Bonang Mohale shares part of his investment journey

He liked what he saw in Purple Group, seeing the potential for a unicorn.

SIMON BROWN: I’m chatting now with Bonang Mohale. I need to disclaim up front. I hold Purple Group shares. That’s an important component. Bonang, good morning. I appreciate your early morning time.

A Sens announcement came out from Purple Group on Friday. You’d advanced them a loan back in, was it, September 2018, a R25 million loan converted into a shares of Purple Group. A great deal. Those shares are worth almost R190 million.

I want to go back to 2018, when you advanced that loan. You weren’t yet on the board. As I understood, you joined the board only in 2019. [What] had you heard around EasyEquities, Purple Group? What was your sense, because I’ve got to  be honest – I looked at it then and I wasn’t as convinced as obviously you were?

BONANG MOHALE: I was absolutely convinced, Simon. You’re absolutely correct. First of all, we always back the jockey. I’ve known Mark Barnes many years. He’s been a good friend of mine. He started Purple Group. We watched him because as a family – when I say family, I talk about myself, my lovely wife, Susan, my two daughters, Tshepiso and Maneo – we started our own family investment in 2002, all of it with after-tax money.

By that time, we had already invested in nine companies. We owned three of them 100%, not having started that way by the way – small stakes and then we increased over a period of time only when offered.

When Mark Barnes in his inimitable way then wrote an article that said this is how you can save the South African Post Office ultimately the National Treasury said, look, then go and fix it.

When he went, I knew that he would not give as much attention to his own creation, Purple Capital. At that time we looked at the family and said, “Let’s create a new entity called ‘Serialong Financial Investments’”. He’s looking for money. He’s already got a loan from Old Mutual and Sanlam. So we had coffee with him and said, “How much do you think you’ll need?” He needed slightly more. We said, “Let’s start you off with R25 million”. We signed a deal at that time that said, although it’s a loan, at any point in time we have the right to convert this into shares. At that time, the strike rate was just less than 23 cents.

We advanced the R25 million and he invited me to sit on the board. We appointed a new chairman, Happy Ntshingila. We looked at the management and said we must really go there and just be helpful. At that time they had about four subsidiaries and the absolute superstar was EasyEquities. I had just come back from leading Business Leadership South Africa after about 8.5 years as the group CEO and chairman of Shell Oil Products Africa, where I was looking after the then 33, now 55 African countries. So I decided to go and try to help this management team and not stand in their way.

They duly invited me to the board, and I must say it’s been a truly incredible ride. I thought I could leverage on the close personal, intimate relationship that I had with CEOs of 86 companies at that time, all of them listed on the Johannesburg Securities Exchange, Simon.

SIMON BROWN: EasyEquities has been an incredible story. The pandemic undoubtedly helped, but it’s been a really, really big story. You and your family now hold what, 11.46% – call it 11.5%. We’ve got another new shareholder there as well, as Mark Barnes exited some of his stake in the business, selling it down a bit. It’s sort of the next leg of the journey for EasyEquities and for Purple as we come through this pandemic and they entrenched themselves in this market.

BONANG MOHALE: Simon, you’re absolutely correct. So Mark wouldn’t have sold, but remember when you are sitting on people’s loans for such a long period of time, at some stage when you are approached by somebody who says, “I like what I’m seeing, I think this thing has legs. It has a potential to be another unicorn (these billion US-dollar net asset value entities). Here’s a pot of money”. Mark then looked at it. We chatted a little bit about it. And he said, it gives me an opportunity to bring down a part of the loan.

At that time the share was trading from our rights convertible loan of just under 23 cents. It was R1.38 cents. So he probably netted about R200 million at that time, and then was able to bring down the loan.

If you don’t owe a lot of people a lot of money, it allows you to think, to reflect, because, remember, creativity is thinking new things. Innovation is doing new things.

I agree with you Simon, the pandemic simply accelerated the business case because there are four business units there. The most popular is EasyEquities. And the business model simply says, if you want to buy an annual share – I’ll take a number, say it’s trading at a R1 000 – but you don’t have R1 000, I can take your R20 together with 100 other people. And then you have a small component of an Anglo American share. You look at it on in your app, and  every hour you can see how it is doing.

So for me it was very clear that if you’ve got big players, like if you signed MTN, then all of a sudden you’ve got access to almost 30 million South African customers. If you went to Capitec at that time, they had 10; they’re now exceeding 30 million customers.

Now, all of a sudden this thing could really be quite interesting. By the way, our stake, which is 14.5%, I genuinely believe has got lots of legs, because you can see the guys are not only thinking, they’re innovating. By that time it was only a South African company. Now it is in the old SACU region you know, Botswana, Lesotho, Namibia and Eswatini. Now we are taking this thing globally. So we are looking beyond the 60 million South Africans, we’re looking at bigger markets.

I must tell you that in the pipeline of these executives – we just had a board meeting last week – the plans that we saw on the table and how we are prepared to give our own sweat equity to make sure that this thing flies, so that if we get it right, maybe, just maybe, we don’t ever have to work again.

And, by the way, that’s why you invest, Simon, because you don’t bet the farm on one investment. Like I said, we are now invested in nine, but there are three that we now own a hundred percent. It’s a company that started as a marketing research company called Consulta. We owned a 16% stake, then 20%, then the University of Pretoria sold us their 40% stake. We moved it up to 60%. Now we own it 100%. It’s run by phenomenal, good-quality human being. His name is Babu Philani Innocent Dlamini.

A second one that we own a hundred percent is in medical devices; it’s called Torque Medical Supplies. Again, there are a number of subsidiaries there – there is Quatro, which is technology. There’s MyINR, and there is Isifuba [Medical], that sells cardiothoracic medical equipment, mostly to public hospitals.

The last one is truly, absolutely exciting. It’s called Digi-Litho. It’s a simple printing company, but if you dig deep, half of it is revenue we get from hiring out forklifts to CTM, to Italtile and to Top Store. As we speak, we are buying six more of these – I call them cars – at half a million each, each one of them with a lithium battery. It’s going to cost us R5 million. But we already have 84 forklifts, Simon. So you can see that there is value, there is utility, apart from printing.

One day when we don’t have money – we’ve got 84, we’ll have 90 by the end of this year – we’ll sell half of them. These things are not tradable. The managing director again is an incredible, good-quality warrior of a woman. Her name is Esme Tsiota. Her husband, Isaac, runs the forklifts division. She’s got a staff of about 15 people. While in Consulta we are talking, in the call centre alone, about 80 people; in Torque Medical Supplies there are 35 employees. All of a sudden you can look government in the eye and say, you know what, in a small little way , we are trying our bit to create some employment so that we do three things: one, we become a trusted advisor. Number two, we are a partner of choice [and three] we do everything in our power to make sure that this ANC-led government becomes a capable state.

SIMON BROWN: Yeah. And that’s creating employment. But I love your point: backing the jockey. I notice you say they’re a unicorn, a dollar unicorn that puts Purple another 10X higher. It’s not going to happen in a week, but it can happen in some time.

Bonang Mohale,  I appreciate the early morning time, sir.

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Simply inspirational. Love his conviction and confidence.

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