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From surviving To thriving
How to protect and manage Intergenerational Wealth:
A case study of the Royal Bafokeng Nation
Elephants Hill, Victoria Falls 22 July 2017
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Table of contents
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1. Our context - Who we are
2. Our corporatisation journey
3. Our Business Model
4. Asset Management
5. Conclusion
Our context:
Who we are
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~30 minutes from Sun City
~1.5 hours from Johannesburg
Who we are
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We are a 128 000 strong community of people. Part of the RLM, NWprovince in South Africa. We are governed by the SA constitution andlaws and we try to remain true to customs, traditions and values.
5 regions
29 villages
R8bn = socio-
economic
development
spend in 10
years
1400 km2 of
land
90% of RBN has tap water
The broad objective of the RBN’s leadership has always been ensuring that
the current and future generations of the community benefit from the asset
base which largely originated from the platinum deposits.
1834-1891: Bafokeng pooled community resources and started buying back the land they had occupied for centuries from white colonialists
1920:the acquisition came to a halt due to Bafokeng financial commitments and would resume in the 1930’s
1924: Platinum discovery: a part of the reef containing the world's largest deposit of platinum group metals were discovered under Bafokeng land
Over 180 years of asset management = Might be the longest African community
investment case
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Who we are (Cont…)
Who we are
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1. Protect and grow 2. Sustainable yield to
service social needs
Our journey to
corporatisation
Creating a world-class community investment case
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O
Our journey to
corporatisation
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Late 1990’s:
• RBN ran out of cash
• Due its legal status, it was very difficult for RBN raise funding
• As the banks and financiers sais “they did not know who to go after in a case of a difficult”
• RBN also realised that this was likely to be a barrier in implementing its vision and objectives
Previous challenges from
Legal status & structure
Early 2000’s
• RBN realised it needed structure that would be best understood not just by the banks but corporates in general.
• Hence, in September 2002 a resolution was passed by the community to corporitise its affairs including the registration of the Royal Bafokeng Nation Development Trust (RBNDT) and companies to house and develop various investments
The Royal Bafokeng Nation is known for its
visionary leadership from 1834 - the time of Kgosi
Mokgatle to the current 36th King, Kgosi Molotlegi
place, there are two important components to our
success:
• It is important that we balance these.
Our Plan’35 is a developmental project that charts
ways to diversify the Nation’s local economy for the
long term sustainability of Bafokeng generations by
2035 (e.g. Platinum is a finite resource and
which will deplete at a point)
Governance
Our hybrid system (co-existence between
Traditional and Corporate Structures) allows
deep community participation and wide
accountability in how we administer our plans and
funds
Our journey to corporatisation: Core principles
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Our journey to corporatisation: Key moments
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Our journey to corporatisation: Incorporation of structures
Our journey to corporatisation:
Group structure
• RBH• Moumo• CPT• Platinum Stars
• RBI (education)• Lebone II
EducationPublic Service
Management
Social
Services
Royal Bafokeng
Administration
(RBA)
Royal Bafokeng Nation
Development Trust
(RBNDT)
Commercial
Institutions
• Public Service Management• Infrastructure Maintenance• Municipal Services • Protective Services• Land Use Management
• Health & Social Development
• Royal Bafokeng Enterprise Development
• Arts and Culture• Royal Bafokeng Sports
Supreme council(leadership & decision-making)
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Royal Bafokeng Nation
Our journey to corporatisation:
Group structure (Cont…)
• Public Service Management• Infrastructure Maintenance• Municipal Services • Protective Services• Land Use Management
• Health & Social Development
• Royal Bafokeng Enterprise Development
• Arts and Culture• Royal Bafokeng Sports
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SocialImperatives
CommercialImperatives
Chaired byKgosi
Our Business Model
Creating a world-class community investment case
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Business/operating Model
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Education and utilities
• Fully built and maintains 46 public
schools operated by DoE (Incl. a
private school)
98% approved households electrified
56% street lighting
Water
• 530km of reticulation
