BIG READ: How ‘the suitcase man’ pulled himself up by his bootstraps to become a mining superstar

Four origin stories seek to explain Patrice Motsepe’s success. Each reflects SA’s race and class entropy.

The first is that he’s a “comprador capitalist”, or an oligarch who paid his way into favour with the new political elite.

The second is the “patriotic bourgeois” notion — that, by virtue of conscience, he felt obliged to repay the party that led the struggle.

The third is that he was given a free pass into making a heck of a lot of money by the ANC, which used empowerment policies to pick and choose who would get to be both black and rich.

The fourth is that Cyril Ramaphosa — who became Motsepe’s brother-in-law two years after Motsepe joined the mining sector — influenced big capital to favour him. Or the ANC to favour him. Or something along those lines.

But there’s a more plausible origin story that doesn’t require reverse-engineering a destiny.

In 1979 Patrice matriculated from St Mark’s in Mbabane, and the following year he enrolled at the University of Swaziland for a BA in law, which he earned in 1983. He then registered at Wits to do his LLB, which took four years.

Among his peers at Wits were Adrian Gore, who graduated as an actuary in 1986 and went on to found Discovery; Shabir Madhi, who graduated as a doctor in 1990 and went on to become a member of the World Health Organisation Strategic Advisory Group of Experts; and Mamokgethi Phakeng, who graduated with an MSc in mathematics and went on to become the vice-chancellor of University of Cape Town.

Like Motsepe, none of these people had the sort of contemporaneous political connections that could immediately boost influence; none was a member of Umkhonto we Sizwe, or a detainee, or an activist; none was an alumnus of a school posh enough to market him; none had famous friends.

Motsepe’s first attempt to enter the extractives industry was in 1989, when, as a brand-new law graduate, he tried to buy small-scale mining operations from Gencor and Anglo American — and failed. No-one would lend him the money or buy shares in his nascent company. Banks, especially, weren’t interested.

That was a heightened time in SA, soon to see the unbanning of the liberation movements and the release of Nelson Mandela by FW de Klerk. It was also when the Chamber of Mines, a 100-year-old organisation of mine owners, started coming to terms with the inevitable end of private ownership in favour of the state becoming the custodian on behalf of the people. The ANC based its plans to maximise resources on that principle as laid out in the Freedom Charter, the 1955 statement of core principles of the SA Congress Alliance, which the ANC and other democratic forces had supported. Empowerment was predetermined.

So Motsepe would have participated in rigorous internal debates at Bowman Gilfillan, the company he joined on graduating, about what mining was going to look like in a democratic SA. This wasn’t business as usual; it was planning how to operate in a new country.

Motsepe was rising at the firm — he’d been called a “superstar” by his superiors — when he was recommended to the American Bar Association for selection for a prestigious two-year exchange programme in the US. Based as a visiting attorney at McGuireWoods in Richmond, Virginia, in 1991 and 1992, he had the chance to develop case law about how to turn dormant mining enterprises into successful businesses. That was a whetstone for Motsepe, who was swept up in the possibilities as he “read extensively ... collecting every single book [on the subject] he could lay his hand upon”.

When Motsepe returned to Johannesburg in 1993, he was announced as the first black partner at Bowmans, going on to represent mining companies “while studying what made some mines succeed and others fail”. A takeaway was that the successful ones were lean.

By 1994 Motsepe was ready to try his luck in business again. He threw everything into this second attempt, registering a company called Future Mining with which he started small as a contractor.

The way he got going was to “ask the bosses what the worst job is on that mine and then ask if you can do it”. Then he hired a team that would become skilled in gleaning dust, left over from blasting, from inside gold-mining shafts. It wasn’t easy work. “SA’s gold mines are deep, hot and water runs everywhere,” one writer observes. “They are slippery, uncomfortable places to work in, and they get deeper and hotter every year as the quest for gold burrows ever further into the earth.”

The uptake on individual contracts went reasonably well, but Motsepe couldn’t pique the interest of financial institutions, or even mine owners, for long-term agreements. He didn’t have a proven history of running an operation, or working capital, and has described how he “literally managed Future Mining” from his briefcase — becoming known as “the suitcase man” — doing the legwork and looking for contracts from mine to mine. He was persistent, and continued to research how to run his own operations using marginal shafts, all the while saving every extra rand to build up reserves.

Meanwhile, the “big six” mining houses — Anglo American, Anglovaal, Gencor, Gold Fields, Johannesburg Consolidated Investments and Rand Mines — were at various stages of delisting from the JSE. Having dominated mining for most of the 20th century, controlling the means of production, exploiting racial divides and creating SA’s postcolonial capitalism, they’d become unsettled by regulatory uncertainty. Mergers with other transnational mining companies were under way, as were moves to international exchanges.

