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87: Adam Kajee

CFO – Evergreen Retirement Holdings
The outgoing CFO of Evergreen Retirement Holdings, Adam Kajee, is determined to make a difference in South Africa and this passion prompted him to establish ThembiSA Private Equity Investments.
11 November 2020

CIARAN RYAN: This is CFO Talks and what a pleasure it is to welcome Adam Kajee, who is CFO of Evergreen Retirement Holdings and he's also CEO of ThembiSA Private Equity Investments. Apart from that he's chairman of Ruta Sechaba Foundation, which we'll find out about in a minute. He's a Chartered Accountant and a Chartered Financial Analyst, having previously worked with the great and wonderful Piet Mouton at PSG, as an investment analyst. Welcome Adam, how are you this morning, and I believe you're in Cape Town?

ADAM KAJEE: Yes, thanks Ciaran, thanks for having me on the show, I'm very good, the weather is fantastic in Cape Town, so I can't complain. I guess I just wish I was maybe on the beach when the weather is this good.

CIARAN RYAN: It’s that good hey, what’s the temperature like?

ADAM KAJEE: I'm not too sure but I think it's going to be 23 today.

CIARAN RYAN: We’re having a bit of a heatwave up here in Johannesburg but apart from comparing weather, just tell me a little bit about the what it is that you do, it seems investment runs quite deep in your blood. Now, tell us about Evergreen Retirement Holdings and what prompted you to leave PSG?
ADAM KAJEE: You’re right, I do love investments and particularly private equity investments and, hence, I ultimately moved from Coronation to PSG Group. I was actually very fortunate to land a position at PSG, which was essentially executive assistant to Jannie and Piet Mouton. During that time, I sat within the private equity team and in 2016 we started looking into the retirement industry and spearheaded that research, due diligence and transaction alongside the PSG Alpha CEO. We concluded the deal towards the end of 2017, it was quite a big investment, R675 million for a 50% stake in Evergreen Retirement Holdings. At the time of concluding the deal, Evergreen didn’t have a CFO at the time. I remember it quite clearly, going to speak to the PSG CEO and saying that I had found the perfect CFO for Evergreen. I joined PSG to ultimately be in private equity and he said that he thought I should apply for the role. I’m quite a calculated person, so going to PSG, wanting to be in private equity and then essentially being offered this position at the age of 30 kind of derails your plans. But he gave me some great advice, he said if you truly want to be good at private equity, you need to get commercial experience. So that ultimately prompted me to take up the position at Evergreen and I've been here for the last three years, and we've grown the business quite nicely. So basically, Evergreen builds and operates retirement villages, it's based on the life right model. We currently have about 1000 units across eight operational villages and there are big plans for Evergreen, we’ve got land banked for a further 4500 units.

CIARAN RYAN: And what is ThembiSA Equity, is that something quite separate?

ADAM KAJEE: Yes, I have always seen myself as a born entrepreneur and, as I said, private equity, and influencing lives through job creation and transformation, which ultimately culminated in me founding ThembiSA Equity Investments, which is a BEE private equity company focused on building and transforming South Africa’s businesses of tomorrow. So coming back to your question,

it's quite funny that I've just founded the company and I've actually recently resigned from Evergreen, with my last day being the end of November. So from December 1 I'm going all in driving ThembiSA and ultimately following my passion. So I am very excited about that and the new adventure.

 

‘The key ingredient to South Africa’s future success is ultimately creating jobs’

 

CIARAN RYAN: Okay, so what's the focus going to be with ThembiSA?

ADAM KAJEE: It’s very much a private equity company, so we’re looking to raise our first fund and it’s going to be focused predominantly on the SME space and, as I said, with a big focus on job creation and transformation. So it's not just about financial returns, there’s going to be very much an impact/social investment element to it. With Covid-19 I think that the timing is quite good, unemployment before Covid was sitting at around 29%, an all-time high, and now you throw in Covid-19 and now the unofficial numbers, I'm hearing things of over 40% unemployment. So I think the country is going to need a lot of entrepreneurs with the same strategy, which is to basically grow businesses and create jobs because my view is that is the key ingredient to South Africa’s future success is ultimately creating jobs.

CIARAN RYAN: So you're going to be focused on what is quite a high-risk area, SMEs, because the failure rate there can be quite astronomical, going by the statistics that we read. So give us a little bit of a sense in private equity, and we've seen some massive meltdowns in private equity in South Africa, right? What are the things that you can get wrong? I mean, it's not just about…in my interviews with people in private equity, it really comes down to the people and the management element, is that your take on it?

