Fred Robertson on how to make millions and lot lose the plot when hard times knock

Just to start off with just a little bit about your origins in Cape Town your family and your background?

 

I’m Chairman of Brimstone Investment Corporation which is worth R1.6 billion and I’m also chairman of a subsidiary of our CRS Corporation, which is 4.6 billion rand. And then, I’m deputy chairman of Remgro Investment Corporation. As you know, Remgro is a very old company, maybe 70 years old or something. And one of the top companies in South Africa or in Africa as it would be, my chairman there is very well known, Johann Rupert.The business was started by his father and I’m proudly a deputy chairman there, as I said, but also extremely proud to be chairman of Brimstone Investment Corporation, which we started in 1995, by just getting our community of friends and family and people in our community, to invest alongside a dream that we had.

I don’t know where they had the confidence to give their money to myself and my partner. Fortunately, he was more convincing. He was a chartered accountant, I was a teacher, who became an insurance broker. So, we raised R 3.5 million from our community. We allow them to pay off their investment over 6 months and those were our first investors. We used the R3.5 million and then got a loan from a bank for about another R4 million and made our first investment into Oceana fishing group.

 

You mentioned one of your investors that Oceana and Sea Harvest also heavily invested there, but a lot of people will say, Okay, you got millions. But, just tell us how difficult it was to raise the R15 000 on the way?

 

It was extremely difficult we have to convince clients of mine who were teachers, you know, and I had to convince them to invest to put money aside on a monthly basis. And put some money with us. I had sold them insurance policies so they were happy with that. And they thought this was a new way of doing things. Because what we sold to them was a dream and said to them that we have in 1994. We had political freedom, political emancipation and a new democracy, but that would mean nothing if there wasn’t economic participation. The African National Congress itself, said at that stage, and there calling was a better life for all. And now, to a better life for all you can’t just leave it to government, you have to have people like ourselves, in business in NGOs, in schools, teachers, lawyers, doctors, you know, nurses, everybody had to really put their shoulders to the wheel; ordinary workers as well. In our case, we thought there is an opportunity that with, political, emancipation comes the economic emancipation and opportunities. And that’s how we started out.

 

I remember one story you were telling me this years ago you went to a petrol station and you said to the guy who owned it Makkie Isaac who is still a friend of yours: ‘ Excuse me, we’re going to open up an investment company. It must be quite odd to do that because it’s okay now you have a big company, but then when you would just two individuals, how difficult was it?

 

Yes, look it was our number seventh investor and myself was number one and number two. And I must tell you we have to take out a loan to put our first money down because I also believe that I couldn’t be taking anybody else’s money if I didn’t have my own money at risk and it was a very, very important principle I thought. We then went along and said to our friends and associates that we’ve got our money in, they should invest too and Makkie, he is a petrol service owner. That is what he tells us, but he’s got a huge portfolio of property, and investment on the on the stock exchange as well. And he’s just always been investing over a very, very long term and then when we came along he says okay, how much I have to invest. And he gave us more money than he was supposed to give us for the investment. But we said no but we need to give you this money back. He said, please take it you need this money for petrol so just come and put the money back in my tank here and he got his money back almost 30 times or something like that, because after the first few years of being listed. We gave back while share price was R1.25.We gave back R1.50 to our shareholders. Which means they had made immediate return. 

 

And strangely in those early days I mean, the mid 90s were a different time you got a call from the then head of state, President Nelson Mandela. Just tell us what happened there?

 

Yes. We had just started our company and we were marketing that we needed investors and things like that and he (Mandela) called and I just thought What does this mean now? And he said we had to come and see him and he wanted to know what, what are we doing, what are we doing in the Cape Flats with this company. And then I must tell you, I mean, just to be in his presence, gives you the shivers, even if you’re an adult, or an older man, as well, but its good shivers because he was just such a big image. And we say that we were getting investors together and he wanted to know why wasn’t he invited and my thought you know, very, very well what are we going to do now? He says why wasn’t he invited but I said no we all have paid our own money to be in this company and everybody must pay for their investment. He says what do you mean why can’t I pay? He took his cheque book out because at that time it was still a cheque book; took it out of his draw and wrote us a cheque for R150 000.

