Christo Wiese South Africa Billionaire

Shoprite chairman Christo Wiese

Retail magnate tells Adele Shevel how he worked his way up to become South Africa’s wealthiest man

Share Article:

•  
•  
• 

YOU wouldn’t expect to find the country’s richest man in an office in an ordinary building more brick than glass and wedged in next to a township in Cape Town’s Parow Industria.

Yet this is where Christo Wiese, retail magnate and the 382nd richest man in the world with a fortune of $4.2-billion, concocts his deals.

It’s a world away from the corporate shrines of Johannesburg’s Sandton or Cape Town’s CBD, but the sort of place where ordinary folk go about their business.

Wiese wasn’t born into grand wealth, but clawed his way to the top by building an empire spanning everything from 19c underwear to $20- million pieces of Fabergé jewellery.

During the interview, Wiese drinks water but not from a bottle emblazoned with his company insignia. Paper and files swamp a boardroom table where he works — a refreshing contrast to the obsessively tidy paperless offices of his peers.

Wiese smiles when asked about this: if a cluttered desk is a sign of a cluttered mind, then what is an empty desk a sign of, he asks.

Now 72 years old, he loves to tell stories. This speaks of his upbringing in Upington, a town surrounded by the harsh Kalahari in the desolate Northern Cape, as well as of his training as a lawyer.

Wiese was drawn to the legal fraternity because of the dramatics of discussion — there was something about listening to arguments and logical analysis that intrigued him.

But he was also drawn to the world of commerce. If others could do it, he thought, so could he.

Being an outsider to fancy accounting theorems helped him see things from a different slant, he says.

His legal training also helped him develop financial structures.

In 1985, when the rand plunged 50% after PW Botha’s Rubicon speech, Wiese’s Pep group was staring down the barrel due to its decision to take on interest-bearing debt in dollars.

So Wiese did what no one else was doing: he bought a currency option to hedge the impact of the currency smack. It mitigated the worst of the impact, but even after the dust had settled, the Pep group had a debt-to-equity ratio of more than 100%.

Wiese believed this to be simply an “accounting convention” — rather than a reflection of reality — so he had Pepkor’s assets revalued, which caused the ratio to fall dramatically.

Wiese’s trek to the very summit of the South African wealth table came during South Africa’s transition from a primarily mining-driven economy to a broader-based consumer society.

Whereas the Oppenheimers and other mining magnates held this title in the formative years of local commerce, Wiese made his money not from digging but from selling things to other South Africans.

In 1965 in Upington, a group of friends including Renier van Rooyen founded Pep stores using a then considerable R125 000. Wiese, then a young 24-year-old, soon joined the company .

This fateful step ultimately led to the takeovers of Shoprite in 1979, Ackermans in 1986 and Checkers, Stuttafords and Cashbuild in 1991.

In 1986, Shoprite was spun out from the group and listed separately on the JSE, while Pepkor became the listed entity for the clothing interests.

Today, Wiese is the undisputed heavyweight in both Shoprite and Pep, chairing both. He owns a direct 52% stake in Pepkor (and more through another 33% of private equity company Brait, which also has shares in Pepkor) and 15% of Shoprite — and he controls them both through a complicated voting structure.

That might be where he made his fortune, but Wiese’s tentacles extend far wider. He also holds large chunks of engineering firm Invicta, investment company Tradehold, and is the third-largest shareholder in furniture manufacturer Steinhoff.

Taken together, Wiese’s influence extends to more than R150-billion in market value for those companies, which employ 160 000 people.

During the interview, his phone rings. It’s “uncle Butch” who, apparently, is Whitey Basson, the CEO of Shoprite.

“Wat doen jy die naweek want ek will plaas toe gaan met ’n pal of twee … ?,” (‘‘What are you doing this weekend because I want to go to the farm with a pal or two?”) he asks Basson. They’re great friends, and have been since university.

The chemistry between the two is legendary. And it’s a good thing, considering how Basson has made billions for Shoprite’s investors — including Wiese.

When Walmart came sniffing around South Africa for a company to buy, Shoprite was high on the list.

So why wouldn’t Wiese sell to the Americans? He retorts: “The question is, why would I?” “There’s not a chance that Whitey Basson would wake up one morning and see that Christo had sold Shoprite to Walmart.

“Th at ’s just never going to happen.

If such an eventuality should ever happen, it will be with the full knowledge and participation of everybody,” he says.

Sure, there might be participation and engagement, but everyone knows that Wiese calls the shots.

One of his great skills, if Basson is any indication, is his ability to pick the right jockeys for his horses.

Says Shane Watkins of All Weather Capital: “He’s very good at finding and backing the right people —– he has a real skill in doing that.” Besides Basson, Invicta’s Arnold Goldstone and Pepkor’s Pieter Erasmus are two other cases in point.

Wiese has “an above-average tolerance for risk, but he also has an above-average talent for it. He loves doing transactions, and the more complex the better. And he has the ability to understand the operational business and has the ability to understand the financial instruments that fund those businesses”, says Watkins.

This is notable praise, considering Watkins clashed with Wiese in 2006 when he underwrote an offer from Brait to buy out all the shares of Shoprite and delist it from the JSE.

The offer was pitched at R28/share, and shareholders complained that Wiese (and Brait) were trying to get Shoprite for a steal, when it was worth far more.

If you look at Shoprite now, trading at R165 a share, it seems those shareholders were right to resist.

Eight years later, Watkins says it wasn’t personal — Wiese was just being opportunistic. “He does a lot of things where he doesn’t seek or get the recognition he deserves.” He tells, for example, how Wiese donates boxes of wine to Watkins’s child’s school fundraising.

