AFRICAN FINANCIAL GROUP
AFRICAN FINANCIAL GROUP
Advancing Black Wealth Accumulation
Through Healthy Investments PRODUCTION: Manelesi Dumasi
The goal of African Financial Group is ‘to become a globally competitive and diversified Pan African investment company’. Chairman Dr Gil Mahlati explains that investments into healthcare provision in an underserviced sector of the market will help advance the company one step closer to this vision.
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Dr Gil Mahlati founded African Financial Group (AFG) in 2001 with the goal of advancing economic transformation in South Africa through the provision of effective investment management and innovative financial solutions. Mahlati, a Fellow of College of Surgeons of SA from the University of Cape Town (1994) and a Clinical Fellow in liver surgery from King’s College Hospital in London, is one of the country’s most trusted figures in the healthcare industry. He started AFG with his wife, Dr Vuyo Mahlati, who is an expert in the financial services industry and part of the team behind SA’s National Development Plan. Together, the pair have launched AFG from the ground to become a trusted name in the
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Pan-African investment industry. In an exclusive interview with Enterprise Africa magazine, Dr Gil Mahlati explains how he is using his experience in the global healthcare industry to advance the business and drive economic transformation in a sustainable manner. “We are trying to use money generated by black people to transform the economy of South Africa instead of using established money,” he says. “We are an emerging company and we have good ideas. Most of the time if you talk about transformation of the economy in South Africa from an ownership perspective - from minority to majority ownership - what used to happen is that institutions and established companies would
drive that transformation and Africans were recipients of such transformations, but now Africans are in a position to drive transformation themselves, and they have the capital to do so whilst attracting global capital as well. Companies who didn’t have black shareholders but who wanted to do business with the government needed black shareholders so they were pushing transformation. Now we see that black-owned companies are gaining these contracts without the need for lengthy BEE reviews. It’s certainly not straightforward but we are now seeing more money coming from black sources.” With the advent of BEE in 2003, AFG started out as a partner for deal structuring and financing in the
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AFRICAN FINANCIAL GROUP
m a i l@sa k h i wo. com
Sakhiwo Health Solutions is a multi-disciplinary health infrastructure consultancy company. We specialise in strategic health planning, health briefs, facility planning, architectural design, project and construction management, health technology, consultancy and advisory services related to hospital infrastructure development, commissioning and health facility maintenance management. Sakhiwo acts as an implementing and multi-disciplinary development agency for hospitals and health facilities and pulled together some of the best expertise in South Africa for the establishment of Sakhiwo Health Solutions.
CURRENT PROJECTS
health sector. “Initially, when we started the company as an investment holding company, we were taking equity positions in transformational BEE transactions. It was myself and my wife, focussing mainly on healthcare across various sectors of the economy. We did deals with Top 40 companies such as Aspen Pharmacare, Old Mutual, Tongaat and similar and we held some shares,” Mahlati reminisces. “After 10-15 years, those deals matured and we took the money to start a financial services entity. We can now offer asset management and stock broking among other financial services. We are investing in healthcare, in hospitals and primary healthcare clinics across Africa, and we’re also active in housing in South Africa.” By designing investment vehicles that pool savings in black communities and investing the capital in fast-growing companies that also embrace transformation, AFG offers positive ROI for its clients. Mahlati sees great potential for the delivery of private healthcare services in a specific demographic – the so-called missing middle. Capital generated from mobilising savings within previously excluded groups is used by AFG to bring first class service offerings to South Africans who are in need and willing to invest in economic initiatives. “There’s a whole section of our economy, known as the ‘missing middle’, including police, teachers and others in the lower-middle class, that don’t have access to proper private healthcare and proper private housing funding so we are concentrating on that area in South Africa which is around 15 million people. With the middle class growing across the continent, we can see that more and more attention is needed in this sector. This is why we have the stock brokerage and asset manager who are gathering assets to invest
South Africa • Cecilia Makiwane Hospital • Lilitha College of Nursing • Frere Hospital, new Oncology and ICU • Sipetu District Hospital • Thabazimbi District Hospital • Letaba Regional Hospital • Limpopo Academic Hospital • Siloam Hospital • Eastern Cape Health Facilities Maintenance Zimbabwe • The Avenues Woman and Child Hospital
Mozambique • Nampula General Hospital The Gambia • Horizons Private Clinic (TA for AfDB) Namibia • Otjiwarongo Referral Hospital • Ondangwa District Hospital • Khomas District Hospital • Katutura Hospital • Windhoek Central Hospital Botswana • Health Facilities Maintenance
w w w.s a kh i w o .c o m
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in the development of people – healthcare, housing and education.” GLOBAL PARTNERSHIPS One of the most recent, and most exciting, investments made by AFG involves a partnership with Austrian healthcare provider VAMED. Mahlati, in his pursuit of offering quality private healthcare to the ‘missing middle’, hopes to use this relationship to help develop the foundations for significant healthcare investments here in Africa. “Now that we have that relationship, I can go to local funding agencies in South Africa, including our own pension fund, and explain that we can now deliver healthcare on a private sector basis to all members of a government pension fund. It gives
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us credibility and gravitas behind our claims,” says Mahlati. “Since the beginning, I had been looking for a partner in the hospital development and management space because there is the section of the population that doesn’t have access to quality private healthcare – it has to depend on government healthcare but they can afford private healthcare. The established companies concentrate on the highest end of the market. South Africa’s four big healthcare organisations are based internationally, in places like London or India, so I needed a big global partner that could make a difference on the continent so I approached VAMED,” he adds. The country’s health industry
has been dashed in recent years by a number of negative stories which have caused lacking confidence in the system. Through 2016/17, estimates suggest that R378bn has been spent on healthcare (approximately 8.3% of national GDP), but R182.71bn was expected to be spent in public sector health facilities which serve more than 80% of the population while an estimated R189.08bn was allegedly spent in the private sector demonstrating the disparity across the industry. The under-resourced and over-extended public facilities have displayed strain and we have seen the recent collapse of public oncology services in Durban and the tragic consequences of Gauteng’s mental health crisis. This has prompted the government to
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fast-track its revised plan for National Health Insurance (NHI). NHI contributions could provide big opportunities for AFG to advance its plans, and with the company’s effective investment management capabilities, now looks like an exciting period. “The government is now talking about NHI and with the emphasis on localisation, we would need to partner with local people, particularly doctors, who could then own a piece of the hospital group,” explains Mahlati. “We have around 110 private hospital licenses that we are looking at in SA and that’s going to need a lot of cash but with the NHI starting in the next few years, we should be able to deliver those costeffective hospitals for that section of the population.” Before NHI can be fully implemented in South Africa, a
number of legislative and regulatory reforms are needed and this means that the launch of the initiative remains some way off yet. AFRICAN INVESTMENTS Included in the AFG offering is financial planning and wealth management, risk/life insurance brokerage, estate planning, succession planning and other related financial services and while the company’s core market remains South Africa, Mahlati is always looking to increase reach on the continent. Experience in emerging economic environments, public private partnerships in infrastructure projects, and participation in empowerment transactions elevates the company above potential competition. But key in AFG’s approach is trust and relationship
The best way to predict the future is to create it.
