SA’s oldest black women-led company aims for stars
- Author: Andile Ntingi
- Published: Friday, 07 October 2016 09:49
The Women’s Development Bank Trust is the ancestor of economic empowerment for women in South Africa.
Over the past decade, the trust has been operating under the radar while its investment arm, Women’s Development Bank Investment Holdings (WDBIH), has grown to be the country’s largest black women-led firm, holding in its portfolio assets with a net value of R3 billion. WDBIH’s interests include stakes in FirstRand, MMI Holdings, Bidvest, Woolworths, Discovery and Ascendis.
The trust, founded by South Africa’s former first lady Zanele Mbeki, recently celebrated its 25-year anniversary, where it recommitted itself to continuing with its core mission of providing microfinance to poor rural women, who use these loans to start small businesses that generate income for their families, helping to eradicate poverty in these areas.
The dividends generated by WDBIH from its investments are used to fund the trust’s microfinance activities and have enabled it to be sustainable and less dependent on donors.
Although an investment powerhouse in its category, WDBIH has a low public profile compared with the more illustrious Wiphold, arguably the most media-savvy of all the black women-led investment firms in the country. WDBIH has practically been living in the shadow of Wiphold, which is renowned for uplifting women in rural areas by helping them access financial services and participating in the agricultural sector.
But, under the leadership of seasoned dealmaker Faith Khanyile, WDBIH is reclaiming its spot as SA’s top women-led company. WDBIH, Wiphold, and Nozala are regarded as first-generation women-led black economic empowerment (BEE) companies. They were established during the first phase of BEE, which
took place from 1994 to 2003. Secondgeneration women-led companies such as Peotona Group, led by politicianturned-businesswoman Cheryl Carolus, and Identity Partners, founded by Sonja de Bruyn Sebotsa and Polo Radebe, were established during the second phase of BEE implementation, which occurred between 2004 and 2013.
During the celebration of its 20-year anniversary in 2014, Wiphold revealed that its investment portfolio had a net value of R2 billion. Nozala has not publicly disclosed the value of its investment portfolio.
Khanyile, who helped establish WDBIH in 1996, returned to the company in 2013 to steer it along its growth trajectory, which involves taking advantage of the growing consumer market in SA and on the rest of the continent.
“We are looking for quality deal flow that is priced properly, but corporate South Africa is no longer excited about BEE. They are not interested anymore,” says Khanyile, who plied her trade as a corporate and investment banker at Standard Bank from 2001 to 2013.
From passive to active investors
The days of enthusiastic interest in BEE may be over, but government is pressing ahead with the third phase of empowerment, which kicked off in 2013 and will probably run for another decade. The emphasis of this phase is to foster active and entrepreneurial participation in the economy through the creation of large-scale black industrialists who operate and manage their businesses on a daily basis.
Black women-led firms are also expected to evolve into industrial operators rather than holders of equity whose involvement is limited to being board members in companies in which they have invested. Ajay Lalu, BEE subject matter expert at Black Lite Consulting, believes that women-led groups have not been as successful in accumulating wealth as men-led groups like Shanduka, Thebe, Safika, Pembani and Kagiso Tiso Holdings, which have grabbed the lion’s share of BEE wealth.
“The women[-led] groups have been on the periphery of BEE, where they have been receiving up to 10% stakes in BEE transactions instead of 25%. In the future they will be more prominent and will grow their stake in the economy.
“I believe the days of the BEE model where blacks are passive investors are over and the next wave of BEE will be characterised by active operational involvement of BEE groups, including women-led companies, mainly driven by the Preferential Procurement targets for black-owned and black women-owned suppliers,” says Lalu.
According to him, women-led groups will be forced to become operationally involved in various industries of the South African economy if they want to take advantage of the 30% black women-owned procurement spend for black suppliers in particular in the public sector.
The role of Brait
There was a time when the corporate sector was interested in BEE and first-generation BEE firms were the beneficiaries of this early corporate enthusiasm. For instance, Khanyile’s former employer, private equity firm Brait, was instrumental in the development of WDBIH in its formative years.
In 1998, Brait seconded Khanyile to WDB to help establish its investment arm, WDBIH. Brait was so keen to contribute to racial transformation of the South African economy that the private equity firm’s co-founder, Antony Ball, became the first chairman of the WDBIH’s board of directors.
“They [Brait] played a critical role in WDBIH’s early formation, helping the company become operational by paying my salary, donating office space and assisting WDBIH in analysing its earlier investments and with ideas on how to fundraise for those investments,” Khanyile is quoted as saying in the WDB Trust’s internal magazine, Mpfuxeto.
Scouting and finding the right investment targets has become a challenge for many BEE companies nowadays, but the shortage of blockbuster empowerment transactions has also been worsened by the scarcity of investment capital.
Khanyile says the lack of investment capital means that the cost of borrowing is exceptionally high for BEE firms, a scenario that could severely slow down BEE and women’s economic empowerment in future.
“As black people, we have not built significant businesses and as a result we don’t have big balance sheets that enable us to raise cheap funding,” she says.
Scarcity of deals
The scarcity of BEE deals began to affect the market during the second phase of BEE implementation from 2004 to 2013, when black capital accumulation almost ground to a halt in the aftermath of the 2008/09 global economic recession.
This saw many empowerment shares going under water while black investors ended up being saddled with a heap of debt they had accumulated to buy BEE stakes from white-controlled JSE-listed companies.
The shortage of BEE deals has forced WDBIH to go to the open market to buy shares instead of acquiring them directly from JSE-listed companies. In December last year, WDBIH bought R500 million worth of Woolworths shares in a book-building process.
The women-led investment company was able to lay its hands on the shares after Woolworths staff had cashed out roughly R2 billion from selling their shares after the retailer’s BEE employee share ownership scheme had matured. In July this year, WDBIH acquired a 30% stake in ICT accelerator Seed Engine.
Khanyile says WDBIH aims to take at least 10% stakes in large, listed companies and 25% to 40% equity in small caps. The investment firm is looking to deploy cash in mainly consumer-facing industries such as fast-moving consumer goods, technology, education, and infrastructure, particularly telecoms and energy.
“We are strategically targeting the consumer-facing industries because we believe in the story of the growing middle class in South Africa and Africa,” Khanyile explains. “Where to for us in the next 20 years? We want to become a significant investor in our investments. At our age as a company, we are ready to grow as investors.”