ALEC HOGG: Upper Echelon is brought to you by Deloitte. Jannie Mouton, the chairman and founder of the PSG Group is in our Upper Echelon this week and Jannie I know you and I share an admiration for Warren Buffett. It’s very interesting where he talks about “one should live where the fictional cost of life is lowest” and about a year ago when we had a similar conversation you were telling me that’s one of the reasons as well why you decided to go to Stellenbosch – you can think better.
JANNIE MOUTON: Yes, it’s a small town – almost like his growing up and spending his own life in Omaha. You have more time to think and less time sitting in traffic.
ALEC HOGG: It was interesting talking to Nick Binedell recently from Gibbs who said “the new business power centre of South Africa is Stellenbosch”. So I guess you’re bumping into some fellow mega magnets over there.
JANNIE MOUTON: That’s over exaggerated – there are a couple of friends – not a mafia – I’d like to put that record straight and it’s not so fantastically for South African business. We have more time to maybe see one another, socialise a bit and talk about the good things in life.
ALEC HOGG: How big is your head office?
JANNIE MOUTON: It’s about 20 people…
ALEC HOGG: And you’ve got a couple of sons in there as well…
JANNIE MOUTON: Yes, but keep in mind one of my sons is sitting in Constantia where the asset management operation is and the other one is with me in Stellenbosch. So it’s not all of the Mouton family sitting in Stellenbosch. Our head office is profitable – it’s not a burden on the company.
ALEC HOGG: How do you make money from your head office?
JANNIE MOUTON: We are paid fees to manage certain companies like Zeder, Paladin and companies like that – they pay us…
ALEC HOGG: Just to go back a little bit – your story is well known. Most people listening to or watching this will have read your book – or intended to read your book by now – fabulous book that is – that you started again at 50 after being kicked out by your fellow directors. If you look back there – not everybody gets a second chance. What were the key things you’ve done differently the second time around?
JANNIE MOUTON: You know you’ve had the experience of setting up a company – it was a successful company and then you’re asked to leave. Number one, it is a shock – it’s almost a disgrace – you don’t want to talk about it. You then realise after a while that only you, yourself would make a difference and you better get going. You’ve had experience, you know you’ve made mistakes and you learn out of mistakes. So for me it took time – during that period I did a lot of reading – reading business books – like I discovered Warren Buffett 15 years ago and that made my days. It’s difficult sitting at home – one day you’re the CEO of a company and the next day you’re sitting at home and you have to make the best of your life.
ALEC HOGG: But what have you done differently this time around?
JANNIE MOUTON: Maybe I am a bit aggressive because even my wife said at one stage, “Jannie the other partners, we were pinned in together can’t be wrong – you must have done something wrong as well”. And I analysed myself – running a company I may be too aggressive, maybe too driven, maybe too focused and don’t spend enough time to understand the human being and be nice and supportive – thinks like that, I’ve learned.
ALEC HOGG: Have you got better at it?
JANNIE MOUTON: I think so.
ALEC HOGG: How have you worked at that?
JANNIE MOUTON: My family still don’t think I’m better at it and the advantage is sitting in Stellenbosch with the different operations situated in different places like Capitec is there, PSG Konsult is there and they have the freedom to build on their own companies without me looking over their shoulders, driving them… it’s something I’ve learned.
ALEC HOGG: I suppose the other opportunity when you start again is to only work with people you like.
JANNIE MOUTON: That’s also true – if you get the right people and give them the right opportunity in life, they will never disappoint you. Yes – I’ve written in my book in cases where people have disappointed me – people that I believed in – that happened. So the biggest choice of investment is actually not the balance sheet, it’s the people behind it.
ALEC HOGG: You brought up the word balance – do you feel that you’ve been able to balance your life perhaps better, in your second career than your first?
JANNIE MOUTON: For sure – what you have – the environment is different than in Joburg. The pace is tremendous, the traffic – you don’t have enough time to think. In Stellenbosch I’m about five minutes from where I live to where my office is – it’s more relaxed. You can walk in and think about your company and the group of companies in the future whereas in Joburg – and I think each and every businessman must make a turn in Joburg, or overseas in cities like London to understand the real pressure of business life.
ALEC HOGG: We know that Warren Buffett spends his days with a clean diary. He starts reading newspapers in the morning and then gets on to the things that he likes doing – what does your diary look like and what does your day look like?
