Ethan Dube: A good time to look at further ventures. Picture: Robbie Tshabalala
Ethan Dube: A good time to look at further ventures. Picture: Robbie Tshabalala

Ethan Dube, the CEO of Vunani, has a strong reputation as one of SA’s top corporate financiers. His reputation was barely dented by Vunani’s sponsorship of the failed listing of the Sagarmatha businesses, which is collectively claimed to be an "African unicorn". That move was just taking a fee for a service, and which sponsoring broker has never sponsored a dud?

But Dube is taking more of a risk by setting up a R100m joint venture with Ayo Technologies, which would have been the heart of the proposed unicorn. Dube describes Ayo as a solid business built from scratch. "We weighed up the noise, but the main thing is that it was willing to do a deal on our terms."

Ayo has relationships with businesses such as IBM, Cisco and Microsoft, which undoubtedly help the process along. Dube says the joint venture will focus only on areas of interest to Vunani: technology to enhance financial services or fintech. Naturally Dube hopes it will be a disrupter, which should have a large impact on the lives of ordinary people, for instance by reducing transactional costs. The joint venture will partner experts locally and overseas to look at payment technologies, online insurance, lending, the digitisation of securities trading and the use of cryptocurrencies. It will also look at robo advisers and artificial intelligence.

Quite a similar script to a competitor such as Sygnia, but more Africa focused.

Vunani’s core areas are merchant banking and stockbroking, asset management, asset administration through Fairheads, and private equity. Its main source of income, ironically, is coal mining. That came out of its private equity portfolio, and it is managed alongside Anglo American as its BEE partner and, more recently, with South32. This venture produced R13.6m of aftertax income, almost half its R29.1m total — which itself is up 80% from the six months to August 2017.

Dube says Vunani will remain focused on financial services and not become a mining company by default. "We would certainly consider offering a package of mining assets to potential buyers one day."

Vunani has worked hard at rebuilding the balance sheet, and total liabilities are down about 40% to R384m, Dube says. The biggest cut was in capital at Vunani Securities, which was down more than half to R131m. He says that it is a good time to look at further ventures.

Vunani is waiting for regulatory approval for what it hopes will be the big re-entry into the property business: what is now Texton Property Fund was originally part of the group. The property is, however, a controversial development at Maiden’s Cove, between Clifton and Camps Bay, in the Cape Town Atlantic suburbs. and it faces a well-funded lobby.

Pieter MacKenzie, who headed the old Vunani Properties and also worked for the highly regarded Attacq business, now spearheads the property cluster at Vunani again.

Vunani Fund Managers its assets to R25.5bn — R3.7bn was new money, the rest market movement. It is now the largest BEE manager in the unit trust market. The group also controls, with local management, Purpose Vunani in Zimbabwe and Alliance Capital in Malawi.

The profit from fund management looks modest at R2.2m, but Dube says Vunani Fund Managers has been building capacity to be seen as a full-service manager.

"We have a compelling blend of older and younger managers, with Tony Bell and Safs Narker in equities and Rowan Williams-Short and Ntobeko Stampu in fixed income."

Fairheads Beneficiary Services is for now a substantially larger contributor, providing R5.8m after tax. It manages umbrella trusts for orphans. Old Mutual, MMI and Liberty have all subcontracted their funds to Fairheads. Assets under administration increased from R6.2bn to R6.5bn over the six months. The year before it lost R2bn of business from Alexander Forbes, which brought its operation in-house.

"We hear they regret the decision, and we would have had a good shot at getting it back if (former Alexander Forbes CEO Andrew) Darfoor was still in office, but with Dawie de Villiers there I am not sure."

The advisory business, which is where the business began, is very dependent on deal flow, and made a loss in the comparable period, but in spite of the failure of Sagarmatha the unit made a R7.8m contribution in the six months to August 2018. In contrast, securities trading made a loss of R4.4bn. In part this is a reflection of the slowdown in the market, but Dube says the cost base must be reviewed.

He acknowledges that the company faces substantially increased competition from two new BEE stockbrokers, Mazi Macquarie, and Peregrine Legae Securities. Dube stands by the value of the Vunani brand in the stockbroking market against these newcomers.

Vunani has disposed of most of its listed holdings: at one time it resembled an AltX-tracking exchange traded fund more than an operating company. Dube says the one significant holding left is in Workforce, in the personnel business, but as it is illiquid this can’t be solved overnight.

Dube has made no secret of his ambitions to create a black Investec or black RMB. It is still a work in progress, but there are some encouraging signs. The asset manager is on the cusp of substantial profitability; Fairheads is the best in the umbrella trust sector. It has a reputable advisory business — why else would Ayo knock on its door?

Vunani rarely trades, and with a R364m market cap is still on a long journey to becoming a bulk player. At 220c it is not a screaming buy — at a small discount of about 10% to net asset value. But it just might be on the brink of better things.