At the same time, serendipitously for Motsepe, the world had fallen out of love with gold by 1997, and AngloGold was looking to dispose of loss-making shafts at its huge Freegold mine at Welkom in the Free State and at Vaal Reefs near Orkney in North West. Bidding for the shafts started at $8.2m (about R30m at the time).

This was a rare moment for an entrepreneur like Motsepe to invest in a big business, and an opportunity to test himself out personally. He tried to get a loan to finance the purchase of the shafts, but no bank would front him the money. “The banks said, ‘Are you mad?’” he recalled. There were no financing models against which to examine a proposal such as his, without a portfolio of administering minerals.

Mining colossus Harry Oppenheimer himself had little faith that Motsepe would be able to make it work. Motsepe recalled: “He was very polite, but he said to me, ‘What makes you think you are going to make money where Anglo has not?’” And this lack of confidence crossed racial lines, with National Union of Mineworkers boss James Motlatsi saying that Motsepe “wanted me to support the deal, but I said it will be embarrassing to black people if Patrice cannot make money out of it”.

But Motsepe had a drive to succeed and was determined to shoot his shot. He founded African Rainbow Minerals (ARM) with venture capital off the back of Future Mining, and presented a solid proposal to Bobby Godsell, Anglo’s CEO of gold and uranium. Godsell had previously come across Motsepe through his contracting work and had been “impressed by his doggedness and resolution”.

Motsepe said he convinced Godsell to take a chance on ARM “because he knew [Future Mining] had done numerous contracts for them”. He drew attention to the disjuncture between Anglo’s “long-life, high-grade asset requirements” which would not necessarily suit some of its deposits.

Godsell’s version of events is slightly different; he said he “wanted to help black South Africans get into the business. I was seeking to create capitalists out of people who had no capital.” And Godsell’s reputation bears this out: he was critically involved in business-led discussions with the ANC in exile in the 1980s. But even he was unable to persuade SA banks to back Motsepe. It was either Anglo reached out, or there would be no way forward.

In a deal that went down in history as one of the most important for SA’s postapartheid business recovery, Motsepe and Godsell were able to work out terms affording Anglo a return on profits with a R500,000 loan to ARM. It was the sort of project-based financing secured against anticipated cash flows that would play out in numerous joint ventures to come.

Motsepe took on mining’s disquieting legacy the moment he acquired the Orkney mine shafts, at which more than 100 lives had been lost a few months after the first democratic elections in what came to be known as the Vaal Reefs Disaster.

On that day, May 10 1995, “Miners, who had just finished a day’s work 1.4 miles [2.3km] below ground, boarded a two-floor elevator to take them back up to the surface at about 10.30pm. At the same time, an underground train was travelling in a tunnel that was supposedly blocked. The train lost control and crashed into a barrier, sending it down the mine and taking with it the elevator’s conveyor system. The impact was so strong that the elevator, which can hold up to 100 people, was crushed to less than half of its original size.”

National Union of Mineworkers’ Motlatsi, traumatised, talked to reporters about the terrible scene, saying “pieces of flesh were scattered all over ... as a two-floor mining elevator was crushed into a one-floor tin box ... As the incident happened during a shift change, more than 100 people were inside. It was a difficult task to recover and identify the individuals who died, as the disaster left miners unrecognisable. Upon crashing, the train also hit a cage used for inspections on the way down the mine shaft, but luckily, the occupants escaped and survived.”

At least 316 children were left without fathers and there were 109 widows. AngloGold and the National Union of Mineworkers established a trust to care for the dependants of the deceased.

Motsepe paid the $8.2m back to Anglo within three years, but “the first few months were frightening” as gold prices plunged, and Motsepe was forced to embark on “some rather radical management initiatives, adopting a low-cost, lean, mean management approach” to running his mines.

For starters, he downsized the management staff by half and gave jobs to only 5,000 out of 7,500 employees at the Orkney mine, which was the most profitable. He also rejigged work shifts so that the shafts would be productive 353 days a year, up from 276 days, and he “slashed overheads by eschewing a home office in Johannesburg, three hours away, instead working out of a building in Orkney”.

Labour laws were still being rewritten in SA when Motsepe launched his first subsidiary, ARMgold, in 1997, so he started out using his own management techniques and taking “a radical approach to the pay structure of the miners in Orkney. Instead of the standard R1,000 a month in salary, Motsepe offered [them] a base salary of R750 plus a profit-sharing bonus that could double their pay.” This was “a deal that is talked about at the mine to this day, not least because Motsepe involved the workers at a time when this was rare” and it won him a lot of favour.

Within 12 months, the shafts had become profitable.

Neither the ANC, nor his brother-in-law, had anything to do with it, nor with the creation of ARM, which sealed the deal. And for Anglo, there was that Easter egg: a shining opportunity to unexpectedly get in front of a priority by the government to push black empowerment.

• 'Patrice Motsepe: Appetite for Disruption' is published by Jonathan Ball.