25 May 2007

South Africa: The Art of Managing Funds

Johannesburg — LUNCH with Cheryl Carolus is no short affair. She talks a lot. And she takes her food and drink seriously. The CEO of investment company Peotona originally chose Moyo in Parkview to meet, but a few days beforehand changes the venue. Carolus says she likes the chain, she tells me of her involvement with owner Jason Lurie through her work at SA Tourism, but confesses has been disappointed with it lately. "The service has just become quite tacky. I'm wondering if it hasn't grown too fast too soon." We are, instead, at the Clico Guest House in Rosebank. A private home until last June, it sits behind the kind of high white walls that most Jo'burgers drive past without a second glance.

We are the only diners on a patio overlooking a pool and sunken garden. There is no menu in sight, but I gather we are in for something when chef Sean Ackermann comes out to offer wine -- Iona Elgin 2006 sauvignon blanc -- and announces the three-course menu.

"I'm going a bit traditional with the starter," he says. "I'm doing a shrimp cocktail, that's going to be followed by a lentil curry, and that's a yellow pepper stuffed with a Moroccan style mince on the lentil curry and for dessert I'm going to do some fresh strawberries, raspberries and gooseberries on marscapone cream."

Carolus pronounces the sauvignon blanc blander than she thought it would be.

All this comes across as quite a contrast to the woman who started life as a communist teacher.

Carolus has also been ANC deputy secretary-general, high commissioner to the UK and CEO of SA Tourism. She founded Peotona in 2005 and it has already sealed a string of empowerment deals, including with De Beers and Investec. I point out she is no stranger to change.

"And I love it! One of the things I love about our democracy is that one can be who you want to be. I was never and will never be a career politician. I was in the struggle for freedom. I wasn't in politics. Now that we have a more than just half-decent democracy, I want to be a citizen. And a good citizen."

Carolus is in the habit of taking stock of her life each birthday. This Sunday she turns 49 and is going hiking.

"I love growing older. Every year I take myself very seriously. I take leave officially on my birthday and if I can help it, I go away. It sounds a bit corny, but I sit down and I do the balance sheet of my life. It's important to take stock of one's life."

The starter is served and after a brief pause Carolus resumes. She decided to leave politics in 1991, she says, even though she stepped down as an ANC office holder only in 1997.

"You were talking about what I do, that I seem to have reinvented myself... It is true and I love that and, hopefully, in my life I'm going to keep exploring new things. I'm quite curious about things and hope I never stop learning. Whether you look at the ANC, both the struggle years and then, I'm a frontiers person, not a maintenance person. I like shaping things."

Carolus says the looming challenge for SA today is the widening equality gap, which she later describes as a "time bomb". However, she mixes polarisation of wealth and hostility towards black economic empowerment interchangeably.

"I do think that where the poverty and inequality equation stands in our country, I do think that it's happened a lot slower than I had hoped it would with the optimism of '94," she says.

"And that's where I do hope sometimes that people who have been beneficiaries of apartheid -- and in particular white South Africans -- I do hope that sometimes there would be a little bit more thoughtfulness and generosity of sprit in acknowledging that there's been an extraordinary patience and generosity on the part of poor black South Africans to avoid a bloodbath."

Carolus slams "the shameless efforts" of those who begrudge SA's empowerment pioneers.

"It's quite dismissive of the many people who have, under very trying circumstances, taken the gap in the very little normality which started to exist after '94, who became the pioneers.

"There's an effort to deny that these people came from quite painful personal and community pasts and to say that 'No, no these were people who were always relatively advantaged'."

As the main course is served and we have another break in the conversation, Carolus advises me to speak up.

"You mustn't hesitate to interrupt me, hey, because I'll talk!"

We digress into general politics such as the ANC leadership -- "for me there is a general question about whether the ANC leader should be the leader of the country" -- and the DA.

Helen Zille's era brings an end, Carolus says, to "chihuahua politics, which I think the DA had degenerated into".

She also jumps into a defence of the proportional representation voting system. While it has failings, such as floor-crossing and lack of accountability of MPs, it does have strengths, she says.

"If we go straight for constituency politics, it would be very racially defined -- the constituencies and the party's representatives. Especially our opposition parties will look very racially polarised, I promise you."

Ackermann comes out to ask how we are enjoying the meal. I am butchering my yellow pepper, but Carolus' pepper, not surprisingly, is still intact. I am talking less, and eating more, than she is.

SA would probably only have two parties in Parliament if the proportional system didn't exist, she continues. But with a party requiring only 1% of the vote to get a seat in parliament, more of SA's wide-ranging viewpoints have been drawn into the system.

I ask Carolus about inequality. The polarisation taking place in SA is not a race thing any longer but more of a wealth thing, I assert. She corrects me.

"I don't agree. Most poor people are still black and most people who are not in the poverty stakes are still white. There's marginal movement in the number of black people who've become rich. A tiny fraction. And there's a tiny fraction of people like myself who have huge debt and hopefully in 10 years' time will see some money!"

The R557m accounting cost of the much-criticised transaction that saw Peotona take a 9,5% stake in consumer and defence electronics company Reunert pushed Reunert into loss for the six months ended March. The arrangement will see Carolus and her three partners, Thandi Orleyn, Dolly Mokgatle and Wendy Lucas-Bull, own 2,8% of the company in 11 years' time.

Carolus says her generation of black businessmen and women are standing on the shoulders of the giants who went first. She has been able to avoid the same scars many of them bear, she says.

"The first generation of people who went in there and did it -- your Cyrils, your Patrices, Tokyo, Saki -- they've been very generous to share with my wave of people who've gone into business with some of their learnings."

It does seem, however, that the Reunert deal seemed to be very generous to the four Peotona partners. Isn't it enrichment?

