Editor’s Note: Read a detailed story on Laurie Dippenaar, GT Ferreira and Paul Harris in the current issue of Ventures Africa Magazine
There’s a new billionaire on the block.
Laurie Dippenaar, a South African banker and co-founder of FirstRand, the country’s pre-eminent banking group has become the latest member of the elite club of billionaires as the stock value of his three major holdings, FirstRand, Rand Merchant Insurance and RMB Holdings leaped an average of 37.1 percent since September last year.
Dippenaar, 64, owns a 2.28 percent stake in FirstRand valued at R4.96 billion ($526 million), a 5.75 percent ownership in Rand Merchant Insurance valued at R2.19 billion ($232 million) and a 6.05 percent shareholding in RMB Holdings valued at R3.47 billion ($368 million). All three companies are listed on the Johannesburg Stock Exchange (JSE). His stakes in these three companies have a combined value of R10.6 billion ($1.16 billion). At the exchange rate of R9.11 to a dollar, Dippenaar’s wealth is now valued at $1.16 billion.
This is the first time Laurie Dippenaar’s personal fortune has hit the $1 billion mark.
Dippenaar has a remarkable story. In 1977, he and two other partners – Paul Harris and GT Ferreira came together to set up a small financial structuring house in Johannesburg. Each man came with his own unique strengths. Harris was the out-of-the-box thinker; GT Ferreira was the shrewd and relentless negotiator and Laurie Dippenaar was the numbers man.
Rand Consolidated Investments
The three friends each deposited a cheque to bring the balance sheet of the company to R10,000 (roughly R80,000 in today’s rands or $8, 463). They called their firm Rand Consolidated Investments (RCI). The startup company was a structured-finance house which specialized in leveraged leasing and off-balance-sheet financing.
The trio started out by offering financing to public utilities for their capital equipment, but with a different twist. As fate would have it, the South African government had offered public utilities a tax break at the time through the South Africa Tax Act. The government was giving tax incentives for capital investments in public utilities, but the utilities themselves could not participate in the opportunity because they were not required by law to pay taxes. The bulk of deal making at the time involved leasing companies stepping into the deals to advice banks or other financial institutions on how to structure the deal and share profits. But the trio did it differently. Rather than acting as a mere advisor, they resorted to quoting as principal. In essence, they dictated the price of the deal and played the lead role in sharing and distributing profits to participants.
Laurie Dippenaar once recounted in an interview with a South African newspaper, “Obviously, to accumulate capital you either take capital from outside or you generate it yourself through earnings. We did that by simply using a structure that nobody else had used, and it took time for our competitor to cotton onto what we were doing.”
RCI recorded impressive financial returns from these deals, and before long, the company grew swiftly, diversifying into an assortment of boutique financial services.
Rand Merchant Bank
The founder’s vision, drive and complementary strengths transformed their fledgling business into one of South Africa’s leading Investment banks. Their newly-found success brought a desire for even bigger conquests. Armed with strong cash reserves, the technical know-how and a burning desire for growth, in 1984 the team acquired Rand Merchant Bank (RMB), a small Investment bank owned by South African luxury goods billionaire, Johann Rupert and merged it with Rand Consolidated Investments.
Momentum Life And More Acquisitions
The merged company adopted the name of RMB, and growth was kick-started. The trio replicated their success and built RMB to become one of the paramount investment banks in the country. Eight years later in 1992, they made another audacious acquisition. This time around, the target was an ailing pedestrian life Insurer, Momentum Life, which was one of the country’s largest insurance companies and was listed on the Johannesburg Securities Exchange. A new holding company, RMB Holdings was formed and Momentum became a fully-owned subsidiary of RMB.
Subsequently, Dippenaar was sent to manage affairs at Momentum, while Harris and Ferreira stayed back to run RMB. Within five years, Dippenaar had transformed the ailing insurer to profitability. But, still not content with the successes they had achieved, they set their sights on larger opportunities.
In 1998 they made a double acquisition. RMB Holdings acquired joint control of First National Bank, one of the country’s largest banks called, as well as Southern Life, the country’s fourth largest insurance company. The new institution was renamed FirstRand Bank, and is now one of the country’s largest listed financial services groups.
First Rand Group has operations in six African countries and India, and more than $80 billion in assets. In 2010, FirstRand’s RMB Holdings spun off insurance division RMI.
Passions And Philanthropy
Dippenaar apparently enjoys canoeing, cycling and rugby. He sponsors the Laurie Dippenaar Postgraduate Scholarship for International Study. The scholarship is awarded annually and is available to a South African citizen, for study outside South Africa in any discipline at the internationally recognized University of their choice for a Postgraduate degree. It has a value R350 000 ($37,000) per annum for a maximum of two years.
Breakdown of Laurie Dippenaar’s Wealth
2.28 percent stake in FirstRand valued at R4.96 billion ($526 million)
5.75 percent ownership in Rand Merchant Insurance valued at R2.19 billion ($232 million)
6.05 percent shareholding in RMB Holdings valued at R3.47 billion ($368 million)
Total: R10.62B at R1 = R.9.11 = $1.16 billion
* Values of stakes reflects shares outstanding multiplied by stock price; both values are as of the close of business at the JSE on the 17th of May, 2013