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Mailbox: Monopoly capital – why are the three richest South Africans white?

Apr 26 2016 13:37
iStock_chess


I love hearing from young people. Students most of all. Because it is in this stage of our lives where attitudes are shaped, where our voyage soon shows us the more we learn, the sooner we discover that there is so much we do not know. My take is very different to those who claim a little bit of knowledge is dangerous.

For me, it’s the beginning of humility. A probing letter from UCT student Hugo Mkhize sparked this line of thought. My response is under his mailbox contribution. Hugo writes:

Hi Alec

I was very intrigued by the tone of the concluding paragraph of your Daily Insider newsletter this morning. Being the ever-curious and inquisitive, young UCT student that I am, I thought I would investigate whether the South African business men you listed were prime examples of “white monopoly capital” or not. My findings are summarised below:

Nicky Oppenheimer (70)


Photo: Bloomberg

• South African born business man and philanthropist

• Former chairperson of De Beers (a company started with the proceeds of sale of the ‘Star of South Africa’ diamond as well as the financing of South African diamond magnate Alfred Beit)

• Former Deputy chairperson of Anglo American (a company founded in 1917 in Johannesburg, South Africa)

• Net Worth: $6.8bn (as of November 2014)

• White

Natie Kirsh (84)

Natie_Kirsh_Bloomberg


• South African born business magnate

• Matriculated from Potchefstroom Boys High and the University of the Witwatersrand is his Alma Mater (both South African institutions)

• Lived and worked in South Africa for 54 years before emigrating to his native Swaziland in 1986 after a business deal unravelled between Kirsh Industries and Sanlam (one of South Africa’s leading financial services firms)

• Net Worth: $3.7bn

• White

Christo Wiese (74)

Christo_Wiese

• South African businessman

• Chairperson and 44% owner of Pepkor (South African based and founded investment and holding company)

• Executive Director of South African retail giant, Shoprite

• Owner of South African investment firm, Brait

• Net Worth: $5.8bn (as of January 2015)

• White

The second half of my analysis will be focused on why black South Africans were not given the same opportunities at the time as the men listed above. Perhaps, you can give me some pointers on where to start?

By not acknowledging the presence of “white monopoly capital” in South Africa you are in fact doing the exact same thing as the local politicians you mention in your newsletter (omitting facts to strengthen your own narrative). Yes, criticise our country’s leaders (Lord knows they deserve it!), but let’s try and stick to the facts while doing so.

Alec Hogg’s response:

Hugo, you are blessed with the most valuable of mankind’s gifts – an inquiring mind. Protect it as you would a bar of gold. Without questioning, knowledge cannot be accumulated.

The broad question you pose is a global one. Oxfam’s latest research shows us that 62 people own as much wealth as the world’s bottom 3.5bn. In 2010 that number was 388. Why this should be so, and why such inequality keeps growing is the key question for humanity today.

In a few instances it comes through winning the lottery of the womb (i.e. inheritance). But the more I learn about this stuff, the more I agree with Nassim Taleb and Malcolm Gladwell that mostly it starts with being in the right place at the right time.

So I have two suggestions to trigger your line of inquiry. First, if you haven’t yet read them, pick up Taleb’s Fooled by Randomness and Gladwell’s Outliers. Both make a compelling argument that in the wealth building game, it is more valuable to be lucky than skillful. Then read Adam Smith’s Wealth of Nations and Niall Ferguson’s Ascent of Money to get a better feel of how it all works.

As per the specifics, Oppenheimer and Rupert won the lottery of the womb. Their forebears happened to be in the right place at the right time – but so did many others. Their genius was to keep allocating capital efficiently so that it grew.

Wiese’s good fortune was being an Afrikaner at a time when his tribe was promoting its fellows. So he had a leg up. But so did millions of other Afrikaners the business world has never heard of.

Kirsh had the good fortune of being born Jewish, a culture which gave him the work ethic and ability to see opportunities others missed. Then again, there are hundreds of thousands of other South African Jews who never progressed beyond middle class.

Warren Buffett says he had the good fortune to be hard wired for capitalism. And blesses the fact that he was born in America where his talent could reach its full potential. He is worth studying for anyone seeking to expand their knowledge on wealth creation. There are two excellent books I’d recommend: Alice Schroder’s The Snowball and Roger Lowenstein’s Making of an American Capitalist.

In a similar vein, from a local perspective you’ll surely also enjoy Jannie Mouton's autobiography – And then they fired me. For Mouton, the luckiest day of his life was when the other partners at his stockbroking firm kicked him out.

For another fabulously wealthy SA entrepreneur Koos Bekker, his day to remember was when he met Hong Kong entrepreneur Pony Ma who needed capital for his young 30-person company TenCent.

And the most famous of all SA entrepreneurs, Elon Musk, came within a whisper of losing everything, As Ashley Vance’s excellent biography unpacks, had Musk’s fourth rocket failed like the first three, he would still be paying off his debts, and certainly not transforming the global car, space and solar energy sectors.

As a final point, few remember that the Oppenheimers nearly went bust many times. Most notably in the early 1980s when Harry Oppenheimer kept faith while most others would have panicked when De Beers’ global diamond cartel seemed to have been unravelling.

Kirsh did start again from scratch after being screwed over by Sanlam – and his fortune today was built in its entirety through his Jetro chain in the US. Wiese also had his challenges, struggling for years to get Shoprite out of the shadow of the mighty Pick n Pay.

So sure, they had luck. They were white at a time when the system favoured them. But there was a lot more that went with it – courage, faith and perseverance for starters. Just being white was never going to be enough to create wealth, in the same way as just being black in SA today.

* For more in-depth business news, visit biznews.com or simply sign up for the daily newsletter.


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tencent  |  biznews  |  warren buffett  |  christo wiese  |  equality
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