From shirts to furniture to groceries, Christo Wiese sells billions in low-cost goods to a continent clamouring for them. America could be next
Table Mountain, the striking mesa above Cape Town, lords over another impressive African monument: The multistory Golden Acre shopping centre. Lunchtime crowds pour into the glassy, brightly-lit structure, and from within it is impossible not to notice the dominance of South Africa’s second-richest man, Christo Wiese. His bargain-bin clothier, PEP, pulls foot traffic to the basement. Above it, you’ll find his more upscale Ackermans chain. Around the corner is his OK Furniture and his grocery chain, Shoprite, which takes up two floors.
By and large, they all carry the same message. PEP’s window ads, accented in canary yellow, proclaim it to be the home of the “Lowest Price in South Africa”. Brightly coloured bunting in OK Furniture heralds a similar promise. Shoprite (among its many slogans: “Lower prices, that’s our promise”) will even play moneylender, fronting customers up to 7,500 South African rand (roughly $470).
“The business has basically been built on one slogan: Low prices you can trust. Just very, very low everyday prices,” says Wiese (whose name, fittingly, is pronounced VEE-sa, like the credit card). “I suppose we could be described as the Walmart of Africa.” Underscoring the cost-conscious philosophy, the 74-year-old is telling me this at his company headquarters, in an industrial area that abuts a composter and Adult World, which sells what you think it does. His offices, like his stores, are decidedly spare: Drab beige enlivened only by some hotel-quality art (a portrait of an elephant herd hangs outside the door of the conference room he uses as an office). “People have very limited budgets,” continues Wiese, clad in a capitalist’s power uniform—blue suit, blue shirt—the very picture of the lily-white executive that still controls most of South African business. “They have to get extremely good value for their money.”
His hunch—that value trumps everything—led him to create the largest retail business in Africa. Publicly traded Shoprite does revenue of $9.9 billion a year, while PEP’s parent company, Steinhoff, brings in $11.8 billion (some of it from selling cellphones and home furnishings). Combined, they net almost $2 billion in annual profits, operate more than 9,000 stores in 30 countries and employ over 200,000 people. No other African retailer comes close to rivalling their breadth and depth, and Wiese controls both.
Those stakes are largely what makes Wiese one of the planet’s richest people, with a $5.8 billion fortune. More than 60 percent of his wealth is in Shoprite and Steinhoff, while another 30 percent or so comes from his shares of Brait, an investment vehicle Wiese uses to buy other companies, many of them outside South Africa. His stock in Tradehold, a real estate firm, accounts for much of the remaining 10 percent.
But if Wiese is to continue his expansion he must move outside of his African comfort zone. The continent isn’t booming the way it once was. Economic growth across Africa has slid from close to 7 percent in 2007 to about 4 percent in 2014, the last year for which data are available. In coming years, it isn’t likely to much surpass that figure. South Africa, still Wiese’s most important market, is emblematic of the larger trend—stuck at sub-2 percent growth for the foreseeable future. The slowdown gravely threatens Wiese’s ambitions. He can shut his eyes and picture his empire twice as big as it is today, but for it to grow that large, he must look beyond Africa.
And he’s already started. PEP is expanding rapidly in Europe, while Wiese is snapping up all sorts of companies through Brait, including majority stakes in British discount retailer (sound familiar?) New Look for $1.2 billion last June and Richard Branson’s fitness centre chain, Virgin Active, for $1 billion a month later. Put broadly, Wiese is a little Sam Walton, in terms of his focus, and a little Warren Buffett, in terms of amalgamating a portfolio. As a matter of fact, he’s beaten Buffett handily lately. His holding company, Brait, has trounced Berkshire Hathaway in total returns over three years (160 percent versus 31 percent), five years (230 percent to 51 percent) and 10 years (314 percent to 121 percent).
Wiese didn’t really develop a profile outside of Africa until recently, and to his annoyance, his arrival was trumpeted not by a cunning deal but by something more ignoble. It came after UK customs officials detained him at London City Airport in 2009 with two suitcases filled with nearly $1 million in cash. They seized it, suspecting illicit origins. The British and South African press merrily picked up on the incident—apparently suspecting Wiese had been nabbed for money laundering—and were further emboldened by Wiese’s stubbornness in fighting for the funds’ return and his insistence that the amount was “insignificant”.(The Daily Mail’s gleeful headline: “It’s Just Peanuts to Me”.) The government ended up returning the money—interest attached—but the damage was done. He still won’t talk publicly about the incident, and until recently, it was pretty much the extent of his reputation in the West.
That’s now beginning to change, and much of his activity is still in Britain. When his holding company, Brait, first showed an interest in stretching beyond South Africa in 2012, it invested in British supermarket business Iceland Foods and added to its position in November 2015, when it paid about $275 million to increase its position from 19 percent to 57 percent. Two more deals came last year: The stakes purchased in discount retailer New Look and gym chain Virgin Active. A second Wiese company, Invicta, has put its capital into industrial companies: Unsexy firms with predictable, recurring revenue streams, like Singapore-based Kian Ann Engineering, a distributor of heavy machinery parts. And a third Wiese vehicle, Tradehold, watched the value of its UK property portfolio increase by about 50 percent to roughly $120 million in February 2015 (the latest full-year results available), driven substantially by new investments in the British real estate market, where it owns residential, industrial and office space.
PEP has charged into eastern Europe, too. After its initial move into this part of the continent in 2005 (Poland mostly but also the Czech Republic and Slovakia), PEP has proven its model successful there. Its eastern European stores do about $1,800 per square meter, a 60 percent increase from 2012 and roughly double what a comparable competitor might do. The region is now 11 percent of PEP’s $2.9 billion in annual revenue (up from 5 percent in 2012).
(This story appears in the 01 April, 2016 issue of Forbes India. To visit our Archives, click here.)