ARC one step closer to overarching world mission with larger stake in Alexander Forbes

Billionaire Patrice Motsepe’s plan to build a world-class business by extending affordable financial services and products to people who were previously ignored, will take a big step forward with African Rainbow Capital Investments (ARC’s) enlarged stake in Alexander Forbes.

The two companies announced on Wednesday that ARC would buy more shares in the country’s biggest pension funds administrator, and replace US-based retirement and investment adviser Mercer as Alexander Forbes’ strategic shareholder.

Mercer will retain a 4.5% stake in Alexander Forbes if all goes ahead as planned, and ARC will hold an effective 41%.

“This investment is strategically important to us. We see a big opportunity at the lower end of the market as we have already demonstrated with TymeBank, Afrocentric and various other investments. Driving financial inclusion is who we are. Being able to offer financial services to more people requires scale to generate efficiencies that can lower the cost for the customer, and Alexander Forbes’ dominant position allows us to do that,” says ARC co-CEO Johan van Zyl.

TymeBank is a digital financial services provider launched in early 2019 while Afrocentric is invested in the health-care sector.

Venture capital group Catalyst Fund estimates that as many as 3-billion people are underserved by the global financial system, meaning they cannot access the full range of financial services or do so affordably.

Motsepe with ARC co-CEOs Van Zyl and Johan van der Merwe listed African Rainbow Capital Investments in September 2017. The vehicle is designed to hold the billionaire’s nonmining investments.

ARC through its financial services arm has acquired stakes in businesses including medical scheme provider Afrocentric, corporate finance boutique Bravura,  investment adviser Colourfield and, most recently, TymeBank, in which it owns a 90% stake.

Alexander Forbes CEO Dawie de Villiers says the transaction is very positive for the company. “A large empowerment shareholder that has strategic ambitions and credentials such as ARC who believes in our advice-led strategy is a great benefit to the company moving forward sustainably,” he told Business Day on Thursday.

Alexander Forbes has commercial relationships with Mercer that will continue, including the pan-African strategy called “Arrive”.  This will result in Alexander Forbes and Mercer jointly seeking new businesses, advising and managing mandates for employee-benefit arrangements across the continent.

De Villiers said the company would be willing to entertain ideas to collaborate with ARC’s other portfolio companies in future.

But true to ARC’s preferred practice of letting management get on with running the business, Van Zyl says ARC will take their cue from De Villiers and co.

“Yes of course we will explore options for collaboration between our portfolio of investments and AF (Alexander Forbes), but we are happy shareholders and will not impose anything on the management team. We support management, we believe in the strategy, and we will follow what they think is the right thing to do,” said Van Zyl.

Minor approvals are required for the first transaction which will result in ARC paying about R1bn to acquire a further 193-million shares in Alexander Forbes.

thompsonw@businesslive.co.za