09 Mar 2016 The billionaire African behind the continent’s greatest retail empire
TABLE MOUNTAIN, the striking mesa above Cape Town, lords over another impressive African monument: the multi story Golden Acre shopping centre. 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.
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 coloured 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 slow d own 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.
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 centre 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%).
“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.”
Back to the beginning
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 a long side 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 R4-million in 1970 to R29-million (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.
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.
Raw retail
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, school wear, 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 non-whites, 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 low-margin 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 and I’ll see he forgot to take out the message: It’s a bottle from Lord So-and-So. He’s a regifter.”……