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The Royal Bafokeng Nation (RBN), dubbed the R25–billion tribe and heralded as a shining example of true community–based economic empowerment, is cementing its position as an icon for social development, and an investment powerhouse.
In April this year, through an award–winning black economic–empowerment (BEE) deal, the royalties collected from Impala Platinum’s (‘Implats’) mining operations on the RBN’s 1 200–km² land in the illustrious Bushveld Complex were converted to a 12,1% shareholding in Implats. This shareholding, in addition to an existing 1,3%, brings the total to a 13,4% stake worth about R16–billion.
The stake in Implats is the largest contributor to Royal Bafokeng Holdings’ (RBH’s) R25–billion asset base. This shareholding is the core asset in the portfolio, and the single biggest income generator, says RBH director Andrew Jackson.
He points out that this R25–billion tribe label does not indicate that each member of the community is steeped in wealth.
The mining investment has provided the leverage for the nation’s commercial arm and investment vehicle, RBH (established as a merger between Royal Bafokeng Finance and Royal Bafokeng Resources), to diversify through the pursuit of nonmining investments.
“We are now looking to diversify and build up a larger nonmining portfolio, although we will not be in a position where the mining interests would be scaled down in favour of nonmining. It is definitely return focused, as opposed to diversification focused,” comments Jackson.
Jackson is unable to give any details of future transactions, saying only that they will be large and nonmining, with diversification as an important element.
Despite its drive to vary its currently mining – dominated portfolio, there is obviously significant value to be developed from the current asset base.
“What we would look to do with our platinum–group metal (PGM) investment is to leverage our existing equity investments in the sector to consolidate and drive our position there. There are a lot of opportunities in the PGM sector; we would like to develop a large black–owned mining business over time. We’ve got the equity base, we’ve got the resource base,” proposes Jackson.
“Clearly, we have a portfolio that has a massive mining bias, and that is a product of history. We are comfortable with our mining exposure, have a positive outlook and are certainly committed to our platinum–mining operations,” he adds.
On what informs investment decisions, Jackson notes that RBH is primarily return focused: “As a shareholder, we draw capital and we are tasked with optimising that capital.”
The emphasis is also on being long–term, value investors, with a tendency towards empowerment transactions but not exclusively so.
A number of significant nonmining transactions have been completed over the last few years, but they remain a minority in terms of the investment portfolio. The current objective is to bolster the investment portfolio by driving a number of large investments.
In terms of a particular sector bias for future investments, Jackson says that they will look at businesses with a leaning towards certain aspects, namely a resources leg, as RBH would like to expand its already noteworthy status as a resource player. The other leanings are toward finance and financial services, and infrastructure and telecoms–oriented businesses.
“The focus at the moment is on South Africa, but we do have a pan–African perspective; the community–based nature of the organisation lends itself to doing business in Africa,” says Jackson.
“We think that there are opportunities available in Africa and we believe that the community model resonates,” he continues.
In diversifying the portfolio, international equity may be considered in future, but it is not the focus at this stage. RBH’s attention is firstly dedicated to South Africa, and then to Africa; only after its position has been satisfied in these markets would international interests be considered.
On the mining front, the 13,4% shareholding in Implats remains the nation’s core asset.
Recently, Implats announced the appointment of Steve Phiri as a nonexecutive director to the Implats board. Phiri is the second RBH representative to serve as a director on the board, and his appointment, in terms of the recently concluded BEE transaction entitling the RBH to an additional board member, enhances the alignment between Implats and its BEE partner.
RBH’s joint venture (JV) with Anglo Platinum, the Bafokeng Rasimone Platinum Mine, produces 220 000 oz/y of platinum and is currently in the final stages of a feasibility study to expand it in order to increase production.
RBH has a 32% shareholding in Merafe Resources and, through its wholly owned subsidiary, Merafe Ferrochrome & Mining, it participates in the Xstrata–Merafe chrome venture. The Xstrata–Merafe chrome venture is a JV with Xstrata South Africa, which is a wholly owned subsidiary of Xstrata plc.
Moving to nonmining businesses, RBH has a 55% stake in information technology distribution business MB Technologies. It bought the stake in two transactions, initially 26%, and then, at the end of February this year, bought additional shares.
It has 100% ownership of Fraser Alexander, a mining services company. Fraser Alexander has three core business: tailings, materials handling and construction. Its services range from materials handling for the mining industry, construction work, tailings disposal, and a hydraulic remining unit which remines tailings.
RBH has a 20% shareholding in packaging company AstraPak, and a 10% stake in short–term insurer SA Eagle.
It also has a 12,5% interest in automotive component supplier MetAir Investments and recently RBH public affairs executive Mpueleng Pooe was appointed chairperson of Metair Investments.
An RBH–led consortium, in which RBH holds 70%, has a 25% stake in transport and logistics solutions company DHL Express.
Smaller interests include a stake in agricultural services provider Senwes; a consultancy business specialising in the nuclear field, called MTech; risk–management company Pasco Risk Holdings; food services company Liberty Star; and Royal Bafokeng Capital (RBC), an entity created to do business in the small business sector. RBC has partnered with a team that has experience relevant to the sector in order to create empowerment and business opportunities.
RBH is an investment house and that is where its skills lie; it is not a resources operator. Jackson explains that it represents a conservative constituency and has a long–term view and the investments it gets into reflect this.
RBH looks to invest in businesses that have strong market positions, dependable niches and strong track records, and positive cash flow generation.
Once a shareholding has been acquired, it does not try to enforce a management role on the business. RBH gets involved in aspects of the business in which it has the relevant skills.