"No, no Michael! The irony was that the transaction was concluded at the end of October and actually hailed as a good transaction in many of the same papers that covered the story, and then just got picked up by different journalists differently after the AGM," she pours out, seemingly without taking a breath.

A difference with earlier transactions, she says, is that between 60% and 70% of the value is set for broad community benefit -- in Peotona's case, women and disabled people. Details of this part are still being worked out.

Carolus is unapologetic. Reunert's size was a draw, she says. "Reunert is big because it's a big company, so anybody's stake in it was going to be bigger than a smaller company. In the previous generations it was unthinkable that 70% of it -- you know, broad-based was thought of as having 30 different black business people or 50 black individuals."

How does Carolus view her own wealth in a country where inequality is growing?

"I haven't stolen money from anybody, have I? None of the money and assets I have would be ill-gotten gains, would they? I hope I would have a long, productive life of hard work, and I can't be held responsible for all the problems in the world."

Business is about taking risks. The four women behind Peotona have all been prepared to stick their necks out, Carolus says.

"And we paid a price for it. We went to jail, we were locked up and a whole lot of stuff."

Was Lucas-Bull, former First Rand Bank retail CEO, an activist?

"Wendy was an activist in her own way. She actually was the founding chair of Business Against Crime... There are some things I have more in common with Wendy than with some terrible black people who are now jumping on the bandwagon and claiming freedom as something they fought for. Some were actual obstructionists in the process."

Carolus took time out after leaving SA Tourism to learn about business. How, though, does she add value? What does Investec, for example, get out of Carolus, other than a high-profile person on its board?

"Someone who asks a lot of stupid questions," she laughs. "I understand where our country's come from. I've been party to writing a lot of the policies. I understand what's behind government thinking on a lot of stuff."

She does not pitch for business. "I refuse to be anybody's darkie, opening doors for them."

At the moment, Carolus says, she is not rich. She cashed in her pension and remortgaged her Hurlingham house to raise funds. That will change, though.

"We buy minority stakes at the moment because we don't have money. But we want to own big things in our economy. In 10 years' time we want Peotona to be a big player."

After draining the Bodum, we eventually bring the afternoon to a close. The conversation is not over, however.

The next day at work I get an e-mail from Carolus with a point she didn't make during our lunch -- about DTI requirements for vendor financing of deals such as with Reunert. With Carolus, conversations take a long time. But when it comes to empowerment, that is a national debate that will even, I dare say, outlast Cheryl Carolus.

Cheryl Ann Carolus

Born: May 27 1958, Cape Flats, one of four girls

Describes self as: 'a Hedonist-Calvinist'

"I actually like good food. I am quite happy to cook good food and go in pursuit of a good plate of food and a good glass of pinot noir. Now I'm on a mission about shirazes and pinot noirs."

The Calvinist thing:

"I had parents who gave us the most incredible gift and that was unconditional love and a very strong sense of self which I think was part of what made me stand up against apartheid. They made us feel we were just the best under the sun. Anything we wanted to be, they would bust a gut to help us. But ultimately it was our choice. You work for things. I still believe very firmly, if you don't like something, you go out there and do something about it. I can't stand people who whinge."

Likes dancing:

Learnt Tango in Argentina and Samba in Brazil.

The lifestyle of Carolus and husband Graeme Bloch:

"We don't have anything smaller than ourselves for which we could be held criminally responsible. We don't have dogs, children, cats, goldfish, budgies."

On coffee

"One of the best things in life is a proper, 15-bar (with pump to provide consistent water pressure) espresso machine. I really think some things in life are worth investing in! I'm just a much better person if my caffeine levels remain constant."


"I still maintain that the people who were really supportive of the transactions did it 10 years ago.

"Let's face it. Most people are doing BEE transactions for entirely pragmatic reasons. If they really wanted to do it for entirely philanthropic reasons, they would have done it at least 13 years ago, pre-'94, or better still, in 1990 when it was clearly changing. Some people did it, so there are a lot of flaws one can find in the transactions now. But I would cut them a bit more slack because they did it when there was no pressure whatsoever to do it."

Carolus on Carolus


"With SA Tourism, our problem was we were not marketing ourselves. (I decided) SA Tourism must not become a political propaganda machine, our job is to take what genuinely exists and that means truthfulness, because the point about marketing is that if you can't deliver on your brand promise, it will backfire so badly the damage will be much worse than where you started off.

"So you go and find out how marketing works. You go and find out how brands get managed. I made it my business to study in detail what Australia did, how did they turn Australia around? When I moved out of SA Tourism, I said I felt I had achieved what I set out to achieve. I'd made it a world-class marketing organisation rather than a government department where people start work at 7.30-8 and at 10 to four they start packing their paper clips up and at four o'clock they're on the bus back to Pretoria.

"Now it's a bunch of the craziest, cutting-edge marketing whizz-kids that the country has. It's kids from marketing, rather than civil servants -- with all due respect to civil servants!"

Loving firsts (& looking good):

"Some people are just not entrepreneurial. They wait for things to come to them. My whole life, whether it was my freedom -- I didn't wait for my freedom to come to me, I worked for it. We didn't wait for tourists to come to SA. We went out there and made it work for our country. When I was in London, we could have waited for opportunities to come to us, but we did some pretty kick-arse things, where we decided to put ourselves in the face of London in a way no one else ever had the temerity to do.

"We were the first-ever occasion when Trafalgar Square was shut down and used and everything around the square was shut down and used for little SA. We did all sorts of firsts. I love firsts and I love working with other people who go for firsts and are cleverer than I am. I've learnt that one way to look good is to surround yourself with people who are actually a lot smarter than you are. And I've been very good at doing that all my life!"

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