GIC to buy shares in investment unit of South African billionaire Motsepe's financial services firm

Singapore sovereign fund GIC, Public Investment Corp and Sanlam Private Wealth will be taking up 2.1 billion rand (S$217 million) of shares, and another 1.9 billion rand will go to selected investors.
Singapore sovereign fund GIC, Public Investment Corp and Sanlam Private Wealth will be taking up 2.1 billion rand (S$217 million) of shares, and another 1.9 billion rand will go to selected investors.PHOTO: REUTERS

JOHANNESBURG (BLOOMBERG) - African Rainbow Capital (ARC), the South African financial services firm started by billionaire Patrice Motsepe, plans to raise 4 billion rand (S$413.3 million) selling shares in its investment unit to selected investors, including Singapore sovereign fund GIC.

The sale will be followed by a listing on the Johannesburg Stock Exchange next month (September 2017) that will give African Rainbow Capital Investments a market value of about 8.5 billion rand, including 2 billion rand in cash for future purchases, co-chief executive officer Johan van der Merwe said in an interview in Johannesburg on Thursday (Aug 24).

GIC, Public Investment Corp and Sanlam Private Wealth will be taking up 2.1 billion rand of shares, and another 1.9 billion rand will go to selected investors, he said.

The investment firm is also planning a secondary listing on A2X Markets, a new exchange in Johannesburg in which it already holds a 20 per cent stake.

Mr Motsepe, the richest black South African, invested in insurer Sanlam more than a decade ago. After his investment grew tenfold, he asked Mr Van der Merwe and the former chief executive officer of Sanlam Johan van Zyl to help him start an investment company focused on boosting black participation in the economy. Having officially started ARC in April last year, it has made 5.5 billion rand in investments, with 2 billion rand of that going into financial services ventures.

African Rainbow Capital Investments' pre-listing statement is due to be published on Aug 28 with the listing scheduled for Sept 7, according to Mr van der Merwe, who was previously head of Sanlam Investments.

The listed entity African Rainbow Capital Investments, which will be 51 per cent held by ARC, is targeting returns of 20 per cent and does not plan on paying out dividends while it is still growing, Mr van der Merwe said. There is a pipeline of potential investments, and the company will consider further share sales if it needs to raise more cash to buy into new opportunities, he said.

In the next year, the firm will be exploring investments in industries including agriculture, banking and telecommunications, according to Mr van der Merwe. The focus will remain on South Africa where, despite a recession, there are "tremendous opportunities", he said.

To date, ARC has invested in companies including advisory firm Bravura Group, insurance broker Indwe Risk Services, mortgage originator Ooba and a property development in the Western Cape called Val de Vie, which has a polo estate that hosted Britain's Prince Harry.

ARC's banking partner is close to getting a licence that it wants to use to challenge the dominance of South Africa's biggest lenders.

The Commonwealth Bank of Australia has said it will sell 10 per cent of Tyme, a Johannesburg-based lender that allows customers to access funds through their mobile phones, to ARC. Tyme was granted a provisional licence by the South African Reserve Bank last year.

"The licence is expected before the end of September,"said Mr van der Merwe. The regulator is looking at the cloud-based system that ARC's fintech partner is using to make sure it works before granting the full licence, he said.

South Africa's four biggest banks, including Standard Bank Group and FirstRand, have not had to face competition in the consumer market since Capitec Bank Holdings started more than 15 years ago. Now, the central bank has three provisional licencees, Tyme, insurer Discovery  and the South African Post Office.

This comes as the country's ruling party pushes for the creation of a state-owned bank to boost lending to the majority black population and businesses that the African National Congress has said have been excluded from the banking system.