“We know what we can and can’t do; we are not sector–specific experts or managers,” comments Jackson.
Involvement in the investments is through sitting on the company’s board, and becoming actively involved in pursuing new business opportunities to which RBH can expose its investment companies. It has a role in the strategic direction that the investments take and is committed to driving an agenda of transformation.
RBH introduces a corporate social investment (CSI) overlay to its investment companies, which involves procurement, small, medium–sized and micro enterprise development, skills development, and the placement of graduates.
RBH currently has about 575 bursars in tertiary education and tries to channel the graduates into investee companies.
Jackson emphasises that RBH is the investment vehicle for the nation and the focus is unwaveringly on social development.
“RBH is just the commercial arm of the nation and it is solely there to manage, preserve and grow the capital base so that there is sufficient income on an ongoing basis for the developmental needs of the nation. Without the nation, without the community, without delivery and development, RBH would cease to exist.”
When asked what sets the Bafokeng’s empowerment initiatives apart, Jackson says that the nation’s empowerment status has a different origin, and was not something that was created to take advantage of the situation.
“It was an existing structure that was well– positioned to participate in the empowerment space. What sets it apart is that it is a truly community–based, bottom–up driven organisation.”
All the RBN’s entities and delivery arms are held to account by the nation; they all report back to the nation during the course of the year and major decisions are put to a vote.
All the delivery arms of the RBN, for example, the Royal Bafokeng Administration, which is tasked with community and social infrastructure development, are kept close to the constituency.
Another factor that sets the RBN apart is that capital has been available to commit to transactions. Jackson notes that there is also no lag between transactions taking place and the subsequent benefits flowing through to the community.
The RBN’s economic empowerment is truly broad–based in the sense that there are more than 300 000 beneficiaries and probably more in the region, outside the Bafokeng community.
The RBH’s further contribution to social upliftment is its own CSI budget that is deployed across various sectors, including education, health and sport. As previously mentioned, RBH works in close collaboration with investee companies and, although they have their own transformation goals and have to be relevant to their respective jurisdictions, they are encouraged to also be relevant to the RBN shareholding. All the companies have CSI programmes that impact directly, or indirectly, on the Bafokeng community.
Jackson points out that it is also important to ensure that the initiatives that the RBN and RBH embark on are regional initiatives and are not isolated within the Bafokeng community.
An example of such an initiative is the trust fund that has been set up with Implats and receives about R40–million a year through joint funding from RBH and Implats. This money will be geared towards projects that have a regional impact. Another example of the regional focus is the schools that have been constructed by the Bafokeng Nation.
Pooe notes that about half the children attending these schools are not part of the Bafokeng community.
In undertaking projects with a regional impact, it is important that the RBN’s objectives are aligned with government’s developmental strategies.
Pooe explains that the RBN performs a number of joint projects with all spheres of government for the development of regional infrastructure. A number of regional infrastructure development programmes (roads, water, electricity, sanitation and general infrastructure upgrades) are ongoing in conjunction with government programmes.
He adds that the nation has a cooperation agreement with the local authority and undertakes contracts jointly.
“We are currently involved in the construction of the road between Rustenburg and Sun City with local government. Our involvement ranges from the National Treasury, the Department of Minerals and Energy to Land Affairs.”
Through a structured regional programme, a mixture of projects will be rolled out that are human–capital intensive and regional infrastructure intensive.
Vision 2020 is the umbrella philosophy for the development of the RBN, and one of its priorities is the creation of long–term community sustainability with a reduced dependence on mining. Its focus is on education and employment, and on health and infrastructure.
Jackson emphasises that the tribe looks to the long term in its human–capital development, and improving quality of life through elements such as poverty alleviation and food security.
The master plan is the physical embodiment of Vision 2020 in terms of the infrastructure roll–out. It provides a framework for regional infrastructure development, so that all development forms part of a well–structured plan with pre– determined goals.
“The aim is to build something that is sustainable beyond mining,” clarifies Jackson. Elements of the plan will be rolled out on a needs–and– priorities basis and in conjunction with local and national government, as the development is for the region, in general, and not limited to the Bafokeng community.
The masterplan encompasses education, health, housing and business development and is, hopefully, a model that spreads further than the North West province, and can be rolled out in other areas.
With regard to business development, evidently, owing to the Bafokeng’s position, it is easier to promote businesses that are mining related. However, the RBN is also looking to tourism, and potentially attracting labour–intensive industrial businesses to the region. Jackson acknowledges that the right pull factors have to be created for this to happen.
Early developments in the implementation of the master plan have been the establishment of the Royal Bafokeng Institute, which is tasked with education and human–capital development. Another milestone is the founding of an RBH subsidiary, Royal Bafokeng Sports Holdings, to generate financial and social returns through the development of the RBN’s sports assets.
The RBN website states: “The 30–year master plan is based on a detailed assessment of the opportunities offered and the constraints imposed by the 1 200 km² of the land owned and controlled by the RBN and sets the direction of the development by the year 2035.”
According to the website, the RBN land has been demarcated into five distinct regions, all with individual development plans. The capital region to the south–west, around Phokeng, will provide “an attractive, vibrant and thriving cosmopolitan environment”, and the central region will be geared towards providing quality housing, recreational attractions and employment opportunities. The northern region will be dedicated to “providing quality living in a mining environment”, with the north–eastern region providing “an attractive residential area amid a natural agro–setting with comprehensive facilities”. Lastly, the south–eastern region will provide access to nature.
As RBH continues to flex its investment muscles, one thing that remains abundantly clear is that the nation is the crux – it is the motivation behind all transactions and its sustainable development and social upliftment maintains its position as the number one priority.
