Brimstone Investment Corporation Limited

Slade House, First Floor, Boundary Terraces, 1
Mariendal Lane
Newlands, 7700
South Africa
Telephone: (+27 21) 683-1444
Fax: (+27 21) 683-1285
Web site: http://www.brimstone.co.za

Public Company
Incorporated:
1995
Employees: 3,400 (est.)
Total Assets: $700 million (2017 est.)
NAICS: 525910 Open-End Investment Funds

Brimstone Investment Corporation Limited is a black-controlled and -managed investment company. Its areas of interest include health care, food, insurance, infrastructure, and real estate. Based in Newlands, South Africa, Brimstone owns a 100 percent stake in the Lion of Africa insurance company, a provider of specialty insurance and risk management solutions to the public sector, and an 18 percent stake in Aon Re Africa (Pty) Ltd., a major reinsurance provider in sub-Saharan Africa. Its food interests include a 54.9 percent controlling interest in Sea Harvest, a deep-sea fishing concern, and a 17 percent stake in another fishing company, Oceana Group. Its health care investments include Life Health Care, an acute hospital care provider, and Obsidian Health, a medical equipment supplier. In the infrastructure sector, Brimstone owns 6.7 percent of Grindrod Limited, an integrated shipping company. Its real estate investments include the Equites Property Fund, a developer and manager of industrial properties, and the FPG Property Fund, the owner of residential, office, retail, and industrial properties. Brimstone also owns in its entirety the House of Monatic, an apparel designer, manufacturer, and marketer. Brimstone is a public company listed on the Johannesburg Stock Exchange. Cofounder Fred Robertson serves as the executive chair.

AN APARTHEID HERITAGE

Fred Robertson was born in Cape Town's District Six, an inner city neighborhood. At around the age of 10, he began selling newspapers, fruits, and vegetables on the streets and hawked snacks at the local movie theater during intermissions. It was a time of apartheid in South Africa, a system of institutionalized racial segregation and discrimination that allowed a white minority to retain political power and privilege. During the 1970s Robertson was among the 60,000 people forcibly moved to make way for white residents, dispatched to Cape Flat, a sandy wasteland known as “apartheid's dumping ground.” Not only were whole neighborhoods split up but so, too, were families. Robertson was one of nine children; his sisters were sent to different townships.

COMPANY PERSPECTIVES

Brimstone seeks to achieve above average returns for its shareholders by investing in wealth creating businesses and entering into strategic alliances to which it contributes capital, innovative ideas, management expertise, impeccable empowerment credentials and a values driven corporate identity.

While Robertson was carving out a living, South Africa came under increasing economic pressure to end apartheid, which unraveled during the early 1990s. Previously prevented from following his entrepreneurial instincts, Robertson recognized that with the end of apartheid came a chance to start his own business. In February 1990 he launched his own insurance brokerage, Commlife. Shortly thereafter, the ban was lifted on South Africa's leading opposition organization, the African National Congress (ANC), and its leader, Nelson Mandela, who had been imprisoned since 1964, was finally released. Because Robertson was close to ANC leadership, Mandela stayed at his home for a couple weeks after leaving prison.

AN INVESTMENT OPPORTUNITY

Robertson looked for ways to help South Africa's black population through business as apartheid came to a close and Mandela was elected president of the country. In 1994 he teamed up with Mustaq Brey, a self-taught chartered accountant, and held breakfast meetings for business people in Cape Town to provide networking opportunities. The two men were soon joined by another accountant, Lawrie Brozin. To take advantage of an investment opportunity, they decided to create a black empowerment investment company. They had a chance to purchase a 9.7 percent stake in Oceana Group, which included operating subsidiaries in the fishing and cold storage sector in South Africa. The purchase price was about $2 million. A bank loan for ZAR 4 million ($1.1 million) was lined up, but Robertson's group would have to raise about ZAR 3 million ($842,000) in cash, or 40 percent of the total amount, within six weeks. To fund the venture, Robertson and Brey each took out a $2,700 loan and held prospective shareholder meetings with their clients, many of whom were working-class people.

Robertson, Brey, and Brozin raised the necessary capital and in October 1995 incorporated the Brimstone Investment Corporation. The name was an allusion to the African monarch butterfly, which was commonly known as Brimstone. The investment in Oceana was made, and the following year the company raised ZAR 13 million from shareholders and invested ZAR 17.4 million in Plessey Cellular, KFM Radio, and Norwich Holdings.

In 1997 Brimstone raised about ZAR 45 million in a private offer to previously disadvantaged individuals who had anti-apartheid settlement funds to invest and raised another ZAR 104 million from institutional investors. The following year Brimstone sold its investment in Norwich at a profit and acquired the clothing manufacturer House of Monatic. Because of a roaring stock market, Brimstone's portfolio had increased in value to $54 million. In July 1998 the company went public on the Johannesburg Stock Exchange and raised ZAR 85 million in a stock offering, about a quarter of which came from private investors.

Brimstone enjoyed an encouraging start as a public company. Its shares were listed at ZAR 4 and quickly increased in value to about ZAR 6. Just one month later, however, worldwide stock markets crashed and financial markets were in turmoil. The price of Brimstone stock plummeted to just ZAR 1, which made the company vulnerable to white corporate raiders.

