Inspiration story of South Africa’s first listed online broker, Tradek

In the late nineties, South Africa was buzzing with new Internet companies and a well-known name in the investment community, Paul Theron, was at the forefront.

Theron is a trailblazer in the South African asset management industry, but not many people know about his pioneering work in the Internet space.

After he graduated with a Master’s Degree in Energy Engineering from the University of Cape Town in 1991, he worked for a corporate in energy policy.

He soon realised he was better suited to be an entrepreneur and partnered with a few friends and associates to start an online sports business.

This business was sold to the Mweb/M-Net group and became the foundation of the Supersport website.

Theron was also behind another business, South Africa’s first online stockbroker and online financial pioneer, Tradek.

“We literally wandered down to the stock exchange in Diagonal Street and told some old-styled brokers we want to start an Internet interface,” Theron said.

Tradek was listed on the JSE in April 1999. In June 1999, Tradek had a market cap of R190 million and traded at a price-to-earnings (P/E) multiple of 84, which was common during the dotcom boom.

A Deutsche Morgan Grenfell report said Tradek was a winner because of the convenience, lower cost, and greater choice the online brokerage service offered.

Called one of the killer applications on the Internet, the model promised fast growth and exceptional internal rates of returns.

“As the first to market, Tradek has secured an advantage in terms of exposure and awareness,” the report said.

Tradek promised to be much more than an online broker. “We view the stock as a play on a paradigm shift in the financial services industry,” Deutsche Morgan Grenfell said.

“The Internet will allow consumers to take direct control of their financial affairs with minimum assistance from intermediaries.”

“Tradek will be positioned as a virtual private bank to take advantage of this paradigm shift.”

Tradek’s turbulent ride, and Vestact is born

Tradek’s financial results for the year ended 31 March 2000 showed revenue of R18.5 million, primarily from brokerage charges.

Unlike many other online businesses at the time, Tradek reported a profit after tax of R2.3 million and relatively strong earnings per share.

Theron, who served as Tradek CEO, said during the results that their growth strategy was progressing as expected.

The platform was signing up 2,000 new clients per month, ahead of projections, and the Tradek website was growing rapidly.

Tradek aimed to be South Africa’s leading financial services portal by offering private clients a range of financial solutions, including investment, banking, and insurance products.

Disaster struck when the dotcom bubble burst, and one of Tradek’s main shareholders, Sanlam, wanted to get out.

Tradek’s JSE listing was suspended in January 2003 and delisted in March 2003 after minority shareholders accepted an offer from Northpark.

Theron said he learned a great deal from Tradek and the other businesses he was involved in, which helped him to start Vestact.

“I learned all the errors one can make when building a business and worked out how to do it properly, which is what I did with Vestact,” he said.

It had a slow start as the firm was started with no clients, but with a focus on international investments, it received a huge boost under Jacob Zuma’s presidency.

“South Africans realised they must externalise their investments, which gave our firm a big push,” Theron said.

The firm gained tremendous traction among South Africans who wanted to build an international portfolio in dollars.

Today, Vestact is a household name in investment circles with R7.5 billion under management, most of it in US dollars in New York.