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Wiese has other eyes on retail
GROWTH MANAGEMENT
CHRISTO Wiese, the retailer, hotel and wine-farm owner and now one of the biggest bankers in South Africa, vigorously denies that his involvement in the NBS Boland banking deal has taken his eye off the retail ball. Pepkor's Wiese said this week many questions were being asked following the NBS Boland deal. Now that he has become a banker, has he lost interest in retailing, and who is in charge at Pepkor? Wiese's company Samgro will house his personal interests and will control Pepkor through Pepgro. Samgro will be the controlling shareholder in NBS Boland with just under 35% after it exercises its right to take Norwich's 20% share. The obvious link between Samgro's banking and retail legs will be in-store banking. Shoprite Checkers will expose 20-million shoppers to financial services, and 50% of the economically active population have had no exposure to financial services, so the potential for in-store banking is enormous.
Wiese's move into Samgro obviously leaves a void at Pepkor, but the problem has been "exorcised" by the appointment of Jan le Roux as CE. Wiese says Le Roux, who was, until 10 years ago, Pepkor's chief financial officer, is one of the biggest investors in the group and has "a few hundred million reasons to do well at Pepkor".
Wiese says Pep Limited, the original core retailing business, has been restructured, with Pep Manufacturing vertically integrated into Pep Stores and Pep International dissolved. The two remaining businesses are Pep Stores and the Scotland-based Your More Store, including Poundstretcher. Le Roux says he wants to ensure Pepkor remains the biggest retail operation in Africa, and in time, the preferred retail stock in any blue-chip portfolio. He says Pepkor was criticised for not being focused. "Pepkor wanted Checkers and got Stuttafords, Cashbuild and Smart Centre in the bargain. Our attitude was: first things first. Let's get Checkers right and worry about the others later." Also, the others were "small potatoes compared with Checkers in terms of the risks involved". After the great turnaround in Checkers, management is often asked if it is not time to sell the other three and maintain its mass-market focus?
But Pepkor is not on the point of selling these companies. While everything is for sale at the right price, Le Roux says they must first reach a level of profitability where they can command a good price.
Pep, which trades extensively in southern Africa, is opening this year in Mozambique, Malawi and Kenya, while Shoprite has established a strong presence in Zambia. Wiese says Pepkor is shifting SA manufacturing to higher value-added products and manufacturing some of its lower value-added products in Africa, particularly Malawi, where wages are 10% to 15% of those in South Africa, and Zimbabwe where they are 20% to 25%. "In a low value-added garment, direct labour is 50% to 55% of the cost. We beat mainland China with the products we make in Malawi." Commenting on the group's efforts in Africa, Wiese says that in Luanda, Shoprite MD Whitey Basson is operating successfully out of shipping containers circled by armed guards. Pepkor has increased its holding in Walhold to 44% and bought a 12% interest in the troubled Waltons. "A lot of things have gone wrong at Waltons and we could be accused of not moving earlier to protect this very sizeable investment".
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