STOCK PRICE PLUNGES

Brey told CNBC Africa in a May 2015 report, “A financial group in Johannesburg came to us and said why don't we delist Brimstone, buy the shareholders out at current market price. Buy them out at a rand. Sell all the assets and then make R1.50 profit.” Such a deal would mean betraying Brimstone's small investors, which the officers of the company refused to take. Although Brimstone sold all its listed stocks and noncore assets, it returned the capital to shareholders in 1999. That same year Brimstone became the black empowerment partner in the Scientific Group, a diversified South African health care company. Although everyday shareholders were happy with Brimstone's actions, the market punished the company's stock, which fell to as low as 18 cents in 2001.

KEY DATES
1995:
The Brimstone Investment Corporation is incorporated.
1998:
Brimstone is listed on the Johannesburg Stock Exchange.
2003:
The maiden dividend is paid.
2008:
Brimstone reports a loss amid economic downturn.
2017:
Brimstone reports total assets of ZAR 9.2 billion.

As the price of its stock continued to decline, Brimstone persevered. In 2000 it sold its interest in KFM Radio and headed a consortium to invest in the People's Bank. The latter deal did not close until the following November. Concurrent but unrelated to that transaction, Brimstone sold most of its Oceana stake. The proceeds paid down debt and freed up some cash. Also in 2001 Brimstone joined Coronation Capital to start the joint-venture investment unit BrimEquity to make investments in the insurance industry. The following year Brimstone made another investment in Sea Harvest and divested its property investments.

FIRST DIVIDEND PAID: 2003

The House of Monatic, a wholly owned subsidiary, was the primary contributor to Brimstone's balance sheet in 2002. That year, the company performed well above projections, due to robust exports to other African countries, the United Kingdom, and the United States. Thus, in late 2002 Brimstone announced a maiden dividend of 4 cps that was paid the following year. In 2003 Brimstone acquired a 25 percent stake in the packaging company Lenco Holdings, doubled its position in Sea Harvest to 21.5 percent, and joined a group of investors to acquire Afrox Healthcare. That same year Brimstone sold its stake in the chicken franchise group Nadno's Group Holdings to buy back some of its stock, which was still trading at below net asset value.

Brimstone's next major investments were in 2005, when it acquired interests in Old Mutual and Newbank. It also purchased 18 percent of Life Healthcare, a stake that a year later increased to 21.9 percent. Additionally in 2006, Brimstone acquired another 10 percent of Oceana. As Brimstone approached its 10-year anniversary as being a publicly listed company, it acquired interests in Aon Re Africa, a reinsurance firm, and Phuthuma Nathi, a broad-based black empowerment investment scheme, and sold its stake in Lenco for ZAR 203 million.

Brimstone had to again contend with economic turbulence, this time caused by the financial crisis during the fall of 2008 that had been triggered by the collapse of the property bubble in the United States. After posting profits of about $70 million in 2007, Brimstone recorded a loss of $7.1 million in 2008. The 2005 investment in Life Healthcare proved to be Brimstone's salvation. Because of South Africa's expanding and aging middle class, Life Healthcare was thriving. Brimstone exited its investment in June 2010 at great profit to shareholders and the company's reputation.

Brimstone also had cash to make further investments. In 2010 it acquired the remaining 26 percent of Lion of Africa and acquired an interest in the mobile telephone company MTN Zakhele. The following year brought further investments in Oceana and the Scientific Group. In 2012 Brimstone acquired 12.3 percent of Taste Holdings and 25.1 percent of Afena Capital. Two years later Brimstone invested in Grindrod and increased its interests in MTN Zakhele and Phuthuma Nathi.

SEA HARVEST TAKEN PUBLIC: 2017

Brimstone completed a host of deals between 2015 and 2017. It increased its holdings in Oceana, Taste Holdings, Grindrod, and Phuthuma Nathi. Brimstone's interest in Sea Harvest increased to 85 percent in 2016. In the meantime, Brimstone made investments in the Equites Property Fund, a leading South African real estate fund manager and developer of office and industrial properties. In 2017 Brimstone acquired shares in Life Healthcare, the investment firm Long4Life, and the education company Stadio BEE. Also during this three-year period Brimstone sold its investments in the Scientific Group, Rex Trueform, Africa & Overseas, Taste Holdings, Afena Capital, and MTN Group. That same year Brimstone received proceeds from the listing of Sea Harvest on the Johannesburg Stock Exchange.

Ed Dinger

PRINCIPAL SUBSIDIARIES

House of Monatic (Proprietary) Limited.

PRINCIPAL COMPETITORS

Helios Investment Partners; Mara Group of Companies; Remgro Limited.

FURTHER READING

“A Textbook Lesson in Business Success.” Africa News Service, October 10, 2002.

“Brimstone Invests in Taste Holdings.” Africa News Service, December 8, 2011.

“Brimstone Turns the Corner.” Africa News Service, June 11, 2003.

“From Salesman to Millionaire.” Forbes Africa, June 1, 2013.

“How a Teacher, Two Accountants Turned Cape Town Workers into Millionaires.” CNBC Africa, May 20, 2015.

“Meet the Boss: Fred Robertson, Executive Chairman, Brimstone Investment Corporation.” Africa Business Insight, March 14, 2013.