Magda Wierzycka, one of South Africa’s richest women, had her lowest moment standing in an airport parking lot, unemployed, looking at the long walk to the cheapest rental car. Things had dramatically changed since she was one of the top three most senior employees in the company she worked for. She had quit, angry at an ethical breach and felt like she had to start her career from scratch.
Little did she know, she was months away from a solid position and eventually, the start of her own company, which would rocket her to the multi-millionaire’s club. However, in that drab parking lot, knowing her husband was unemployed as well, knowing she had bills to pay, children to feed, and trying to start her own business, it all felt overwhelming.
“I felt like I was in a constant state of panic attack,” says Wierzycka, “It was such an incredibly stressful time.”
Today, she is the Chief Executive Officer of Sygnia Group, an asset management company. She went from that day in the parking lot to one of South Africa&#8217;s richest women in a few years. It&#8217;s a tale of countering adversity to rise to the top.
South Africa has had a slew of businessmen tumbling from grace in the past year, some from oversight and others from severe ethical impropriety. For many C-suite executives, a public downfall is difficult to correct, and few can crawl out from the rubble and continue their careers.
However, “You’d be astounded how many billionaires were bankrupt in their past,” points out James van der Westhuizen, a South Africa-based industrial psychologist and the managing member at KnowHouse. “If you can learn from your failure, that’s a good sign of future success.”
Some of the businessmen included in that list are the truly resilient, like Steve Jobs, CEO of Apple (once fired from the company he created).
Resilience is the difference between those who succumb to and those who bounce back.
“Some people would have taken a deep breath and planned the next step after landing themselves in a situation like mine, but I just threw myself into activities,” says Wierzycka.
“My philosophy is that you must never stop fishing. You only need to catch the occasional whale, but you have to keep fishing to do that.”
<a href="http://www.forbesafrica.com/focus/2018/02/21/lose-2-1-billion-one-day/" target="_blank" rel="noopener">READ MORE: How To Lose $2.1 Billion In One Day</a>
<h2>How to be resilient</h2>
How you handle failure says a lot about your internal resources: resilience. The New Yorker defines resilience as the answer to this question: when the worst hits, “Do you succumb or do you surmount?”
James van der Westhuizen, a South Africa-based industrial psychologist and the managing member at KnowHouse, says that he covers three factors in his executive coaching that apply to resilience. They are:
<ol>
<li>Mind body system: “Humans are an energy run system, and you need to replenish your internal resources by looking after your body,” says Van der Westhuizen, “I’m often astonished at the neglect I see in executives.” Look after your body and take time out to care for your mind too.</li>
<li>Social network: “Humans are social creatures,” says Van der Westhuizen. Make sure you have a social network you can draw on. A supportive home base and secure relationships make a huge impact at a time like this. “I couldn’t have done any of it without my husband,” says Wierzycka, “He was the voice of reason.”</li>
<li>Habits of thinking. This is a big one, and it can trip you up unnoticed. It’s easy to fall into negative thinking patterns that make you feel helpless. It’s important to keep perspective, avoid globalising one event to everything and to take one day at a time.</li>
</ol>

When the mighty fall

The global retail group Steinhoff is reeling under allegations of accounting fraud. Since the allegations surfaced last year the CEO of the multi-billion-dollar business, Markus Jooste, has <a href="https://www.iol.co.za/business-report/steinhoff-shares-nosedive-after-ceo-markus-jooste-resigns-12286137" target="_blank" rel="noopener">fallen on his sword</a> and the company’s stock has been <a href="https://www.sowetanlive.co.za/business/2017-12-07-steinhoff-share-price-continues-to-fall/" target="_blank" rel="noopener">hammered</a>, at one point losing about 90% in market value in a few days.
Observers are calling for harsh punishment, including jail, for the culprits.
<a href="http://www.forbesafrica.com/focus/2017/12/18/steinhoff-scandal-points-major-gaps-stopping-unethical-corporate-behaviour/" target="_blank" rel="noopener">READ MORE: Steinhoff scandal points to major gaps in stopping unethical behaviour</a>
Early reports suggest that Steinhoff was involved in massive <a href="https://www.timeslive.co.za/sunday-times/business/2017-12-14-steinhoff-accounting-woes-go-back-to-2016-as-scandal-grows/" target="_blank" rel="noopener">accounting fraud</a>, including the overstatement of the company’s financial position.
The company is listed on both the Johannesburg Stock Exchange in South Africa as well as the Frankfurt Stock Exchange in Germany. With a primary listing in Frankfurt and an <a href="http://www.steinhoffinternational.com/corporate-information.php" target="_blank" rel="noopener">Amsterdam</a> corporate address, Steinhoff follows the Dutch corporate governance code.
Consistent with this code, Steinhoff has a <a href="http://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1001&amp;context=fisch_2016" target="_blank" rel="noopener">two-tier board structure</a>. This <a href="http://www.steinhoffinternational.com/leadership.php" target="_blank" rel="noopener">is made up of</a> a management board (comprised of four top executives) and a supervisory board (comprised of 9 non-executive directors).
The point of the two-tier board structure is to ensure that the supervisory board is independent from the executives who sit on the management board. The management board accounts to the supervisory board, which accounts to the shareholders or to the company.
The two-tier board structure is favoured in western Europe. The US and UK prefer the <a href="http://www.steinhoffinternational.com/leadership.php" target="_blank" rel="noopener">one-tier</a> – or unitary board – structure, as does South Africa for historical reasons.
It appears that Steinhoff’s decision to opt for the two-tier board structure may have contributed to its undoing. Natural holes in the structure, the biggest one being the fact that the management board doesn’t always keep the supervisory board in the loop, combined with Steinhoff’s corporate culture which was anchored by a <a href="https://www.moneyweb.co.za/in-depth/investigations/we-have-always-been-wary-of-markus-jooste-36one-founder-cy-jacobs/" target="_blank" rel="noopener">dominant personality</a>, appear to have created accountability holes.
<h2>Two-tier versus one-tier structure</h2>
There are pros and cons to both systems.
One of the good things about the one-tier board system is that executive directors and non-executives directors sit together on a single board. Traditionally there would be two or three executive directors (the CEO, chief financial officer and the chief operating officer) sitting alongside a majority of non-executive directors.
This means that there’s a seamless flow of information between executives and non-executives. The executives can be asked questions with the entire board present. This closes any information asymmetry. In addition, it can also facilitate quicker decisions.
On the downside, the unitary board structure has been criticised for its propensity to compromise the independence of the non-executive directors. This dilutes their oversight role.
For its part the two-tier system seems to have more checks and balances built into it given that the management board is subject to oversight by the supervisory board, and the supervisory board has to answer to shareholders.
But the two-tier structure is often <a href="http://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1001&amp;context=fisch_2016" target="_blank" rel="noopener">criticised</a> for information asymmetry between the management board and the supervisory board. In other words management knows a great deal more about the business than the supervisory board. This can lead to operational challenges developing without the board noticing until it’s too late.
