Billionaire Johann Rupert’s ‘child’ worth R486 billion leaving the house

Johann Rupert’s Remgro is on the cusp of concluding a nearly decade-long process of selling its shareholding in FirstRand, which owns FNB, RMB, and Wesbank. 

Remgro CEO Jannie Durand explained that this process has felt to the company as though it is letting its first-born child go and spread its wings. 

Rupert was instrumental in creating the FirstRand banking group through a merger between Rand Consolidated Investments (RCI) and Rupert’s Rand Merchant Bank. 

However, as FirstRand grew over the years, the influence Remgro and Rupert had over the banking group steadily declined. 

Now a behemoth that is multiple times the size of Remgro, the investment in FirstRand is no longer strategic, Durand explained to 702. 

“We unbundled our big FirstRand stake in 2018, when we were still the biggest shareholder in the company,” Durand said. 

“We said at that point in time that it is like a child that is leaving the house, it has gone through university, and it’s learning to now spread its wings.” 

FirstRand has gone from strength to strength over the past 28 years since it listed on the JSE in 1998, with it becoming the most valuable banking group in South Africa. 

The title of South Africa’s most valuable bank is now held by Standard Bank, valued at R516 billion on the JSE. FirstRand, Standard Bank, and Capitec have all had stints as the most valuable in the past year. 

With FirstRand growing rapidly, it soon became multiple times the size of Remgro, and the influence the holding company and Rupert had on the bank dwindled. 

“FirstRand is much bigger than us. Our influence and value-add were very limited. So, we just kept a strategic stake as effectively near-cash,” Durand said. 

“Now, since 2018 and at this point in time, we feel we can deploy this cash better somewhere else.” 

Durand said the equation around where this cash is deployed has changed over the past few months, given the geopolitical situation and the company’s deal to take control of Mediclinic’s operations in Southern Africa being concluded. 

The most recent sale of 52 million shares in FirstRand brings this unbundling process almost to a close. Durand explained that much of the sale had concluded before the US-Israeli war on Iran began on 28 February. 

“It is important to see that we sold our biggest portion of this sale before the war in the Middle East. We are still sitting on a little bit of the shareholding,” Durand said. 

“It has been a long time coming, with the process beginning in 2018.” 

Creating FirstRand

FirstRand is ultimately the brainchild of Laurie Dippenaar, GT Ferreira, and Paul Harris, who formed RCI with only R10,000 of initial capital. 

Dippenaar has explained that the partners did not draw a salary from the company in the first nine months to ensure the maximum amount of capital could be reinvested into the business. 

RCI had tremendous success in investing in early-stage companies and backing entrepreneurs to build businesses in South Africa. 

However, the three men always wanted access to the significant profit pools in South African banking. At the time, attaining a banking licence was extremely difficult, with the only way of getting one being the purchase of an existing bank. 

No one knew this better than Rupert, who proposed to RCI a merger between it and his Rand Merchant Bank. This deal gave Dippenaar, Ferreira, and Harris access to a banking licence.

Rupert took a backseat in running the bank and left it to the three entrepreneurs, with it becoming extremely successful. 

This kicked off an acquisition spree, with Rand Merchant Bank snapping up Momentum Life to expand it into insurance. 

At this point, the bank had so much backing and trust from the established financial sector that it raised R5 billion in a single day to fund its takeover of Southern Life in 1998.

Dippenaar knew that international banks would try to enter the South African market after 1994 and that this would create intense competition, where scale would prove vital. RMB desperately needed a retail banking arm. 

When the Southern Life deal came around, RMB ensured that First National Bank (FNB) would be included in the acquisition of the struggling life insurer. 

“It is like the goldfish swallowing the whale,” Dippenaar described the transaction. From this takeover, FirstRand was created.

Momentum was the vehicle to effect the merger and subsumed Southern Life and FNB. The company was listed on the JSE in May 1998 under the name FirstRand, with Anglo American holding 20.43% and RMB 25%.

Post-merger events saw Rand Merchant Bank and FNB merge to form FirstRand Bank Limited, with the two units remaining to trade as its divisions.

Now the banking group operates predominantly through FNB, RMB, and Wesbank. It also has Ashburton, its asset management arm, and operations in the United Kingdom.