 

Which was a lot of money then? 

 

It was a lot of money then It was just an amazing, amazing man and I’m so happy to have him as an investor. Responsibilities, weigh heavily on one’s shoulders, you know, to take investors’ money, ordinary peoples’ money, and then look after it and do good investments with it.

 

Once you’ve got your money together you went on an acquisition journey. Just tell us, how did you pick them? I know you have invested in Oceana and Sea Harvest how did you pick out the companies that you’ were going to go for?

 

At that time in South Africa. It was an amazing time; the democracy dividend was there for everybody to have. It was a land of opportunity, and we were like kids in a candy store really because the opportunities were all over so and we had started at the right time. 

 

So in terms of when looking at those investments  how do you approach companies, especially in Africa, how you approach companies, and how do you look to transact, where you are going for companies?

 

Well those years we used to approach companies ourselves where there was also a network. But nowadays, its more the banks, the transaction advisors bring you deals and I think the corporate advisors within the banks and all the corporate advisors of companies that were looking for investors, and at that stage, also the whole issue of broad based, black economic empowerment was they started bringing deals to us. 

 

Now you looked at a lot of companies those days and we’ll talk a little bit more about some of the highs and lows of Brimstone Investments as we move on, but just to ask you now, what you did back in the mid-90s was altruistic you wanted to raise people up and give them freedom that they were enjoying politically at the time. How do you feel 26 years later how much have you done or was it just a drop in the ocean?

 

Chris, I certainly think it’s a drop in the ocean I wish many more people could do it many more people could invest could create and sustain jobs, more entrepreneurs are created I think we need that we need job creators and we need to do it in a proper way to create an investment company; well, the thing that sustained us over the period was our ethical base and we’ve very early said we’re not going to do business like was done in the old South Africa. 

It must be an inclusive economy and by meaning inclusive it means all people we also then coined the phrase in Brimstone saying we’ve going to be profitable, empowering and have a powerful social impact. 

 

In terms of your ethical investing  I mean I know you’ve told me before that you don’t invest in gambling, you don’t invest in alcohol because of your, beliefs of the shareholders. Also, you always tried to be as clean and ethical as you possibly can how did you feel during this COVID 19 pandemic, where you saw a loss of contracts flying around for masks, and you had the machines, you had the where with all you got absolutely zero. Does it frustrate you sometimes?

 

That I suppose was the final straw to me that broke the camel’s back. We were owners of the House of Monatic, we had staff compliment of 250 or more people at some stage I think we had 700 people and you know, the textile business and building manufacturing business is a declining business, but we kept it going a large extent it was a social investment for us. One Sunday morning, I got a call from one of the chairmen of one of the banks. He says look is your factory operating. I said it’s not Operating because of COVID he said well can you manufacture masks. I said certainly we can manufacture masks and he says, we’ll give you a few million masks to manufacture and you will so we opened the factory and 200 odd people waited and waited and waited. And it’s not that Chairman’s fault, because, as he gave the job down and even the chief operating officer of the bank rang a week after saying are you guys are ready to take this on as they gave it down into the system. It (the job) just went everywhere else… that was really disappointing and as much as there is a complaint of government people hijacking some orders it also happened in the commercial environment in a significant way.

 

Would you compare those heady days you know when Mandela was calling you up to invest in your business to now? I mean, bearing in mind how would you compare the economy now to what he hoped for and what you hoped for back then?

 

It’s in quite a bad shape I think that our previous president, really didn’t know what was going on around him and or he knew what was around him and supported it but that was, that was a very bad time and you know, people lost a lot of their will and confidence in this government and today, President Ramaphosa was at the Zondo Commission (A South African commission of inquiry into corruption) The way he answered and the way he did things; I thought where was this man for ten years?  He should have been the president rather than Zuma.  But you know there’s also a lot of pressure on the government even when they are successful. The expectations are that there has to be more because particularly the youth want things quicker, faster, bigger and I think that one can’t blame them because they grew up in a different era they grew up in an era of electricity in each and every home, cell phones, internet, Everything is immediate and one wouldn’t blame them but actually our economy and our government should have kept up with.