Steinhoff’s board structure followed the two-tier system. In 2016 its management board comprised three members, Jooste (CEO), <a href="http://www.huffingtonpost.co.za/2018/01/05/steinhoff-cfo-ben-la-grange-steps-down_a_23324706/" target="_blank" rel="noopener">Ben La Grange</a> (Chief Financial Officer) and <a href="https://www.fin24.com/Companies/Retail/steinhoff-shares-rally-as-beleaguered-retailer-names-acting-ceo-20171219" target="_blank" rel="noopener">Danie van der Merwe</a> (Chief Operating Officer and now acting CEO). As is normal under the two-tier system, none of the three members of the management board sat on the supervisory board.
Some analysis of the <a href="https://www.theguardian.com/business/2016/jun/22/volkswagen-handling-emissions-scandal-shambles-investors-agm-german-carmaker" target="_blank" rel="noopener">Volkswagen emissions scandal</a> apportioned blame to the two-tier system combined with a <a href="https://www.nytimes.com/2015/09/25/business/international/problems-at-volkswagen-start-in-the-boardroom.html" target="_blank" rel="noopener">corporate culture</a> that was anchored by dominant personalities.
A similar case can be made for the Steinhoff saga.
<a href="http://www.forbesafrica.com/billionaires/2017/12/08/south-african-billionaires-fortune-plunges-2-billion-day-amid-accounting-scandal/" target="_blank" rel="noopener">READ MORE: South African Billionaire&#8217;s Fortune Plunges More Than $2 Billion In A Day Amid Accounting Scandal</a>
<h2>Flaws in the Steinhoff structure</h2>
Did the two-tier structure give the CEO too much leeway to take decisions that in the end led to the near collapse of the company?
This may indeed have been the case. Take, for example, the fact that some believe the company <a href="https://www.iol.co.za/business-report/opinion/opinion-steinhoff-shock-the-warning-signs-were-all-there-12314186" target="_blank" rel="noopener">grew too quickly</a>.
The danger of companies expanding too rapidly was highlighted decades ago by <a href="https://books.google.co.za/books/about/Corporate_planning.html?id=FRMPAQAAMAAJ&amp;redir_esc=y" target="_blank" rel="noopener">author and corporate strategy guru </a> John Argenti who came up with <a href="https://accountingandplanning.files.wordpress.com/2014/12/qualitative-models-of-corporate-failure.pdf" target="_blank" rel="noopener">a model</a> that considered factors leading to corporate failure. Two of the higher scored factors were expanding too fast (referred to as overtrading) and high levels of loan borrowing.
Steinhoff seems to have suffered from both. And yet the supervisory board appears to have failed to raise the red flag when it comes to large transactions. An example of it failing to fulfil its oversight role was when it decided to not make public Steinhoff’s <a href="https://www.reuters.com/article/us-steinhoffintlaccounting-disclosure/steinhoff-didnt-tell-investors-about-nearly-1-billion-in-deals-idUSKBN1D81BZ" target="_blank" rel="noopener">$1 billion</a> transaction with a related company. Even if the supervisory board didn’t legally have to make this public knowledge, ethically it should have made the disclosure.
The functioning of the audit and risk committee didn’t help the situation either.
<h2>Audit and risk committee</h2>
Steinhoff had three standing committees of the supervisory board – audit and risk, human resources and remuneration and the nominations committee. The committee structure had two weaknesses.
The first was that too few of its non-executives actually served on the committees – only 5 of the 11 supervisory board members. And given that the then chairman Christo Wiese and Claas Daun only sat on one, it begs the question how only three members of the supervisory board could have been expected to carry the real responsibility of the standing committees.
The second flaw was that audit and risk were wrapped up in one committee. This is the norm under a two-tier governance structure.
South Africa’s corporate governance structures might have helped to address both these problems.
<a href="http://www.iodsa.co.za/?page=KingIV" target="_blank" rel="noopener">King IV </a> stipulates that the risk governance committee should be made up of a mixture of non-executives and executives (the majority being non-executives). And the governance guidelines warn against audit and risk being under one committee. Its advice is that a company should only combine them if it’s able to devote enough time to dealing with risk related issues.
For a company of Steinhoff’s complexity, it seems inconceivable that the audit and risk committee could have devoted the necessary time to undertake its responsibility.
<h2>Conclusion</h2>
The Steinhoff case highlights weaknesses in the governance structure the company had chosen to operate under. That said, the rules have worked perfectly well for thousands of other companies. The lesson therefore is be alert to the warning signs such as dominant directors who don’t heed the rules. They can pose a grave risk to any company. &#8211; Written by <a href="https://theconversation.com/profiles/owen-skae-315237" target="_blank" rel="noopener">Owen Skae</a>, Associate Professor and Director of Rhodes Business School, <a href="http://theconversation.com/institutions/rhodes-university-1843" target="_blank" rel="noopener">Rhodes University</a>
This article was originally published on <a href="http://theconversation.com" target="_blank" rel="noopener">The Conversation</a>.
<img loading="lazy" decoding="async" src="https://counter.theconversation.com/content/89704/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1" />

Did Steinhoff’s board structure contribute to the scandal?

What do you read from these allegations of corporate corruption?
The Steinhoff scandal is disturbing because it points to a serious gap in the checks and balances in the investment management space. A scandal of this magnitude should not have occurred if the systems with their multiple layers were working.
It’s still early days but it seems as if a multiple of highly paid professional layers failed investors. This includes auditors, asset managers and non executive directors who in their different roles should ensure that the company’s accounts are as close to the truth as possible.
Steinhoff share price <a href="https://www.timeslive.co.za/sunday-times/business/2017-12-08-no-way-back-for-steinhoff-as-share-price-plunge-nears-90/" target="_blank" rel="noopener">collapsed</a> by more than 90%, wiping off nearly €10 billion in shareholder value in about three days following the resignation of the company’s CEO, Markus Jooste, after news that German prosecutors were investigating the company for alleged massive <a href="https://www.fin24.com/Companies/Retail/german-prosecutors-still-probing-steinhoff-for-possible-accounts-fraud-20171207" target="_blank" rel="noopener">accounting fraud</a>. Steinhoff is listed on both the Johannesburg Stock Exchange and Frankfurt Stock Exchange.
Steinhoff shares were the darling of most fund and asset managers in South Africa and across the globe. We must ask questions why these entities, which draw enormous fees, <a href="https://www.fin24.com/Opinion/magda-wierzycka-asks-hard-questions-about-steinhoff-and-asset-managers-20171207" target="_blank" rel="noopener">failed to pick up</a> the alleged irregularities when it seems like they should have done so if they were doing their jobs properly.
How big is the damage caused by this scandal?
