Bloomberg News | February 26, 2024 |
Christo Wiese, South Africa’s billionaire retail king, is going back to the future.
The 82-year-old serial investor, who steered the expansion of both Africa’s biggest clothing retailer and the continent’s largest grocer, has dived into something that harkens back to the start of his storied career nearly half a century ago: diamonds.
“I’ve always been fascinated by diamonds because it’s that amazing industry where you plod along and then one day stumble on a big stone that can change your whole life,” Wiese said over lunch at the summer-green vineyards of Beau Constantia, a wine farm in Cape Town. “This stretch of the Atlantic Ocean produces some of the world’s highest-quality diamonds.”
The theory goes that the more than 2.5 billion-year-old Kaapvaal Craton and shifting continental plates transported diamond-bearing detritus down South Africa’s Orange River to the south-western coast of the continent. It is here that Wiese dreams of finding a “big one,” leading the self-made tycoon over the last few years to spend at least some of his eight-hour work days on his mining business, which he says has already turned up a $10 million pink diamond.
Trans Hex Group Ltd., the mining unit Wiese owns with his son-in-law, plans over time to hunt for other sought-after minerals and metals like phosphate, lithium, gold and platinum. It has four large ships fitted with equipment that can look for these treasures by vacuuming up gravel from the ocean floor that’s processed on board before the tailings are tossed back into the sea. A state-of-the-art diamond recovery vessel can cost as much as $420 million.
The magnate, whose net worth is $1.2 billion, according to the Bloomberg Billionaires Index — down from $7 billion after he lost a sizable chunk of his fortune with the 2017 implosion of the furniture stores chain Steinhoff International Holdings NV — knows what he’s venturing into.
Wiese first got into alluvial diamonds in 1976 when he bought a mine along the Orange River. It was the country’s biggest behind those held by Anglo American-owned De Beers, the world’s top diamond producer, which also mines along Namibian waters.
It was “a very exciting proposition,” Wiese said of his first enterprise. He sold it about five years later because he wanted funds to buy control of the clothing chain Pepkor, which became his biggest asset.
Industry observers say Wiese’s revived passion for diamond mining may be riskier than any of the bets he’s made in the retail sector, and that it shows he has not lost his appetite for adventure even after being badly burned by his investment in Steinhoff.
“South African mining is made up of pioneers, but this type of mining is not easy and gives patchy profits at best,” said David Shapiro, who has 52 years of experience on Johannesburg’s stock exchange and is chief global equity strategist at Sasfin Securities. “He’s got enough money to do what he needs to do, so perhaps he’s willing to dabble in riskier ventures.”
Born the son of a sheep and cattle farmer in the remote, desert-like northern city of Upington, Wiese obtained a law degree from Stellenbosch University in 1967, after which he joined Pep — founded two years earlier with a single store in a rural railway town. He left the business briefly to practice law, and unsuccessfully stood for parliament for the Progressive Federal Party.
Turning his focus back to Pep, he became the biggest shareholder and chairman of the company in 1981, renamed it Pepkor, and helped oversee an aggressive expansion drive. Pepkor bought retail chains Smart Group Holdings, Cashbuild, Checkers and Stuttafords in 1991 and made its first offshore foray that year, opening a Your More Store outlet in Scotland.
Wiese spent three and a half decades building Pepkor into a formidable business with operations across Africa and Europe, and spun off and expanded Shoprite Holdings Ltd. to become the continent’s biggest grocer. Shoprite remains his star investment.
In 2014, he exchanged his $2.5 billion Pepkor stake for stock in Steinhoff. Three years later, auditors refused to sign off on Steinhoff’s accounts after uncovering financial irregularities, and its share price tumbled by about 90%. It later emerged that its management had vastly inflated profits. Wiese denied any knowledge of the malfeasance.
A sprightly octogenarian, Wiese keeps up with a wide range of his interests. While deeply involved in the nitty gritty of the retail business, he’s known to be able to jump into everything from a discussion on enabling more South Africans to own land, or the significance of a book he’s reading or even why Europe’s loss of community-style living hurts its economies.
The entrepreneur still drives his Lexus Landcruiser from his house in Clifton, the beach-front strip in Cape Town, to his office, from where he oversees his various businesses. These include gym chain Virgin Active and South African food maker Premier Group Ltd. He’s also recently invested in a medical malpractice insurance company.
Even with an established family office, Wiese says he has no plans to retire. He wants to continue working and to remain active, with his two resolutions for 2024 being to visit his 4,000-hectare (9,884-acre) Lourensford Wine Estate near Cape Town once a month and travel to his private wildlife reserve in the Kalahari desert more than a handful of times this year, he said.
“Many people think I’m crazy to still come and sit in the office every day,” he said. “But I think, while you’re alive, be active, be part of life. And I enjoy it, even when we sit here sometimes really struggling with challenges.”
These include operating in a country with the gross domestic product growing less than 1%, inflation at 5.1% and unemployment at almost 32%.
Wiese, like most South Africans, is closely watching the country’s politics as it gears up this year for what is expected to be its most significant election since the end of Apartheid 30 years ago. He expects the ruling African National Congress to be more heavily challenged than it has been since it started ruling over the newly democratic nation in 1994.
This would be “a good change,” he said, adding that for all South Africa’s problems, there is nowhere else he’d rather live. All three of his children live near him.
Still, the country’s economic travails have placed a ceiling on the revenue growth of the retailers he owns — a limitation those companies are seeking to mitigate by claiming a bigger share of the local market through greater digitization. Wiese says that Shoprite is almost becoming a “digital business that has a grocery store attached.” The company’s Checkers Sixty60 was South Africa’s first one-hour grocery delivery app and makes up more than three quarters of the country’s on-demand delivery spend on such products.
The marine diamond mining business has provided some further diversification — albeit not without its own risks. Prices of the gems have been cut this year as suppliers try to revive sales, while production costs remain high. Beside the expensive vessels, offshore miners apply for concession areas that are usually hundreds of square kilometers and they need specialized crew who stay on board for weeks at a time.
There’s also opposition from scientists with environmental concerns. The impact of ship-based mining remains largely unknown and “without dedicated monitoring and ecological impact assessment, it is very difficult to detect the effects on the marine environment,” Iona Blair wrote in a paper published by University of Cape Town. A lot of people along Namibia and South Africa’s west coast make a living from fishing.
Norway’s recent decision to allow seabed mining exploration in its waters caused a call for a pause on such activities until regulations for mining in international waters are established.
Compared to Norway, however, the work Trans Hex does is in relatively shallow waters. Scientists contracted by Trans Hex concluded that some disturbance of the ocean floor, that has been untouched for millions of years, does not harm. The company also employs a few hundred people and brings in foreign currency through diamond sales, Wiese said.
“We think that on balance it’s a positive,” he said.
(By Janice Kew)
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