 

Before we move on to talk a bit about the banks as well and COVID-19 Someone here says that if you had a political position presumably as big as Nelson Mandela, what changes would you make for the benefit of the South African economy?

 

Well, I think one would have been more aggressive in privatizing Some of the parastatals, we got something, I believe something like 700 parastatals. You know you only hear of Eskom and Transnet and SAA, but there is a number of other better parastatals that are there and I would have started with the smaller ones and in that way create entrepreneurs and also spread the wealth of the of the country around that takes the burden off the state.

John in Uganda, who’s listening in here and he’s saying, what about this idea of the African continental free trade area, is it possible to have trade without borders in Africa and what could do for businesses, if it ever was achieved?

 

I think it’s, phenomenal for businesses I do think that we need a strong policing environment because the illicit trade could become a highway for illicit trade and from both from, the South African ports into Africa and vice versa. So, that has to be watched very carefully, but it would just be wonderful if the trade zone would have a few 100 million people in it and, and certainly the marketplace could be as big as the US with the number of people. As we create more industry and as more people become better wage earners better entrepreneurs and the standard of living should improve significantly.

 

Another question here from somebody online is saying how do you think, Africa’s position in the global market has changed compared to where you started out in an investment 25 years ago?

 

I think there is a greater awareness of the potential of Africa. I think that the view that Africa was a basket case; that’s what they thought 20 years, ago to 35 years ago, I think that’s gone I think that people are seeing a lot more opportunity and that’s why there’s a rush a new scramble for Africa going on, whether it’s China or the US, Europe. In Europe its different countries like France, can you just imagine the gas finding along the Mozambican coastline it’s absolutely phenomenal. That could have powered so much of Africa.

 

Isn’t that a case study really in some ways is this huge resources this huge potential but some of the problems that Mozambique is facing like insurgency, lack of infrastructure, lack of capital, are some of the things  that plague some of these wonderful projects that do exists in Africa?

 

You know Chris, If the wealth of this country is shared equally the people will look after it the people will protect the country its where we have corruption that creeps in and this corruption isn’t just because of the politicians. You have a corruptor and a corruptee; one always looked at is a black person, an African person; he must be corruptible and where does this view come from, I mean its Europe, America, India. I mean in South Africa you have seen an Indian family come in, and almost destroyed our democracy in the way they corrupted our government really destroyed young people’s lives very good young people who were very well educated and things like that, guys and was just a pity and a crying shame that this was allowed to happen.

 

Some of the listeners may not know exactly what we’re talking about here we’re talking about the Gupta family who have been investigated for corruption and contracts etc. Since they left the country, they have refused to come back and answer these questions, I mean how do you feel about that in some ways, as you say young well-educated people in government were selling their country out for a few million Rand and what do you feel about that?

 

Extremely disappointed Because I knew some of them one of them, at least, had phenomenal potential, phenomenal potential could have been a global player in his own right and state institutions or UN or IMF. These poor people were just corrupted and now families are destroyed. So corruption is such a bad thing that’s why I firmly believe even in the smallest company, one must have been sure that you have ethical bases. There are things that you won’t do in your company.

 

We’re talking to entrepreneurs here out there, what was your advice, I mean all entrepreneurs are faced with all manner of things, requests for bribes, investing in things maybe they don’t believe in these desperate times and sadly a lot of people are more likely to be tempted in assumption, what’s your what’s your advice as a veteran in the investing game?

 

I tell you, if an entrepreneur has a dream and belief in himself and pride then he will go a lot further with that than just taking a short route, taking a quick bribe here or there. I mean, an entrepreneur must believe and have a big dream I believe he must seem self-successful in his own mind, you know you have to be brave, work hard and must go the extra mile. The extra mile has no distance and you know your business when you started it, it’s like a baby, you’ve got to care for it. It’s so wonderful to be able to see the pride that you will have your business pride that you will have in yourself, but also the pride of your mother or father looking at you and seeing how successful you are. Your children looking up to you that’s more than any money can buy and can you imagine the disappointment that they have when they read the newspaper that you have been corrupt .Go the extra mile work hard of stay clear of corrupt people don’t corrupt your government, don’t take shortcuts ,don’t corrupt  whether its minor or officials in government because it starts there and  minor official becomes a bigger official over time and also remember that, you know, a success is never  overnight, even overnight successes never overnight. Go the extra mile and Invest in yourself and do the right things. There is no right way of doing the wrong thing. 