It’s still early days but some people are already tagging this scandal as the <a href="https://www.timeslive.co.za/sunday-times/business/2017-12-08-no-way-back-for-steinhoff-as-share-price-plunge-nears-90/" target="_blank" rel="noopener">biggest corporate failure</a> in the history of the Johannesburg Stock Exchange. With more than 40 retailing brands in over 30 countries, Steinhoff was positioned as one of the largest companies by market capitalisation on the exchange. Its market value of close to R300 billion as recorded earlier this year placed it in the <a href="https://businesstech.co.za/news/business/164635/the-biggest-companies-in-south-africa-by-market-cap/" target="_blank" rel="noopener">top 10</a>, flanked by other South African corporate giants like media giant Naspers, luxury products specialist Richemont, resources giant Anglo American, petrochemicals firm Sasol as well as two big banks Standard Bank and FirstRand.
If Steinhoff’s stock doesn’t recover the capital losses of share investors who bought at inflated prices will be massive.
Steinhoff started off as a South African-based company but built itself into a global retail business with significant interests in western Europe. As a result it attracted <a href="https://www.moneyweb.co.za/news/economy/collateral-damage-who-owns-steinhoff/" target="_blank" rel="noopener">prominent</a> investors. In South Africa, these include the Public Investment Corporation which invests on behalf of the Government Employees Pension Fund among other public entities. The Public Investment Corporation is reported to hold <a href="https://www.moneyweb.co.za/in-depth/investigations/pic-reacts-to-steinhoff-implosion/" target="_blank" rel="noopener">10%</a> of Steinhoff’s total shares which means its losses reached more than R10 billion after the share price collapsed.
It is therefore of the utmost importance and in the interest of all involved – particularly direct and indirect investors – that the Steinhoff matter be brought to a swift closure. Swift closure should be followed by legal action against and punishment of all those implicated.
<a href="http://www.forbesafrica.com/billionaires/2017/12/08/south-african-billionaires-fortune-plunges-2-billion-day-amid-accounting-scandal/" target="_blank" rel="noopener">READ MORE: South African Billionaire&#8217;s Fortune Plunges More Than $2 Billion In A Day Amid Accounting Scandal</a>
How wide spread is such behaviour?
Each time a major scandal surfaces, regulatory gaps are identified and new measures are put in place to plug the apparent holes. But the scandals keep coming.
South Africa has had its fair share of corporate scandals with the most recent being a list of companies linked to the Gupta family inspired<a href="https://www.fin24.com/Opinion/the-gupta-master-plan-meticulously-executed-state-capture-20170830" target="_blank" rel="noopener"> state capture</a>. Big names like <a href="https://www.biznews.com/sa-investing/2017/12/06/naspers-links-gupta-corruption/" target="_blank" rel="noopener">Naspers</a>, KPMG, McKinsey and SAP have been caught in the extensive web of corruption allegedly driven by the Guptas who have close ties to the country’s president.
Some <a href="https://www.facebook.com/search/top/?q=tim%20cohen%20steinhoff" target="_blank" rel="noopener">commentators</a> have linked the Steinhoff saga to the broader ethical challenges facing South Africa. The integrity of some people in key positions of authority in both the public and private sectors is being questioned. This includes the country’s President Jacob Zuma who stands accused of <a href="https://www.news24.com/SouthAfrica/News/zuma-breached-oath-of-office-de-vos-20160405" target="_blank" rel="noopener">violating</a> the oath of office.
<a href="http://www.forbesafrica.com/focus/2017/12/13/anger-corporate-slippery-slope/" target="_blank" rel="noopener">READ MORE: Anger At The Corporate Slippery Slope</a>
What must be done?
Despite the best efforts, it’s impossible to regulate for integrity and ethical behaviour. The one effective way that behaviour can be changed is through legal process and by means of tough punishment.
At this point in time we are still unsure of the degree of corporate rot in Steinhoff. Numerous <a href="https://mg.co.za/article/2017-12-07-steinhoff-the-largest-corporate-failure-on-the-jse" target="_blank" rel="noopener">allegations</a> have been made, but the world now waits for the company’s delayed audit report to see the full extent of possible corporate fraud. Steinhoff must act swiftly in informing shareholders and other stakeholders about the true financial health of the company.
The board of directors of Steinhoff is responsible for the financial health and the financial reporting of the company. The problems at the company resulting in the serious decline in the share price, raise the question whether the board members should continue to hold office. Under the watch of the current board a massive destruction in shareholder value took place.
No board replacing the current one can do worse, as there is simply hardly any shareholder value left to destroy. Will the current board do the honourable thing and step aside?
If fraud is proven, I want to see Steinhoff executives serve jail terms. They have caused immeasurable harm to many people. This is the only way in which unethical and fraudulent behaviour can be out-rooted and integrity restored.
From a proper investigation of the affairs of Steinhoff, possible regulatory gaps should also be identified and eradicated. Nevertheless, no structure of regulation and supervision can replace the single most important requirement for successful business conduct: Ethical behaviour. In South Africa we need ethical behaviour at all levels, namely the government, businesses and civil society.
<img loading="lazy" decoding="async" src="https://counter.theconversation.com/content/88905/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" />This article was originally published on <a href="http://theconversation.com" target="_blank" rel="noopener">The Conversation</a>.

Steinhoff scandal points to major gaps in stopping unethical corporate behaviour

The acquisitive plans of South African retail king Christo Wiese took a hit Wednesday when Steinhoff, the retail conglomerate he chairs, said its chief executive Markus Jooste had resigned amid accounting irregularities. It’s a major reversal of fortune for Wiese, 76, and Steinhoff, which has recently expanded its business across Europe and America.
Steinhoff shares have fallen more than 60% in a day, erasing $2.3 billion from Wiese’s fortune. He&#8217;s now worth an estimated $1.49 billion, according to <a href="https://www.forbes.com/profile/christoffel-wiese/?list=rtb" target="_blank" rel="noopener">Forbes Real Time Rankings</a>. That&#8217;s down more than $4 billion from March 2017, when he was worth $5.6 billion.
Going forward, Steinhoff has tapped PwC to investigate the accounting irregularities, and with Steinhoff CEO Markus Jooste out, Wiese will temporarily become Steinhoff’s executive chairman.
Since 2016, furniture and home good retailer Steinhoff has done more than half a dozen deals, including the acquisition of US-based Mattress Firm. Steinhoff is a part of Wiese’s discount retail empire, <a href="http://www.forbesafrica.com/cover-story/2016/05/01/africas-sam-walton/" target="_blank" rel="noopener">which the South African has been building since the 1970s, as a 2016 profile of Wiese in Forbes magazine details</a>.
Wiese first joined the ranks of the Forbes Billionaires in 2011, with a net worth of $1.6 billion. His fortune rose as high as $6.3 billion in March 2015. In December 2015, Wiese moved Steinhoff&#8217;s listing from the Johannesburg Stock Exchange to the Frankfurt Stock Exchange to concentrate more on the European market.