building. “In Africa that is the most important thing,” says Mahlati. “Your balance sheet and financial capability is important but amongst Africans, trust and relationships are paramount – you only get to do things because people trust that you can do it, not necessarily because your balance sheet is better than another. You earn that trust over years and it involves your focus – what is your business about? Are you transformative or just interested in the bottom line? It’s called the ‘triple bottom line’, and that means your business is concerned with social impact, environment and sustainability in terms of profit.” In a bid to catalyse infrastructure development projects which will contribute to economic development, AFG has entered into
Consilium Capital Consilium Securities
Consilium
Corporate & Employer Share Scheme Manager
Members of the African Financial Group Asset Management: Appropriate risk management and the delivery of superior performance via a dynamic quantitative based approach which adjusts to style rotation, includes risk factor analysis and incorporates multiple assessment dimensions. Stock Broking: Fully regulated and licensed stockbroking service offering an extensive array of securities that include margined and non-margined products. Our stockbroking team deliver discretionary and nondiscretionary services.
Wealth Management: Comprehensive and holistic wealth management solutions ranging from individual discretionary investment advice through to retirement and estate planning, both domestically and offshore. Employee Solutions: Employee share scheme management on behalf of our client’s company for the benefit of their employees. Through the pro-active and appropriate management of this scheme we can assist in attracting, retaining and motivating employees, as well as aligning their interests to that of the company
Second floor, West Wing, President Place, Rosebank 2196 T 011-340-1300 F 011-442-8053 E info@consiliumsa.co.za | www.consiliumcapital.com
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a relationship with an international equity fund ready to work in Africa. “We have partnered with a global pension fund aggregator who is interested in funding infrastructure across the continent. What is good is that they come with all the equity for the project and access to equity is a problem in our environment,” says Mahlati. “We are trying to de-risk projects,” he adds. “For example, in Botswana we are a working with the national power company and they want to start with renewable energy. If the government can give us a guarantee for the next 20-years then we will fund the whole project. We are doing the same thing in Namibia with infrastructure,
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bringing the global pension fund aggregator who is willing to work with local pension funds in each country. It allows us to come up with specific infrastructure solutions for that particular country – we are doing the same thing all over the SADC region.” PEOPLE BUSINESS AFG is a business that develops deep trust with clients. Without this trust, no investment business can truly thrive. Mahlati recognises this thanks to his years as a surgeon, where ‘clients’ literally put their lives in his hands. He insists that investing in people is a vital part of business, especially in Africa, where
relationships are so important. “From the beginning, we have focussed on the triple bottom line – that’s society, environment and sustainable profit,” he says. “I believe you have to take this approach and not simply focus on making tremendous profits and that is how you can be sustainable over time.” When asked why he decided to make the switch from healthcare to financial services he looks back to the country’s changing circumstances in 1994. “We became free” he says. “People were allowed to do anything they wanted. Things I couldn’t do before I could then do. What really drove me was the understanding that society is driven by many elements
AFRICAN FINANCIAL GROUP
but the biggest are politics and business so I chose business.” Ensuring that the right people lead the business forward in the future, Mahlati has already started planning for his retirement. He is keen to keep the family feel to the business, something which reinforces the ideas of trust that the business is built around, and as such is encouraging his children to get involved but being clear that it was never expected of them. “My daughter has already joined the business. She has her MBA from University in Shanghai, she speaks Mandarin Chinese and I’m starting to look at the next generation and what it will do,” says Mahlati. “My son
is working towards a Masters in Big Data in the US and is working with Deloitte so when/if he is ready he will be welcomed into the business. I want to focus more on healthcare and allow my daughter to look at financial services alongside my wife.” Before his retirement, Mahlati has set a target of increasing turnover to $1 billion in the next three years. Right now, that target remains some way off, but he is confident if all factors fall into place at the right time. “We are in a position to get a lot of assets from pension fund,” he says. “We are going to the States to access global pensions funds and private equity funds but we might not reach the one billion. If we can
get underway with the hospitals, we could get there. We are also hoping to finalise a relationship with Vodacom for the delivery of costeffective healthcare solutions using technology; if that is completed, we will definitely be on our way. “Times are tough, but they remain exciting,” he concludes.
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Issue No.64
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ENTERPRISE AFRICA
OCTOBER 2017