 

I wish sometimes a lot more people will have that ethical base in their businesses but let’s talk about something else that’s big with entrepreneurs, resilience, and let’s talk about a couple of the toughest times that you went through I’ll go back first to the days, as you called it of whiskey and cigars in the late 90s, were you listed and I Remember you live linked up with your investors in Cape Town with the  Johannesburg  Stock Exchange and I remember you said to me that the price dipped a bit when you first launched, and someone came to you and said, hey Fred what are you going to do with our money?  But that time, in 1998 Your share price dropped to about what 80 cents, which I’ve written a few times, wasn’t enough to buy chewing gum at the time how easily you could have sold it?

 

You know that was, that was the first IT bubble, and you can imagine the investment houses were running through, it’s  like, camels trying to get through the eye of the needle. Everyone wanted to exit the market, and we were just caught up in that storm the first one we just listed just for two years or something like. We were listed in 1998 and hit the first big storm the IT bubbles and our share price dropped to 80 cents, but the cash we had was well more than R1.50, so There was a corporate raid on us. Fortunately, we had in our structure high voting shares and low voting shares and that was a bit of a defence for us. While the meeting was still on and these guys were shorting us they were selling shares that they didn’t even have and driving our share price down. While the meeting was on, I excused myself I went out a bought as much brimstone shares as possible.

 

So how much did you pop out in a few minutes when you went out of the meeting to buy your own shares to support the price?

 

It wasn’t much it wasn’t many shares when these things start to happen You’ve got to look through that thing and you have to ride the storm out, if you really have that believe in your dream, and you have the passion, and you have belief in your product and your purpose, you have to ride the storm out, and that’s what was the first IT bubble brought. And, oh, and we battered our way through it then along comes 2008 with the housing crisis in the US, the subprime loans and all of those companies and we got hit and we were just trying to run our business here in South Africa and the furthest point down south of Africa and we get hit with a subprime crisis that was happening in the US and our share price went down to about 18 cents but we battered our way through there and then got a big deal. We bought a private healthcare company and we had to issue our shares I think we had a hundred million shares then but to raise more capital we had to issue another hundred million shares so we diluted ourselves by significantly but it was done that was one of the defining deals in our lives as well.

 

During these tough times, if I recall rightly they were offers to actually buy you out of brimstone for more than 100 million Rand, some people maybe would have advised you and say well you know, why don’t you just take the money and go retire somewhere. Why is it that you and your partners, as entrepreneurs decided not to do that?

 

Because I think Brimstone has a purpose the purpose to be around for a long time, it is right now we’ve got about  while we have two key investments in Oceana and sea harvest, we also have three funds a legacy fund with Old Mutual and Nedbank where they take a spaza shop and turn it into a Pick ‘n Pay franchise and we would do those kinds of things  and invest at lower level, its lonely but teaches people how to run their administration, do the accounting and their books properly Doing  the auditing Well, treat their customers well But you know, we got a purpose also to be empowered, and to have positive social impact.

 

We’ve talked about ethics in business somebody online knows and asking you, what about crypto currency, would you invest in it is it the future?

 

You know, I’m 66 years old, my son invests into crypto currency and I must tell you the only thing I advised him on when he was making some money take your profit of the table keeps some going there and nobody is on poor taking a profit. I think he’s taken my advice, I wish I had taken my advice a lot more for myself, because often I don’t take enough off the table, but I just don’t know enough about that new world for me to pass comment, but it certainly looks like we’re going to go there because if you’re really think back. Gold was the standard if you had gold you know, earlier was silver and all of those things with and then with the US moved off the gold standard and dollars, and I mean, just think about it a paper and promise that you can contract. So, it just makes sense that things are going to move into a direction, like crypto currencies is it bitcoin? Is this one or that one I don’t know but the history has shown a movement in a certain direction.