The retail king made headlines in 2009  after U.K. customs officials detained him at London City Airport with two suitcases filled with nearly $1 million in cash. <a href="http://www.forbesafrica.com/focus/2013/03/01/the-king-of-retail/" target="_blank" rel="noopener">They seized it, suspecting illicit origins</a>. The British and South African press picked up on the incident &#8211; apparently suspecting Wiese had been nabbed for money laundering &#8211; and were further emboldened by Wiese&#8217;s stubbornness in fighting for the funds&#8217; return and his insistence that the amount was &#8220;insignificant.&#8221; (The Daily Mail&#8217;s gleeful headline: &#8220;It&#8217;s Just Peanuts to Me.&#8221;) The government ended up returning the money to Wiese &#8211; interest attached. Wiese wouldn&#8217;t talk publicly about it.
&#8211; Written by <a href="https://www.forbes.com/sites/abrambrown/" target="_blank" rel="noopener" data-ga-track="contrib block byline">Abram Brown</a>, FORBES STAFF

Christo-Wiese_JC-6

South African Billionaire’s Fortune Plunges More Than $2 Billion In A Day Amid Accounting Scandal

When he talks, people listen; when he moves money, markets react and when he invests, many follow.  He is Christo Wiese, Africa’s third richest man after Aliko Dangote and Nicky Oppenheimer &amp; family, according to FORBES’ list of Africa’s 50 richest, and the creator of Africa’s largest retail store. He is ever busy as he adds to his $6.5 billion fortune, but his last investment raised a few eyebrows.
As we meet, Wiese is dressed in black pants and a black sweater; you may mistake him for an ordinary bloke on the street in Cape Town, South Africa. But, there is nothing ordinary about this man when it comes to business. His creation, Shoprite, earns revenue of $9.9 billion a year, at a time when retail is struggling. Steinhoff, the parent company of Wiese’s retail company PEP, brings in $11.8 billion. Combined, they net almost $2 billion in annual profits, operate more than 9,000 stores in 30 countries and employ over 200,000 people. He made his fortune from smart investments that earned him billions. So, why is he looking to venture into Africa’s glittering, but struggling, diamond industry?
<img loading="lazy" decoding="async" class="alignleft size-medium wp-image-5514" src="/wp-content/uploads/2017/05/Christo-Wiese_JC-6-300x200.jpg" alt="" width="300" height="200" />
The family businesses, Cream Magenta 140 Proprietary Ltd. and Metcap 14 Proprietary Ltd., bought close to 50 million shares (23.54% each) in diamond company Trans Hex. This adds up to a dominant stake of just over 47%.
This isn’t entirely new territory for the risk taker. Wiese was in diamond mining in the late 1990s through an investment in Ocean Diamond Mining Holdings (ODM). He sold ODM to Namibian-based diamond miner Namco.
“I used to be in the diamond industry 40 years ago and the opportunity arose to acquire a controlling stake in Trans Hex which is one of the junior diamond mining companies and one I think has potential,” says Wiese.
The cold fact is South Africa’s once thriving diamond industry is suffering atrophy. It has no more than 200 diamond beneficiators remaining from a historical peak of about 4,500 and a decline in investment, according to Mining Weekly.
“Rough-diamond prices are too high for manufacturers, who cannot profitably polish goods at such levels. Polished-diamond prices have declined, in turn, reducing demand for diamonds from South African mines, as well as throughout the world,” it says, quoting World Federation of Diamond Bourses president Ernie Blom.
Trans Hex has not been immune. Their 2016 results suffered heavily from a sharp decline in rough diamond prices.
“The diamond market was severely impacted by excess stocks in the polishing industry and a resultant decline in demand for rough diamond. Average prices received for rough thus decline by 23.5% year-on-year. As a result, the Lower Orange River operations, which are earning the end of their reserves, moved into loss overall,” says Bernard van Rooyen, Trans Hex Chairman in the company financials.
Piet Viljoen, Alternate Director at Trans Hex, says its share price has come under pressure but the business has tried to ride the storm.
“The problem creates value in a very lumpy way. It earns a lot of money one year and then makes big losses the next year… so its share price doesn’t seem to go anywhere ever, that’s why it creates the impression that the business is under pressure,” he says.
Viljoen says it helps to have shareholders like Wiese who have vision.
“The shareholder reference can act as a provider of capital when the business needs it, do acquisitions or to fund projects.”
Trans Hex Group incurred a disappointing loss of R100.8 million ($7.3 million) and Viljoen has called it “a difficult year” but Wiese is optimistic.
“It is going well, except the exchange rate is not in favor of diamond exports because the rand is stagnant. With the diamond industry, you are not running a shop where you always know what your sales are going to be,” says Wiese.
Wiese is known for taking risks and smart investments. More than 60% of his wealth is in Shoprite and Steinhoff, while another 30% or so comes from his shares of investment company, Brait. His stock in Tradehold, a real estate firm, accounts for much of the remaining 10%. He has made investments in the United Kingdom (UK) such as clothing retailer New Look and gym chain Virgin Active. He says there is no secret behind the success.
“In this company, we have always had a philosophy, in terms of which we run our group of companies. These are the five pillars as we call it; faith, positive thinking, enthusiasm, compassion and hard work. Hard work is probably important but you’ve got to be a positive person and able to put teams together and motivate them. I am not a person running the business, I play a different role. The good business leaders like Whitey Basson and Markus Jooste are people who can put teams together, motivate them and steer them in the right direction,” he says.
There have been several enormous setbacks like the currency upset in 1985 when the rand lost about 50% of its value in less than a year, Brexit, which badly affected the share price, and great disappointments in people. It is wealth that hasn’t come easy.
“Oh yes, plenty [of bad investments]. I can’t even remember the worst one but there are many adventurous investments that just didn’t work out. I am heavily invested in wine farming and that’s not a very big lucrative business but it gives other pleasures such as the beauty of it…”
“A man’s true wealth is the good he does in the world,” goes the proverb. According to Wiese, success is more than how much money you have, it is about whether you can look at yourself in the mirror and say maybe it’s very small but my contribution made life or the world a slightly better place. Following this mantra, he is helping the poor gain title deeds to their homes. He is a sponsor of the Free Market Foundation, which is working with First National Bank to give people land tenure, and gave more than 100 title deeds to residents of Ngwathe, a municipality in South Africa’s Free State province.
“The Free Market Foundation looked at South Africa and found that there are between seven and 11 million households where the occupants own the structure on the land by they do not own the land, so they launched an initiative cooperating with the local, provincial governments to give people title to their homes. My family decided to get involved in that to make financial contributions in order to help people to acquire the title deeds to their homes,” he says.
“It is an enormously important thing for people to have a sense of ownership. People that are used to owning things do not realize how much it adds to a person’s dignity if he can say ‘this is my home. It may be a modest little home, but it’s my home and I can leave it to my children and be assured they have a roof over their heads.’”