JANNIE MOUTON: Mine is more or less the same. I start off by reading the Afrikaans newspaper at home and then Business Day and Business Report at work and I even have time to do the Sudokus. But while I’m doing the Sudoku, I’m thinking about what opportunities there are in life or in business – it’s fantastic and I even think at night-time. You know, somebody once said you know you work during daytime in his company and at night he dreams about things to do. My life is more or less the same – I can never switch off totally from PSG.
ALEC HOGG: And from your business?
JANNIE MOUTON: No – I even like to discuss it with my wife, my children and my family. I live for PSG.
ALEC HOGG: What about when you’re making a decision on to invest in a company and even take a majority stake in a company, have you got key investment ratios that you punch in, or is it more a people story?
JANNIE MOUTON: You must get a feeling for the value and we often discuss this – a nice, good growing company – you can buy at a 20 PE but if the company is not growing and the management is not creative, you don’t necessarily buy a bargain at a four or five PE.
ALEC HOGG: Is that your ratio that you look at – the price to earnings ratio?
JANNIE MOUTON: You have to look at growth potential – is the company going to grow profits on a good solid way forward, and then you can place a value on it. Warren Buffett tends to take profits into the future and try to discount it back and then get his own price. You have to form something like that in your mind – what is the growth potential and then put a value on that. A balance sheet, PE ratio gives you guidelines for sure.
ALEC HOGG: If you have a look at some of the businesses that you’ve invested in, Capitec – the growth there has been astonishing. Curro the growth there is promised to be equally exciting. If you could maybe look at those two as options, with Capitec did it surprise you on the upside and Curro, are you maybe not being a bit optimistic?
JANNIE MOUTON: On Capitec there’s no doubt that Michiel le Roux, chairman and Riaan Stassen as CEO have done an unbelievable job and they are still doing that, and this company is still growing at a tremendous pace. We struggled – we had what we call PSG specialised lending where we had a business in payroll deduction and a business buying up all sorts of loan shark companies throughout South Africa. They were difficult years but we had a dream that there was a market. Capitec is an unbelievable success story. Curro – to say something about Curro – it won’t be that profitable for the next couple of years because we invest heavily in new schools and each and every school you build has a kind of J-curve. The first couple of years there just aren’t enough kids in school to make a profit, but we don’t care, because we’re building a group that one day, when the pace of buying new schools – then the profits will come through. Curro is an exciting group – education is deep in my heart and I believe we need to make a better South Africa.
ALEC HOGG: What keeps you “skipping” to work in the mornings?
JANNIE MOUTON: Our people like the Curros – there are numerous other opportunities, whether it’s in energy. The PSG Konsult group – if I listen to the radio and read in the papers, PSG Konsult is always prominent there – they have 216 offices now. But I’m also proud of companies like Kaap Agri, Pioneer – Pioneer went through a tough time with the Competition Commission saga – but it’s wonderful – its people. You think about what you can do to help those people to run their businesses better.
ALEC HOGG: And how do you decide on the people that you bring into the group or the people that you in fact that you invest in?
JANNIE MOUTON: It’s sometimes an operation with people in it and if you believe in them, they will grow with the right people – yes they make mistakes. I actually wrote about two examples where I under estimated – I didn’t do enough research on the people and that’s important – to learn something in life is not to focus only on the balance sheet, but to look at the people behind the company as well.
ALEC HOGG: Just to close off with, the one thing that has surprised me is that you haven’t taken the big secret of Warren Buffett’s and that is finding an insurance company so that you can use the float. That’s what he loves – he loves to have other people’s money that he can invest and make a good return on. Is that in your future?
JANNIE MOUTON: As you remember – our first acquisition – almost our first – Channel Life Insurance Company – and I had my hands in the float in 1997 and 1998 when the market was high and helped them to invest. Then the market came down and I almost burnt my fingers and I realised a lesson. First of all you must have a good insurance company before you can use the float, and we almost bought an insurance company to create a float. But that is a secret of his and we don’t have it at the moment and it’s not a priority to get an insurance company.
ALEC HOGG: Finally, professional managers say that you believe to be in a business for no more than five to seven years. Clearly that isn’t holding true in your case. Are you still excited to be like Warren Buffett in that respect – still to be running the group when you’re 81?
JANNIE MOUTON: It’s a wonderful question because he’s my mentor and he is 16 years older than I am, so I think I still have 16 years to go before thinking of retirement…