 

In terms of investment again I interview the author of rich dad poor dad a few years ago, and he was telling me the same as what you’re saying that the dollar is no longer backed by gold, the value is going to dip of all money around the world, and we should all buy gold but as I said to you at the time most working people, the kind of people whose investments you represent. They can’t just go down the road and go buy some gold on the way home on a Friday it’s not the things that people do and not things a lot of people can afford?

 

Certainly in fact investors Like property, they want to feel and touch they want to drive passed property to see if the bricks are still in place you know. They like fishing because they eat fish daily and they like what we invested in them.

 

Someone else online is asking an interesting question here you just mentioned your son a young man investing in crypto currency. They’re saying is it too late to become an entrepreneur in your fifties, or do you have to be a young upward thrusting person to be an entrepreneur?

 

I think there is no age barrier to be an entrepreneur if you think of  the guys of McDonald’s those guys were in their  60s  if  you think of some of the guys have done very, very well Late in their  years I have been encouraged by some friend saying Okay, you’ve done your trip with Brimstone come take your family company and  do the thing  there and I said why would I do that and they said know you’ll  make a lot of  friends that they  know have made a lot  more money in  their  60s that they haven’t made before .So, it’s never too late.

 

As you know, one of the big stories that we’re covering in Billionaire Tomorrow is the young entrepreneurs the people who want to be literally millionaires tomorrow, what advice would you give to somebody starting out with maybe just a small amount of seed capital or maybe nothing?

 

One thing I must tell you should never make it about the money. it’s wonderful to say billionaire tomorrow but it’s not just About the money And It can’t just be about the money and I think throughout my discussion here I’ve said it deals with being commercially successful and socially relevant, you must be able to share with those around you.  The advice I would give to some people starting out and I thought that you have to have a big dream you got to have the passion, you’ve got to be brave and you know, you’ve got to take risk

 

Sure, well we have Got a question online from Gary in Johannesburg now He’s asking, what’s the next big thing you think that people should be looking to invest in?

 

I think businesses themselves would be looking at shared offices and the little corner offices is not for something for a top-class Manager to aspire for anymore it’s going to be open office plan and All of those kinds of things. But what would you invest in, you know, so much opportunity I’ve just actually focused on food I must tell you in the food sector and people eating healthier and so fish glass is big branded stuff is big. We own 25% of Oceana Group and they have brands for Lucky Star it’s a phenomenal brand I mean, we don’t have enough fish around South Africa, to go into, into that the lucky star tin we have to import the fish I’d say we because we own 25% of it, I can’t be a director of Oceana because I’m a director of CLs. So, food for me, is quite a big, big thing, just doesn’t go away. In our see harvest, we have in the deep-sea hake business but also a number of other aquacultures, and we grow our own abalone our own mussels and our own salmon. 

 

Well I say another question coming in online here another south African, African born entrepreneur Elon Musk is making headlines at the moment with his electric cars, which he believes are going to dominate the market. Would you ever invest in electric cars in Africa, or become an innovator in electric cars, especially, bearing in mind that they seem to be taking their time on making it to the continent, would you consider it?

 

I think you should start off with electric scooters or something like that first, and you know these E bikes and that people are ever out probably be a good place to start, there would be to have the power bank, places where they can charge up theses scooters and bikes would be a smallest space needed than parking for a car So, it certainly seems to be the way things are going. I know there is talk of F1 or something like that in Cape Town which will give a big lift if it does come off that you have a racing competition for electric cars, it certainly is something in that direction. But with power that is interrupted by Eskom and its almost irregular one would want to see that you have alternative power supplies, whether its sun, wind or anything else and also make sure that the batteries last longer.

 

Well we talked about quite a few problems with the economy at the moment. I’m sure if we sat down to about the whole continent, we could come up with many more. A lot of entrepreneurs are asking this online this question about Africa; how we need to promote its image rather than anything else doing courage investment on the outside of the confidence that people can do business and do it well. What’s your advice on that well how would you approach that?