Wiese says positivity rules his life.
<img loading="lazy" decoding="async" class="alignleft size-medium wp-image-5516" src="/wp-content/uploads/2017/05/Christo-Wiese_JC-1-300x200.jpg" alt="" width="300" height="200" />
“If you are positive about life, you ignore the unfair criticism. A lot of the criticism is totally justified but you don’t focus on either the nice things people say to you or about you too much or equally you don’t concern yourself too much about the bad things people say…”
“I don’t remember anything bad people say. I always say to entrepreneurs, ‘if you start rising above the average, you become a target’. People say, ‘but that guy is not cleverer than I am, why does he make a success and I’m so clever and I don’t make the same financial successes?’ You have to know you will have people tear you down; it’s part of the game,” says Wiese.
We leave him preparing to jet off to the UK for meetings. Some may not understand his decision to dive back into diamonds, but Wiese seems to see money where others don’t.  Maybe the smart investor should take a look at the diamond business.

The Billionaire Diving Into The Depths Of The Diamond Business

Table mountain, the striking mesa above Cape Town, lords over another impressive African monument: the multistory Golden Acre shopping center. Lunchtime crowds pour into the glassy, brightly lit structure, and from within it is impossible not to notice the dominance of South Africa’s second-richest man, Christo Wiese. His bargain-bin clothier, PEP, pulls foot traffic to the basement. Above it, you’ll find his more upscale Ackermans chain. Around the corner is his OK Furniture and his grocery chain, Shoprite, which takes up two floors.
<img loading="lazy" decoding="async" class="alignleft size-medium wp-image-4835" src="/wp-content/uploads/2017/05/FO032116_236-300x213.jpg" alt="" width="300" height="213" />
&nbsp;
&nbsp;
By and large, they all carry the same message. PEP’s window ads, accented in canary yellow, proclaim it the home of the “Lowest Price in South Africa.” Brightly colored bunting in OK Furniture heralds a similar promise. Shoprite (among its many slogans: “Lower prices, that’s our promise”) will even play moneylender, fronting customers up to R7,500 (roughly $470).
“The business has basically been built on one slogan: Low prices you can trust. Just very, very low everyday prices,” says Wiese (whose name, fittingly, is pronounced VEE-sa, like the credit card). “I suppose we could be described as the Wal-Mart of Africa.” Underscoring the cost-conscious philosophy, the 74-year-old is telling me this at his company headquarters, in an industrial area that abuts a composter and Adult World, which sells what you think it does.
His offices, like his stores, are decidedly spare: drab beige enlivened only by some hotel- quality art (a portrait of an elephant herd hangs outside the door of the conference room he uses as an office). “People have very limited budgets,” continues Wiese, clad in a capitalist’s power uniform – blue suit, blue shirt – the very picture of the lily-white executive that still controls most of South African business. “They have to get extremely good value for their money.” His hunch – that value trumps everything – led him to create the largest retail business in Africa. Publicly traded Shoprite does revenue of $9.9 billion a year, while PEP’s parent company, Steinhoff, brings in $11.8 billion (some of it from selling cellphones and home furnishings). Combined, they net almost $2 billion in annual profits, operate more than 9,000 stores in 30 countries and employ over 200,000 people. No other African retailer comes close to rivaling their breadth and depth, and Wiese controls both.
Those stakes are largely what makes Wiese one of the planet’s richest people, with a $5.8 billion fortune. More than 60% of his wealth is in Shoprite and Steinhoff, while another 30% or so comes from his shares of Brait, an investment vehicle Wiese uses to buy other companies, many of them outside South Africa. His stock in Tradehold, a real estate firm, accounts for much of the remaining 10%.
But if Wiese is to continue his expansion he must move outside of his African comfort zone. The continent isn’t booming the way it once was. Economic growth across Africa has slid from close to 7% in 2007 to about 4% in 2014, the last year for which data are available. In coming years it isn’t likely to much surpass that figure. South Africa, still Wiese’s most important market, is emblematic of the larger trend – stuck at sub-2% growth for the foreseeable future. The slowdown gravely threatens Wiese’s ambitions. He can shut his eyes and picture his empire twice as big as it is today, but for it to grow that large, he must look beyond Africa.
And he’s already started. PEP is expanding rapidly in Europe, while Wiese is snapping up all sorts of companies through Brait, including majority stakes in British discount retailer (sound familiar?) New Look for $1.2 billion last June and Richard Branson’s fitness center chain, Virgin Active, for $1 billion a month later. Put broadly, Wiese is a little Sam Walton, in terms of his focus, and a little Warren Buffett, in terms of amalgamating a portfolio. As a matter of fact, he’s beaten Buffett handily lately. His holding company, Brait, has trounced Berkshire Hathaway in total returns over three years (160% versus 31%), five years (230% to 51%) and ten years (314% to 121%).
<div id="attachment_4832" style="width: 210px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-4832" class="size-medium wp-image-4832" src="/wp-content/uploads/2017/05/0000171388-200x300.jpg" alt="" width="200" height="300" />JOHANNESBURG, SOUTH AFRICA – APRIL 22: Billionaire businessman Dr. Christo Wiese on April 22, 2009 in Johannesburg, South Africa. (Photo by Gallo Images / Foto24 / Sharief Jaffer)</div>
“Christo has been a massive risk taker his whole life,” says Syd Vianello, a retail analyst in Johannesburg, who has observed Wiese over many decades. “Africa is not a place for sissies. You’ve got to have nerves of steel. In Africa they see him as a genius.”
The breathtaking views of Cape Town, where land and sea dramatically converge to produce vistas of green mountains towering above deep blue water, can be quickly forgotten on a nine-hour drive north to the dry, hot savanna city of Upington, an unsightly provincial town alongside the Orange River, close to the Kalahari Desert. Upington does possess one unique site: a statue of a donkey, a rare tribute to the quintessential beast of burden. It is not undeserved. Starting in the 1880s, farmers, employing donkeys to pump water, tamed this rough part of the country with an almost puritanical determination.
Wiese’s father was one of those men. He owned a sheep and cattle farm, as well as a car dealership in town. “People in Upington were hardworking, very neat, very orderly – disciplined,” says Wiese. “People who were not neat always stood out like a sore thumb.” For college, Wiese attended Stellenbosch University, one of South Africa’s better schools, situated in a sleepy area awash in wine and vineyards. He studied law and became head student of his residence hall and an active member of a progressive student organization.
After graduating in 1967, he decided he’d rather return home and join the small retail business owned by his cousin’s husband than become an attorney. The company had around ten discount stores near Upington, which were called PEP. With Wiese on board and helping guide expansion, sales went from 4 million rand in 1970 to 29 million rand (around $100 million today) four years later. Fast growth, but Wiese lost interest after a moment of self-discovery.
