enough in Glencore CEO Ivan Glasenberg's opening to realise this was another Badenhorst moment.

Although the physical delivery was measured, Glencore's CEO banged away at how his is an entrepreneurial business. A place where management and employees think like owners. A temple where they worship at the altar of efficient allocation of capital.

All at Glencore, he stressed, care about shareholders' money. Because all are shareholders (insiders own 35%) their interests are aligned with investors.

All of which may even be true.

But for those experienced in such matters, the obvious purpose behind his lecture in the "Glencore Way" was spin.

It was an unashamed attempt to contrast Glasenberg's brilliantly managed, rational organisation with the terribly imperfect Xstrata, the smaller mining group Glencore acquired in May.

It shouted out a simple message: Xstrata's founder Mick Davis and his team were grossly incompetent. But under Glencore, Masters of the Mining Universe, their bloated business will become something worthwhile.

The message reverberated the following day in the UK media which trumpeted how Glencore had initially anticipated cost reductions of $500m but had already carved out actual savings of $2bn. With more to come.

Glasenberg came closest to gloating when emphasising these savings had been achieved after only three months. Although they've begun at the actual operations, his axe wielders have taken out 1 800 jobs in Xstrata's coal division. So watch this space. And rejoice.

Forgive me for being just a tad sceptical.

Despite what is now intimated, Glencore hasn't suddenly discovered the workings of Xstrata. Before May's deal, it already owned 40% of Mick Davis's business. It has long enjoyed Xstrata board representation. Indeed, Glasenberg himself reputedly got Davis appointed in the first place.

Tuesday's message is also so different to the "other" story. One spun a couple years back before a friendly merger became the largest acquisition in mining history.

Back then they sold a tale of two South African billionaire entrepreneurs whose friendship apparently went back to schooldays.

By combining their businesses, the story went, these pals from the colonies would create a giant to rival BHPBilliton, Rio Tinto and Vale. A business double the value of Anglo American.

The media hoovered it in.

With hindsight, Glasenberg and Davis were always the most unlikely of partners.

Lean and trim, Glasenberg is a former Champion race-walker, intensely disciplined, a fitness fanatic. Davis is, well, not.

The Glencore boss is an entrepreneur to the tips of his fingers, a one-company man. His brilliant counterpart got into the C-Suite when appointed Eskom's financial director while still in his twenties. Davis might have left that bureaucracy, but judging by what we're now told, it never left him.

Victors have always written the official record. In the Glencore Xstrata world, Davis is history. The King is Dead. Long Live the King.

He may well have been the incompetent palooka now painted by his one-time chum. Possible, although highly unlikely. Village idiots don't build businesses worth $44.6bn.

The Glencore Spin Doctoring is a very dangerous game. Make Davis a clown, and, by association, you're doing the same to the reputation of all the Xstrata staffers now supping at Glencor's table. And drawing monthly paychecks.

But that's not the kind of thing that will bother the excruciatingly rational Glasenberg. Certainly not right now. He's already onto his next bit of market mining.

In Johannesburg, Tuesday's news of Glencore's planned secondary listing on the local exchange was celebrated as a sentimental homecoming. Once again a touching bit of spin. Don't you believe it. Glasenberg doesn't do sentiment.

The motivation is entirely logical. As he let to slip to the London Financial Times which reported: "Mr Glasenberg said Glencore was looking to tap a pool of local capital that could not be invested overseas because of South Africa's capital control rules."

There, at least, is some truth. Exchange control restricts the financial freedoms of citizens.  It also distorts the market. But this legacy from Apartheid isn't just a wasteful prop to keep hundreds of central banking staff employed. It is also a useful marketing tool for the JSE. Nice.

* Alec Hogg is a financial writer and broadcaster. He founded Moneyweb and now runs Biznewz.biz. UNDICTATED appears every Monday morning in Business Day, Africa's premier business newspaper.