“There are numerous examples where he’s done stuff like that. He will attend to quite trivial things to help you,” Watkins says.

This raises the inevitable question: for a man who is a dollar billionaire many times over, why is he still working? Wiese says he sees it as his contribution to creating “opportunities” and spurring young people to move up the ladder.

He sees his retail empire as something of a family business. His son Jacob is involved in it, and is now working in London on the family’s property portfolio.

His youngest daughter Christina also recently joined the business as a management trainee.

“I tell my children that it’s not as if you can just up and go. When you move into those positions, you assume that responsibility, that cross.” It may look like Wiese is keen to roll up his sleeves with the working class in Parow, but at the end of the day, he will climb into his car and drive to Clifton — perhaps the cream of South African addresses.

Wiese, it turns out, loves property.

He has a game farm in the Kalahari, and he owns the Lourensford wine estate.

Wine farms sound good on paper, but it seems to be an expensive vanity asset. Wiese agrees that it doesn’t make sense to own a wine farm. But he says it creates employment.

And, lets face it, he can afford it.

• This article was first published in Sunday Times: Business Times

Christo Wiese is the brain behind Shoprite, Africa’s most storied retail chain.

A story is told of two shoe salesmen who went to a poor country to undertake due diligence because their parent company was looking to make a foray into the country. One of the salesmen sent back a telegram, saying: “There’s no market here because nobody here wears shoes,” and the other one sent a telegram back: “I’m elated because what a market – because nobody has shoes.”

That anecdote is reminiscent of South African billionaire Christo Wiese’s story. When Wiese went to Zambia in the early 1990s to open up a clothing store, he discovered that clothing was sold on the street pavement by hawkers. There were no clothes shops in the country, and a colleague from Pep Stores with whom he had made the trip told him, “You know, we can’t come and open shops here because people prefer to buy  their clothes from hawkers,” Wiese recalled during an interview with South Africa’s Leadership magazine.

Of course, Wiese went ahead and launched a Pepkor store in the southern African country. Needless to say, it thrived- just like all the other previous stores across the continent.

Today, Wiese is the largest individual shareholder and chairman of retail giants Pepkor, Shoprite and Tradehold, and one of the continent’s most successful entrepreneurs, with a net worth of $3.1 billion on Forbes’ 2012 World’s Billionaires List.

After acquiring a bachelors’ degree in law from the University of Stellenbosch, Wiese practiced at the Cape Bar for several years before taking up a job as an Executive Director at Pepkor, a discount clothing chain his parents had helped found. By 1979, Pep Stores made its foray into the food retailing business with its acquisition of Shoprite, a small chain of retail outlets spread across South Africa. Wiese assumed the position of chairman in 1981, and in 1982 he led the company to change its name from Pep Stores to Pepkor Limited.

With Wiese at the helm, the company made some audacious acquisitions. He acquired Ackermans, a clothing chain, in 1986. Subsequently, Pepkor listed its clothing interests on the JSE as Pep Limited and its food interests as Shoprite Holdings Limited. In 1991 Pepkor made four additional acquisitions. The company acquired the retail chains Smart Group Holdings, Cashbuild, Checkers and Stuttafords and in the same year, Wiese led the company to open its first retail outlet in Scotland.

Today, Pepkor is a renowned South Africa-based retail investment holding company with stores in 10 countries in Africa, as well as operations in Australia and Poland. The group owns a diverse portfolio of retail outlets centered on the low-price market, primarily selling textiles, clothing and footwear. Its main operating subsidiaries are Pep and Ackermans in South Africa and Best & Less in Australia, all based on a high volume/lower margin business model. The group has some 2,800 stores and employs almost 28,000 people.


Wiese has been the engineer of all this growth, and has reaped some handsome financial dividends in the long run. He is widely acknowledged as one of the richest men in Africa today. His combined interests in Pepkor and Shoprite- the continent’s largest retailer are currently worth $2.4 billion.

In addition to retail, the mogul has been involved with several other companies and sits on numerous corporate boards. Apart from serving as chairman of Pepkor, Shoprite and Tulca, he is on the board of South African media giant Primedia and financial services firm PSG Group Ltd.

Wiese is 70, but he says he’s not prepared to step aside anytime soon. “I believe I am good for another five to seven years,” he said last year during an interview with South Africa’s Moneyweb. Wiese’s eldest son, Jacob, 30, is part of the company’s key management staff and will look after the family’s interests in the company when Wiese retires.

Business aside, Wiese has been one of Africa’s most vocal economic optimists. Last year, he voiced his thoughts in an opinion article in Ernst & Young’s 2011 Africa attractiveness survey: “I’m extremely positive about investment in Africa. Africa has a wonderful climate, wonderful people and amazing possibilities. Africa has been called dark and hopeless, but today it is neither of these. Africa is awakening. It’s a huge market of almost a billion people with huge resources and a young population. It’s the best place to invest.”

Wiese has seen his own fair share of troubles, too. The South African billionaire is currently facing a legal battle to recover more than $1 million in cash that was seized from him in 2009 by British customs officials. Wiese had been carrying the cash in his personal hand luggage while attempting to board a flight from England to Luxembourg.

A British judge ordered that the money be seized on the suspicion that it was the proceeds of crime, but according to the Daily Mail, Wiese and his lawyers have explained that the money was part of profits from diamond deals in South Africa in the 80s and 90s and had been kept in a safety deposit box in the Ritz hotel because of foreign exchange restrictions in his homeland.

The case is still in court.

source