“I had worked out for myself that I’m not really” – he trails off, as if about to utter a dirty word – “a number-two man.” There was another concern, too. “I started thinking about getting married,” he says. “And the way I lived in those days, I was away from home 20 days a month. That’s no way to build a marriage. So I thought if I go and practice law, at least I’ll be home much more.”
While working as a barrister in criminal and commercial law in Cape Town, Wiese, restless still, made a futile run for parliament in 1977 on the opposition party ticket, partly inspired by his new father-in-law, a controversial member of parliament expelled from the ruling, pro-apartheid party for dissension. Wiese also grew interested in something that has always attracted the ambitious in South Africa – diamonds. He found a mine nearer his hometown, in Richtersveld. (“The area has a stark beauty, like a moon landscape. Very sparse vegetation, very little rainfall.”) He bought it for about $20 million in today’s currency and began mining and trading diamonds.
<div id="attachment_4830" style="width: 310px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-4830" class="size-medium wp-image-4830" src="/wp-content/uploads/2017/05/AV_00022953-300x199.jpg" alt="" width="300" height="199" />JOHANNESBURG, SOUTH AFRICA – JUNE 12: Billionare businessman Christo Wiese on June 12, 2012 in Johannesburg, South Africa. (Photo by Gallo Images / Financial Mail / Hetty Zantman)</div>
Five years after purchasing it, in 1981, he sold it, and looking for his next chapter, he turned to his cousin and PEP, which by then had 450 locations, including a grocery business, Shoprite, it had added a few years earlier. In taking a check (worth roughly $100 million in current terms) for his successful, middling business, the cousin was set for life. Wiese, no longer number two, pictured something much grander. “Maybe I was more ambitious,” he says, quietly, eyebrows arched.
What Wiese envisioned was retail at its rawest, and he understood how attractive it could be. In modest, unadorned storefronts, PEP sold only the simplest kinds of clothes (“underwear, schoolwear, very basic stuff”). The choice between a white shirt and a blue one was often the most complicated one in the store. Shoprite did the same with groceries. All that mattered to Wiese’s target market – poor whites and a black population kept systematically impoverished – was price.
In a perverse twist, apartheid ensured him a gigantic customer base of some 20 million nonwhites, who made up more than 70% of the population. They were incapable of climbing the ladder or earning more money – or shopping elsewhere. And the heavy economic sanctions against South Africa meant little in the way of foreign competition. It was a perfect market: massive and artificially protected.
“Wiese saw the opportunity faster than anybody else,” says retail analyst Vianello. “He targeted the bottom end of the market, and nobody could argue his business had any element of waste. He cut out all the extravagance and gave people what they wanted at the lowest possible price.” The concept proved popular enough for Wiese to begin expanding aggressively, sometimes opening as many as 100 new stores a year. While other retailers concentrated on stores in large markets, he eagerly plunged into rural and poorer areas. He’d rather his customers spend their money in his stores than spend it traveling to them.
Wiese was maniacal about costs, a business necessity in lowmargin retailing and perfectly fitting with his personality – a billionaire who keeps spare change neatly stashed in a tiny bottle inside his Lexus SUV. “Christo is stingy,” says James “Whitey” Basson, Wiese’s right-hand man at Shoprite since day one and an old buddy from Stellenbosch University. “He’ll give me the nicest bottle of champagne as a present, and I’ll open it up, and I’ll see he forgot to take out the message: It’s a bottle from Lord So-and-So. He’s a regifter.”
To guard against corporate expenses, PEP manufactured many of its clothes in 11 factories; one was situated next to the company’s modest offices in Parow Industria. Most important, from almost the start PEP relied on a central distribution system with warehouses to store goods, a total departure from how most South African retailers operated (with many deliveries from many suppliers to each shop). “That was a no-brainer,” Basson says. “Getting one truckload to a store is substantially cheaper than getting 30 trucks to wait outside the store and offload 30 different times.”
<img loading="lazy" decoding="async" class="alignleft size-medium wp-image-4833" src="/wp-content/uploads/2017/05/FO032116_237-300x211.jpg" alt="" width="300" height="211" />
In 1986 Wiese spun off Shoprite and PEP into separate public companies while maintaining control of both. Good timing. Four years later Nelson Mandela was freed after spending almost three decades in prison. Apartheid was ending. South African companies were no longer pariahs, and Wiese began to expand elsewhere in Africa. A year after Mandela ascended to the presidency in 1994, Shoprite opened its first store in central Africa, in Zambia, followed by Mozambique, Swaziland, Botswana, Zimbabwe and Uganda. PEP had a similar trajectory. Their stores’ simple model made them easily exportable.
“Wiese and Basson sat down and took a view that they could conquer Africa, and they went out and conquered Africa,” says Vianello. Shoprite’s size ($2 billion in 1996 sales with about $120 million in cash flow and little debt) allowed it to move more quickly than local rivals. “How long does it take to clear a container in Angola or Nigeria? What bribes do you have to pay to get supplies in? Who on earth would finance them to put up stores? They had to build their own stores themselves. No one else would.” (Wiese insists he has spent not one rand on bribery.)
Other growth came through acquisitions. By the 1990s he had already made six purchases to expand both Shoprite and PEP, pushing PEP’s operations as far as Britain and its sales to more than $2 billion. In 1997 he bought OK Bazaars (and its nearly 300 grocery and furniture stores) from South African Breweries for just one rand. The catch? OK Bazaars was losing around $40 million annually, which was just about how much Shoprite was booking in annual profits. It could be kept on life support for just so long.
“We bet the farm,” says Wiese. He reached for a familiar page from the playbook: “cutting frills, lowering overhead,” including renegotiating several onerous leases. As it turns out, OK Bazaars had good bones and had simply been mismanaged. “Christo is a fantastic corporate deal thinker,” says Basson. “He always makes me think: What would the alternative be if I didn’t make a deal? What happens if the opposition buys the company?”
Wiese didn’t really develop a profile outside of Africa until recently, and to his annoyance, his arrival was trumpeted not by a cunning deal but by something more ignoble. It came after U.K. customs officials detained him at London City Airport in 2009 with two suitcases filled with nearly $1 million in cash. They seized it, suspecting illicit origins. The British and South African press merrily picked up on the incident – apparently suspecting Wiese had been nabbed for money laundering – and were further emboldened by Wiese’s stubbornness in fighting for the funds’ return and his insistence that the amount was “insignificant.” (The Daily Mail’s gleeful headline: “It’s Just Peanuts To Me.”) The government ended up returning the money – interest attached – but the damage was done. He still won’t talk publicly about the incident, and until recently, it was pretty much the extent of his reputation in the West.