• 19 reservoirs built
• 95% of approved
households with Portable
water in their stands
R7bn+ spent on infrastructure development to date
Business/operating Model: e.g. of social delivery projects
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Examples
of social
delivery:
Infrastruct
ure and
other
programs
Health
• 6 clinics fully built & maintained by the
RBN
• RBN also pays for some medical staff
to assist the DoH
• Additional investments in ambulances,
emergency response teams and fire and
disaster response teams
Business/operating Model: e.g. of social delivery projects (Cont…)
Sanitation
• 140km of sewers
• 3 treatment plants
• 21000 households waste collection
R7bn+ spent on infrastructure development to date
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Project 1: Bafokeng Stadium
Total budget to upgrade: R429m
• RBN partnered RLM (50/50 contributions)
2009 Confederation Cup venue
• RBN Tender process (with RLM as observers)
2010 Soccer World Cup Venue
• Project delivered by RBN technical team
2013 AFCON
Project 2: Provincial road - P115 Sun City
• Built the P115 Sun City road in partnership with
NW DTRCS for R36 million
• Phase 1 : 50:50
• Phase 2 & 3 : 20:80 (DTRCS)
Project 3: Provincial road - Western Bypass
• Western Bypass: RBN contributed R60m (NW
DTRCS, RLM & RBN)
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Business/operating Model: e.g. of social delivery projects (Cont…)
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Asset Management
Building resilience in a challenging economy
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2006 2015 2017
Global financial crisis- Decline in mining - Energy shortages- High inflation
2012
Marikana:Protracted strikes , cost pressures for RBPlat (labour, electricity)
Decline in platinum prices Decline in commodity prices
20092007 2008 2010 2014 2016
Asset Management: Key economic events
• SA ratings downgrade
• Volatility of the Rand
• Political & Policy uncertainty
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The platinum sector has not fully recovered since 2008/09 financial crises. Accordingly; in 2013 the RBN
realised that the spending pattern was unsustainable and that if it continued the following events were
likely to occur:
• The funding deficit would widen over time
• The RBN cash reserves would be depleted
If we carried on like
this, today we
would have a
negative bank
balance of -R1.2bn* These projections were made in a context of tough economic conditions (volatile
commodity prices and an unstable political environment)
YEAR
2014
2015
2016
2017
Projected
income
(Rm)
R360m
R83m
R46m
-R1.m
Projected
social
expenditure
R775m
R843m
R898m
R967m
Total bank
balance
R1.4bn
R567m
-R331m
-R1.2bn
Asset Management: Impact of
challenges in the mining space
service delivery
Asset Management: What we did to thrive in a tough economy
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20062015 2017
Exchange of Implats royalties for 12%
shareholding
2012
Restructuring programme at RBA
RBNDT raises momentum on diversification strategy
20092007 2008 2010 2014 2016
Financials Property Infrastructure
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Success Indicator
The diversification we have
built into our portfolio
allowed RBH to pay a final
R300m in 2015.
Success Indicator
• Deficit has narrowed
significantly; and
• Our bank balance is
growing again
Asset Management:
What we did to thrive in a tough
economy (Cont…)
530 185 129 11 28
Asset Management:
Building resilience through
diversification
• Portfolio – historically platinum heavy but has evolved through diversification
• Mining vs. non mining assets has improved from 93%:7% (2008) to 15%:85% (2016)
• Overall, The RBN spent an average of ~2.5% of NAV over the past ~10 years . This is below Global peers (Endowment
Funds) spending of between 3.5% and 5% of NAV.
0
5
10
15
20
25
30
35
40
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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Ra
nd
bil
lio
n
Evolution
Other
Property
Mining Services
Industrials
Telcos
Infrastructure
Financials
Mining
• Health & Social Development
• Royal Bafokeng Enterprise Development
• Arts and Culture• Royal Bafokeng Sports
Asset Management:
Sector allocation
• RBNDT’s equity portfolio
managed to find growth
during a difficult period.
• The Net Asset Value
(“NAV”) increased by
16.2% 2016 outperforming
the JSE ALSI by 15%
As at December 2016
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• Health & Social Development
• Royal Bafokeng Enterprise Development
• Arts and Culture• Royal Bafokeng Sports
Asset Management:
Key investment drivers
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Achieving our vision
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Conclusion
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To ensure that we safeguard the Royal Bafokeng Nation’s heritage and economic future, we remain committed to:
• Visionary & courageous leadership
• Innovation & relevance
• Accountable & transparent stewardship of the community’s assets
Thank you
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