AGENTS OF CHANGE

Private equity is playing an increasingly important role in South Africa’s economic development. In addition to providing investors an alternative option for returns and diversification, it can have a significant societal impact – from job creation to transformation. Old Mutual Private Equity (OMPE) states that it has consistently placed transformation on its priority list over the years. Which is why TOMORROW had a talk with Chumani Kula, Co-Head of OMPE, about the role of private equity in progressing SA’s transformation project.

As one of South Africa’s largest and most established private equity managers, OMPE invests in high-quality, unlisted businesses with quality management, significant growth potential and attractive characteristics. Having successfully invested over R9 billion and returned more than R15.4 billion to investors since 2004, they describe their distinguishing factors as their partnership approach, unusually wide perspective on the market and a ‘no stone left unturned’ philosophy.

Chumani joined OMPE in 2007 and was appointed Co-Head in 2019. He oversees the investment process, strategic direction, operational management of the business and is involved in the full suite of private equity functions, from fundraising, deal origination to implementation, investment management and exit. He is proud to say that OMPE has one of the most diverse, transformed top-tier private equity teams in SA. He says this has been a very intentional, steady process of cultivating home grown talent within their business.

Chumani however acknowledges that, in general, when looking at private equity in South Africa, the value of assets managed by black and women owned firms is still depressingly low. It is still very much a white, male dominated industry. “Structurally, private equity is quite a low churn industry – it is a long-term game. This means the change will be gradual as new hires will likely be brought up from the bottom up. How we got it right as OMPE was to have a conscious effort to look for young, black professionals and nurture them – of which I was one. It is fortunate that OMPE put in that investment years ago and we are seeing the results now.”

Switching gears from looking within the private equity industry to unpacking how private equity can be a catalyst for transformation outside of itself, Chumani points out that private equity is an obvious engine for entrepreneurship in any economy. What is needed more, however, is a mandate from asset owners for managers to drive transformation within their own businesses and in the investments they make. “Private equity managers can be agents for change and if asset owners are dedicated to this issue, they can ensure it remains a significant objective.”

“For us transformation is not just a good thing for society but is also good for business. Those companies that have worked towards transforming have shown a competitive advantage over time. We have also learnt from experience that those companies that take too long to transform and do not embrace diversity can lose real commercial value. Which is why it makes perfect sense to embrace the empowerment principles this country has been working on.”

Given their view that transformation can give business the edge, we asked him how they assess an enterprise based on its transformation credentials. Do they shy away if a business has unimpressive transformation?

“We first assess what the competitive landscape is for that business – our deals take close to a year so we haveample time to analyse the enterprise properly. If we don’t believe we can effect the desired change, it may deter us from making a commitment. However, in most cases we love the challenge of coming in and enhancing the business in every way we can – transformation included. That is exactly how we add value.”

However, not all businesses are ideal candidates. As OMPE has put forward, they like to partner with businesses they share similar values with. One such case that Chumani highlights is the case of Medhold. “Since our investment in June 2018, we have worked together to enhance their empowerment status – via ownership, board composition and procurement spend. They are now sitting at BEE Level 3 and we are working to improve that further.”

Since OMPE invested, the number of employees at the business has increased by c25%. Over the past year Medhold has offered learnerships to five budding clinical engineers (of which four were absorbed) and seven disabled learners who are currently at different stages of their 12 month learnerships.

These types of initiatives, which create jobs for the increasingly unemployed youth of our country, seem to be especially important to Chumani. This shouldn’t be surprising as he is the founding chairman of the non-profit organisation, Fun Learning for Youth (FLY). And his dedication to transformation for a better future is clearly shared by the rest of his team.

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