That’s now beginning to change, and much of his activity is still in Britain. When his holding company, Brait, first showed an interest in stretching beyond South Africa in 2012, it invested in British supermarket business Iceland Foods and added to its position in November 2015, when it paid about $275 million to increase its position from 19% to 57%. Two more deals came last year: the stakes purchased in discount retailer New Look and gym chain Virgin Active. A second Wiese company, Invicta, has put its capital into industrial companies: unsexy firms with predictable, recurring revenue streams, like Singapore-based Kian Ann Engineering, a distributor of heavy machinery parts. And a third Wiese vehicle, Tradehold, watched the value of its U.K. property portfolio increase by about 50% to roughly $120 million in February 2015 (the latest full-year results available), driven substantially by new investments in the British real estate market, where it owns residential, industrial and office space.
PEP has charged into eastern Europe, too. After its initial move into this part of the continent in 2005 (Poland mostly but also the Czech Republic and Slovakia), PEP has proven its model successful there. Its eastern European stores do about $1,800 per square meter, a 60% increase from 2012 and roughly double what a comparable competitor might do. The region is now 11% of PEP’s $2.9 billion in annual revenue (up from 5% in 2012).
As PEP broadens its store expansion into Britain it will likely run up against the most entrenched competition, including venerable discount retailer Primark. Considering this, Wiese blithely expresses a malapropism: “There’s the old American saying that only three things are certain: death, taxes and competition. You can’t shy away from competition. You’ve just got to go meet them.” And besides, Primark tries to be fashionable, while PEP proudly does not. “We don’t have fashion. You can’t come into our stores and expect a wide selection of colors and pattern,” says Steinhoff CEO Markus Jooste. “Our stuff is for people who have to have it, not want to have it. It offers value to the bottom-end customer and gives them some dignity in what they wear.”
<img loading="lazy" decoding="async" class="alignleft size-medium wp-image-4834" src="/wp-content/uploads/2017/05/FO032116_238-300x122.jpg" alt="" width="300" height="122" />
Last December expansion-minded Steinhoff began trading on the Frankfurt Stock Exchange in addition to its long-standing listing in Johannesburg. But not before Wiese got slapped with a reminder that his international ambitions wouldn’t proceed without a false step. A few days before its Frankfurt debut German tax authorities raided local Steinhoff offices as part of an investigation into its accounting. Steinhoff dismisses the investigation as baseless, but it certainly spooked the company’s investors. The stock dropped about 15% in a month – wiping away almost $600 million from Wiese’s personal fortune.
Having long parried advances from those interested in buying his companies – including a visit by Wal-Mart heir and then chairman Rob Walton several years ago – Wiese sees himself firmly in command of his empire for the foreseeable future. Ahead, there’s one obvious final frontier for Africa’s retail pioneer: America. “We’ve been hesitant to plunge into the retail industry there. What can we teach them?” he says. “But we’re looking at getting involved there – one or two opportunities.
“In a decade I’m hoping you’ll find the business has grown, hopefully at the same pace as the previous decade. That will require a lot of thinking, a lot of commitment and a lot of energy – and I’m hoping that you’ll find me right here still.”

Africa’s Sam Walton

From a confiscated briefcase at Heathrow Airport to being lambasted by the press over his business with the tax man, Christo Wiese has no airs about him. Only his gold Rolex watch gives you a glimpse of his wealth.
There is no doubt that Wiese is a formidable businessman, who has made a meaningful impact in the South African retail industry. As he sits in his boardroom—which is larger than his family’s first store—overlooking Industria, Cape Town, he’s either on the phone making arrangements, giving assurances or chatting to his broker. This is a far cry from his childhood in a small South African farming town, a place he calls an oasis.
Wiese’s father was a farmer and businessman in Upington in the Northern Cape, like many in his family before him, armed with basic informal schooling and his entrepreneurial spirit. Wiese is proud when he talks about how his parents never worked for anyone.
“I grew up in a household where that [entrepreneurship] was the way one approached life, which I found was a great benefit to me,” says Wiese.
<div id="attachment_1566" style="width: 310px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-1566" class="size-medium wp-image-1566" src="/wp-content/uploads/2013/03/Lanzerac-Main-Entrance-300x200.jpg" alt="" width="300" height="200" />Lanzerac Wine Estate</div>
Wiese shows much affection towards his late mother, referring to her as a woman of great wisdom with a lot of drive, who had a strong influence in his life. She was a housewife who eventually owned her own business too.
Unlike his father, Wiese spent his last two years of high school at the prestigious Paarl Boys High school and moved to Cape Town to study further at UCT. After a year, he dropped out and moved back to Upington to join his father in business.
At 21, Wiese left Upington to study law at the University of Stellenbosch, whose alumni include some of South Africa’s wealthiest: Johann Rupert, Koos Bekker, GT Ferreira and Jannie Mouton. Wiese’s parents co-founded Pep Stores in 1965 and were its second largest shareholders. He worked for the company during his vacations, driving around the country with the major shareholder looking for locations to open new shops.
Wiese graduated in 1967 but returned to the family business instead of practicing law. There, Wiese dealt with administrative duties such as keeping minutes and updating share certificates. He got stuck in it and did what needed to be done.
In 1973, law came calling and Wiese practiced at the Cape Bar until 1979. During this time he bought a stake in a diamond mining company, the largest in South Africa not belonging to De Beers.
A businessman at heart, Wiese bought the controlling stake in Pep Stores from the founder in 1981, at the age of 36, and renamed it Pepkor Limited.
The decision to expand Pepkor’s footprint to Europe in the early ‘90s came about as Wiese realized that international brands would be coming to South Africa to compete with them. Once again, proving to be a savvy businessman, Wiese made the choice to take the competition to the rest of the world, with what he deemed a good formula that could be transferred to developed economies.
“We realized that as South Africa was opening up to the world, the world was opening up to South Africa,” says Wiese.
Pepkor’s business model is simple: high volume, low margin. If you look at the group’s history all the businesses follow this model except Stuttafords. The premium department store caters to the high-end customer and was a default acquisition when Pepkor bought Greatermans Department Stores in 1991. This was not the business the group wanted; their target was the Checkers supermarket chain, Stuttafords was sold a few years later.
Wiese’s Shoprite became the first of the group’s companies to expand into Zambia. The old OK Bazaar chain was bought from the government after being nationalized and run into the ground by the Kaunda government. The chain was rejuvenated and Pep opened in Zambia in 1994.
In 1999, Pepkor delisted from the Johannesburg Stock Exchange, at $331.4 million, after being listed for 27 years as Pep Stores. Pepkor had been approached by Brait, a private equity company, which advised them to delist. Brait proposed that Pepkor would do better at that stage as an unlisted entity. Following this, management acquired a substantial stake in the company. Brait owns a 37% stake in Pepkor. Wiese says the group, or parts of it, could be listed in the future.
Pepkor’s success has led it to have 
John Craig and Shoe City in its stable.
As cut-throat as business can be at times, those that are successful have spent years building and maintaining good relationships. Wiese and South African investment millionaire Jannie Mouton go a long way back. The two sit on the board of KWV Limited and Wiese used to sit on the board of Mouton’s PSG Holdings. Mouton has nothing but admiration for Wiese.