 

I certainly would push the tourism angle first if I were to open borders if we could have African approached tourism and get people to come over here and see. I think a lot of people will come and bring opportunities here and because they would want to settle here. I mean in Cape Town, Amazon is putting up a bigger place here and would wonder why are they doing that so they already got a big space now they setting up the second one. University is putting up a big space in Cape Town as well  Because these, people have come to Cape Town and have seen the lifestyle they have seen that Everything works, transport works, phones work , electricity works in certain places works a lot more regularly in other places. The road network is there the beaches and everything the moment people see that they will come up back and reinvest because they have the experience. They have the experience of hotels, people serving them, we are friendly and African is friendly. You know, we love sunshine Most of the time. And we shouldn’t stand back for anybody.

 

Is there anything, that you have done in business and investing that you would perhaps do differently if you were to do it again?

 

Would I do it differently, I’d certainly deal with my banks differently somebody asked me recently about were the banks during the time of Covid. I think they were bad…. Their balance sheets were boasted up, but they didn’t pass that on to businesses. And so I think that there was a question. I think you posted question or asked a question on how to deal with banks I say you have to deal with banks very carefully. It’s like, it’s like scorpions making  love, but you’ve got to be open with him and careful  and keep them informed, and have real  contact, but  I would keep my finances on side all  the  time. All   stakeholders; keep them posted keep them informed and I think I would do that a lot stronger in the future.

 

it is very difficult always  regulators and even governments say that if they do crack down on banks, financial institutions, they’re being seen as interfering, seen as tampering with the economy and not allowing the free market to operate. What would you suggest?

 

Government shouldn’t interfere at that level, but I think the media could have highlighted a lot more.  The banks were supported by government and they wouldn’t just have supported us because they were banks… they had to keep the wheels of the economy going. Even though we had a lockdown in Covid they had to keep the wheels greased … and they didn’t do that enough.

 

So in your long career now as an investor, I mean you’ve no doubt increased   the wealth of thousands people in Cape Town alone never mind the rest of the country. What gives you that sense of pride when you get up in the morning and drive around Cape Town that you’ve made a difference in your life as an entrepreneur.

 

You know, Chris I bought a little company in 2002 at this company was already 100 years old. It was started by politicos in my community, in the year 1906- 1908. Then it was said that there should never be a funeral for any black, colored or Indian in the Cape, that is old Cape colonies that what is now the Northern Cape, Eastern Cape and Western Cape…I invested 5 million rand into it in 2002 there about and there where only three people employed in that business, the business made six hundred thousand Rand Premium for the year. Last year, it made 1.2 billion Rand premium and, it had three people as I said, it now employs about 65 people. That to me is just wonderful if I walk around the office and hear the chattering of young people straight out of school, straight out of university and that to me is a pride and joy that the opportunity I have had I could create a business. Five million invested then is now probably worth about 120 million Rand or Something like that. It’s not in your billionaire status at all. Its created jobs its created opportunities for young people. That to me is extremely exciting that is what the new democracy brought to me. That is what I think I owe to those people who have fought for our freedom is to create jobs and opportunities for young people that are what they fought for to give us the opportunity to move forward to create wealth for all and assist with giving a better life for all. And that’s excitement, that’s the pride, I have I must say and grateful for the opportunity to be an entrepreneur.

 

Lastly, I mean how do you want people maybe you do maybe you don’t think of you in the future as an entrepreneur, I mean, your name will live on for many, many, many years to come. How do want you want to be thought of?

 

I don’t think I would want people to think of me many, many more years ahead they must use what we have done as stepping stones to greater things that they can do. It’s a path we have travelled they must stand on our shoulders because it’s not just me; I did it in partnership with other people. The big thing that I can say is that you got to select the right people the right partners and the future can just stand on our shoulders and create opportunities so other people can stand on their shoulders as well so we build a bigger and better South Africa and a bigger and better Africa and that must be the goal so it’s not about me, it’s about what we can create.