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Christo Wiese. TJ Strydom
Читать онлайн.Название Christo Wiese
Год выпуска 0
isbn 9780624085867
Автор произведения TJ Strydom
Жанр Биографии и Мемуары
Издательство Ingram
Eloff Street in its heyday had some of the most sought-after commercial property in Johannesburg. It was in fact the most expensive street on the South African version of the boardgame Monopoly. But in the early 1980s city centres were changing and Pep was part of the new era. Acquiring a shop of a thousand square metres in Eloff Street, the chain made a play for the spending power of thousands of black workers in the CBD who used the bus and train station nearby.
The new Pep Metro stores were set up in locations close to commuters on their way home to places like Soweto. To reach these consumers was not as simple as it might look, as white-owned retailers were not allowed to set up shop in black residential areas. The government of the day was still committed to grand apartheid and its market-distorting regulations. Shops such as the one in Eloff Street offered the next best thing.
But to overcome the restriction on stores in townships, Pep also had plans to start a company in which black shareholders would hold a majority stake. This was along the same lines as Pep Peninsula, a venture with shareholders from the coloured community started in the 1970s in line with the dictates of the Group Areas Act. The business had since grown to more than 20 stores in coloured areas in and around Cape Town.
Wiese knew, however, that it would take a few years before the black-controlled company got off the ground. ‘Pepkor believes in not focusing on the spending power of one specific population group, but much prefers to concentrate on all the different low-income groups in South Africa,’ he said.8
Some of the other retailers followed a less direct route to reach black consumers. They started cash-and-carry businesses. Spaza shop owners and other traders then bought from them in bulk to sell the goods in the townships. Companies like Metro Cash & Carry and Score grew rapidly thanks to this business model.
Black consumers were the future. And Wiese, like most of his competitors, knew this.
Black spending power might have been in vogue, but black political power was not. Late in 1983, South Africa’s white minority headed to the ballot box for a referendum on a new constitution. Wiese’s father-in-law was a vocal supporter of the new dispensation that would see coloured and Indians represented in the so-called tricameral parliament. He was, after all, a member of the President’s Council that had made these recommendations. Voters gave the nod and the tricameral parliament started life in the last decade of government in South Africa without participation by the black majority.
Wiese still had a lively interest in politics, but he was not actively involved as he had enough other balls in the air. Page through the 1983 edition of South Africa’s Who’s Who and you will notice his entry is longer than those of Anton Rupert or Harry Oppenheimer. And in between it all he also found time to be a diaken (deacon) of the Dutch Reformed Church in Three Anchor Bay. ‘Yes, I have my doubts about things such as the church’s stance on apartheid, but I felt I need to ignore that and serve where I can.’9
Another important part of Pepkor’s restructuring was to stitch the most recent acquisition into the rest of the business. For years the group had been building up its manufacturing capacity, steadily supplying more of the goods that it sold. By the time Wiese took over, Pep Stores had been at it for a decade. What started with a shoe-manufacturing plant in Durban had grown to twelve factories and included school clothing and blankets.
In 1981 Pep Stores bought the clothing manufacturer IL Back from Rupert’s Rembrandt group. Wiese, by then a full-time Pep Stores executive, was quite closely involved in the deal to buy the company.10 This acquisition constituted literally a change in style, because even though IL Back had been struggling for years to turn a profit, it was still the manufacturer of well-known brands such as Alba, Carducci, Yves Saint Laurent and Monatic.
IL Back had a massive factory of more than six hectares.11 In contrast to some of the other manufacturing businesses in the Pep Stores stable, the new plant was very capital-intensive. This also meant that it relied more on debt as a source of finance. ‘Despite its recent bleak profit history, IL Back was one of the blue chips in the South African clothing industry and its brand names have remained household words,’ said Wiese.12
By the time Wiese announced his first set of results as executive chairman – with bumper profits – IL Back’s number were not yet included.13 Six months later, it was a different story, because it had become clear that the IL Back deal saddled the group with a huge pile of clothing stock, which weighed on profits. The results also revealed that Pepkor’s interest payments had doubled as the acquisition of the manufacturer was to a large extent financed by debt. A high debt burden was an expensive exercise as interest rates had more than doubled in the previous few years, reaching 20% in 1982 and climbing to 25% by the middle of the decade. Wiese would soon find a way to pay less interest – a move that would haunt Pepkor for years.
To get IL Back back in black was clearly a big task, complicated by the fact that its clothing ranges were much more sophisticated than the blankets and shoes that Pepkor was manufacturing in other parts of the country.14 Later that year, Wiese appointed Selwyn Kantor as head of Pep Manufacturing. Kantor, a seasoned factory boss, had previously been with Rex Trueform. He was the one who had to solve IL Back’s under-utilised capacity and low productivity. But the restructuring eventually took longer than planned and was marred by cost overruns.15
There was, however, one thing Wiese and his team could use to great effect: IL Back’s earlier losses could be written off against taxable income. ‘A side effect of the restructuring is a lower tax rate, and it is expected that the average tax rate will continue to be lower for the next few years,’ said Wiese.16
Buying struggling companies – with substantial tax benefits due to a history of losses – would become a trademark of Wiese’s approach to business. IL Back was the first public example of the sort of financial engineering that he would, according to David Meades, ‘in later years develop into an unrivalled artform’.
But not even the most favourable tax structure was much of a cushion for the blow that was to follow. In 1982 the economy ground to a halt. The rest of the world’s frenzied demand for gold, which had pushed the price of the precious metal to $850 per ounce, tapered off. South Africa was at this stage by far the largest producer and exporter of bullion and was extremely vulnerable to swings in the gold price. The metal’s recent run had boosted economic growth to 6,6% in 1980 and 5,4% in 1981, but in 1982 the economy contracted by 0,4%. A big factor in the sudden downturn was the Reserve Bank’s decision to increase interest rates sharply to prevent the economy from ‘overheating’ and to keep inflation in check.
The recession hit the consumer hard. But Wiese optimistically believed that the downturn wouldn’t affect Pepkor’s target market too badly.17 Pepkor was largely recession-proof. When the economy was in the doldrums and shoppers couldn’t afford to buy from Edgars or OK Bazaars, Pepkor’s clothing and grocery chains gained customers. Middle-class consumers who tighten the belt never stop shopping completely; they just trade down. Moreover, Pep and Shoprite did not sell on credit, so they had no need to worry about collecting debt or writing off customers in arrears, a problem that often plagues other retailers in a downturn.
There were no debt hassles – unless Pepkor itself was the borrower.
To reach the target of R2 billion in sales by 1990, Pepkor needed to expand aggressively. But opening a fleet of new stores every year wouldn’t cut it. A dealmaker has to scan the horizon for possible acquisitions.
Not long after Wiese took the reins, in 1983, he was in talks with Malbak, an industrial group, about bringing the two companies together. No deal was made, but the discussion did herald the start of a long relationship with Malbak director Arnold (Nols) Louw.18
That same year, Pepkor bought the Bloemfontein-based retailer Kloppers, and its property, so as to enter the market for household appliances.19 It also acquired a 51% stake in the technology company Deqtime and took over Elvinco Plastics, a zipper supplier.20 The next year, it bought Ackermans from Edgars.21
Ackermans, which was founded by the father of Pick