“I think what’s important is that he understands risk. He’s not scared to take risks. He believes in himself and he will back it, he’s not scared to raise money for a good business proposition,” says Mouton.
Wiese’s investment strategy is three pronged: get the best possible returns; invest in ethical businesses and remember that investing is a long-term game. This is the philosophy of the chairman of Pepkor, Shoprite, Tradehold and non-executive chairman of Invicta Holdings and Brait SA.
Tradehold is an investment holding company listed on the main board of the JSE, its main interests lie particularly in property in the United Kingdom, which is hoping to expand. Wiese owns around 80% of the company, with a market capitalization of around $137.5 million.
Invicta is an investment holding and management company with a market capitalization of around $770.6 million. The company controls and manages assets of $934 937 and finalized an acquisition in Singapore, its first outside Africa. Wiese owns around 37% of the company.
Wiese feels that the driving force of any entrepreneur should be to build businesses and help people develop. This, he says, is the true measure of success.
“The objective for people like myself is not to see how much money you can make because there’ll always be somebody richer than you. So what the heck?” says Wiese.
“I often say to people that I know a lot of people who’ve made a lot of money in different businesses, in different formats, with different styles but the one golden thread is that to make money takes decades.”
Pepkor is testament to this in its 57 years; Wiese has been part of 47 of them. As the man behind this growth, Wiese points out that it was a step-by-step process that had its ups and downs. His worst knock happened in 1985 when the rand collapsed. The company bled money, when the rand lost 50% of its value in a few months because of its significant dollar exposures. The balance sheet was under strain and the company had to be restructured. Shoprite was listed separately and some of the non-core assets were sold off. In one year, the company went from interest bearing debt of R140 million to having R110 million in the bank, at the time.
Getting out of a corner is something, Wiese says, only experience can teach you.
As a man who has done business across the continent for decades, Wiese calls himself a committed and optimistic African. He feels that Africa is shedding its old image; that a new Africa is emerging. He marvels at how people can still look at the continent with, what he calls, “old eyes”. He says that whenever something negative happens in Africa the “afro-pessimists”, as he calls them, turn it into a catastrophe but if the same were to happen anywhere else, it would purely be a setback. He considers the events at Marikana, where Lonmin mine strikes turned violent, a prime example.
Although Wiese is best-known for his business interests in retail, he has also tested other waters. Wiese was not looking to get into the hospitality industry when he bought the Lanzerac Wine Estate in 1991, on the outskirts of Stellenbosch. With a five star hotel on the premises, Wiese bought it as a new home for his family but as much as they loved the estate they loved their Clifton beach house even more.
Wiese chose not to walk away from Stellenbosch when his family did, simply because the place gave him too much pleasure. The wine estate was run down and the vineyards had been neglected for 25 years. But he saw something in it. Wiese spent a lot of money refurbishing the hotel, replanting the vineyards, building the cellars and developing the property. The magnificent 300-year-old estate was sold in 2012. The billionaire now owns Lourensford Wine Estate in Stellenbosch, bought in 1998.
On the rare occasions when Wiese isn’t too busy buying companies and making deals worth millions, he enjoys hunting, clay pigeon shooting, playing with his dog, catching up with old friends and spending the last three weeks of the year at his beach house.
None of this compares to his private game reserve in the Kalahari. Wiese always dreamt of owning a farm close to where he grew up but never spends more than two or three days at a time there. It’s his way of giving back through conservation, while running it as a business to keep it sustainable.
“If it pays and washes its own face and gives a little of a return on the capital employed, then it is sustainable,” says Wiese.
Wiese is no stranger to making headlines. In 2009, Wiese was stopped by customs official at London’s Heathrow Airport where he was carrying a briefcase filled with just over a million dollars. The money was confiscated and the matter went to court. Wiese insists that he acted on the advice that it would not be an issue. Wiese’s advocate stated that the money was less than what his client made in a week. The courts ruled in his favor and the money returned.
“It’s my money. I didn’t steal it from anybody. I didn’t defraud anybody. It’s my money and it’s certainly my right to do with it as I please,” he declares.
The media criticized the earnings of Shoprite CEO Whitey Basson, who topped the list of top earning executives in 2010, which was released by the Business Times. Basson earned more than $82.7 million that year but dropped in rankings to 20th the following year. He did however earn the largest bonus of $4,398,470 in 2011. Wiese counters that Basson is underpaid for the work he does and all he has produced for Shoprite’s stakeholders. Wiese says it’s too big a job for him to ever be tempted to do it himself.
Shoprite was bought in 1979 for R1 million, with fewer than 500 employees and eight stores. Basson was put in charge and the company is now Africa’s largest food retailer with a reported turnover of more than $9.25 billion for the year ended June 2012. Shoprite has a market capitalization of more than $23.23 billion and 2,033 stores across Africa, including the group’s subsidiaries. Wiese is the largest shareholder of Shoprite.
“I’m not an entrepreneur… You could best describe me as an entrepreneurial financer or investor,” he says.
But he understands entrepreneurs, which is exactly why he thinks so highly of Basson. He has brought others into businesses who are the opposite of Basson. These individuals, however, either didn’t grow the business or ran it down, despite their impressive credentials and promises.
In return Basson thinks highly of his boss.
“Christo Wiese is probably the most respected businessman in South Africa. He has the ability to dissect problems and opportunities without emotions or personal complexities. As non-executive chairman of Shoprite and a close personal friend we not only respect his judgments but also seek his advice,” says Basson.
Another painful media experience for Wiese was about his tax payments. He was reported as owing the South African Revenue Services, SARS, $274.905 million in unpaid taxes. While it’s unlawful to disclose a person’s tax affairs, he says that he doesn’t settle his legal matters in the press and that SARS has not dragged him to court regarding this.
“Personally I don’t have, as an individual, any taxable income because my income comes from my companies and that income comes from dividends, which are not taxable. If I owe you money, sue me,” challenges Wiese.
Wiese’s company Tradehold won a court case against the commissioner of SARS regarding additional assessment of $48,533,200 on the company’s capital gains in 2003.
This newsworthy 71-year-old billionaire is not looking to retire anytime soon. He wouldn’t know what do with himself if he did. He is, however, grooming his eldest son, Jacob (30), to take over the business. Wiese also hopes that both his daughters, one a non-practising lawyer, like her father, and the other a recent graduate from the London School of Economics, will join the family business someday.
“I asked Rob Walton, of the Walton family, whether their children are in the business and he said: ‘No’ and I said: ‘Well, what do you teach your children then?’ and he said: ‘We teach them to be responsible owners.’ And maybe that’s a good thing,” says Wiese.
The next 10 years for the Pepkor Group are said to be very much like the last 10: a continued high growth path focused on plugging into technology.

Tag: Christo Wiese