ADAM KAJEE: That is pretty spot on. It’s not very far from the PSG model where I've come from, but ultimately investing in industries where I believe in the macro growth, but it does boil down to the people behind the company. So you’re basically backing management and I think the model is going to be to grow the business alongside management. So very much helping them from a financial strategic perspective and growing the business together. So you are 100% correct, you might have   the best business model, but ultimately you need the right people driving the business.

CIARAN RYAN: Is there going to be a particular focus, you talked about SMEs, that's very broad, but is it going to be tech focused, is it going to be health or are you fairly agnostic on the type of investments you're going to make?

ADAM KAJEE: Very much agnostic, I do quite like the technology space and I do you see that as the future. So it's looking at businesses and management teams that are innovating and using technology to change traditional ways of doing business. ThembiSA will be 100% black-owned, and I think there's a nice opportunity, and it's probably a systemic problem in South Africa, but just generally speaking, typically people of colour do not have the same access to technology as predominantly white people. If you look at a lot of the tech companies out there, it is predominantly white-owned and that's kind of more…I don't have a hard and fast stat on that, but it’s a general feel and what I see in the economy. So I think there's quite a nice opportunity for ThembiSA to be a trusted BEE partner in this space because I think a lot of people look for a BEE partner, but one that comes with capital and two, that’s got experience and is  ultimately trustworthy and working towards the same goal, which is, one, obviously to create returns because that's how you make money, but with a bit more of that, which is very much the job creation and transformation angle.

CIARAN RYAN: You served time at Coronation and at PSG, and you’re a CA and a CFO, so you’ve spent a lot of your life studying. Congrats on that. The CFA course, as we know, is pretty monstrous. What was the culture like at these companies and what did you learn that helped you on your journey to CFO? Well, I guess CFO, you're really going to be now moving into a slightly different role, not just CFO, but you're going to be managing a private equity firm of your own, but my question really is about the culture of these companies and how did that help you on your career journey?

ADAM KAJEE: I must say, I've been very fortunate, both companies have great cultures. Coronation from a work-life balance perspective is really great. I think the guys there are very sharp, but they have a high focus on living a balanced life and exercise because it is a very stressful job, managing other people's money. Ultimately it comes down to numbers being the return, so you can't hide from your performance. But I learned from them that you've got to manage that stress and they do it through exercise during lunch. I actually went on a couple of lunch runs with them, I almost half died on the mountain because my background is swimming, so being out running is definitely a different kind of exercise for me. But I definitely have to say, learning how to manage stress and actually being quite modest, the guys there have done extremely well and live a modest lifestyle, which is great to see. Then the PSG Group, so obviously I was at the holding company, so a very small company in the heart of Stellenbosch, so not quite corporate like Coronation. But also a great culture where it’s more driven by results. I was lucky enough to be part of that mentoring programme, where I got access to the engine room of PSG. So I attended all the board and executive meetings, giving me great exposure to top business executives and their way of thinking, which ultimately contributed to my ability to think critically. So I think that played quite a big part in where I am today.

CIARAN RYAN: Critical thinking, of course, is mentioned so much in executive positions, in the C-suite. Particularly in investments, when you're sitting there as an analyst and you're proposing something and you’ve got to expect somebody is going to just shoot bullet holes all over the thing, and you've got to be able to stand your ground and argue your case. I'm sure that's pretty much what you've learned, right?

ADAM KAJEE: You’re 100% right, it's understanding the industry, looking at all the various angles and potential outcomes and looking at the various routes, and it's really believing in investment case, and ultimately having a logical conclusion to ultimately why you’re making that investment.

 

Providing education opportunities for previously disadvantaged children

 

CIARAN RYAN: Tell us about the Ruta Sechaba Foundation. What is that?

ADAM KAJEE: So that's something I'm actually very, very proud of. The Ruta Sechaba Foundation basically provides academic and sport-related scholarships to qualified black learners to go to Curro-managed schools. We set the foundation up in 2016 when I was at PSG, so I am one of the founding trustees, and I've served as chairman since inception. It's quite great, we've had the privilege to offer over 1300 bursaries to date to previously disadvantaged children. As I said, it’s something that I’m extremely proud of because I was fortunate enough to get a scholarship to go to Reddam House for water polo, and receiving a private education, which ultimately led to going to UCT and becoming a Chartered Accountant. So to be able to provide a similar opportunity to previously disadvantaged children is definitely something I'm extremely proud of, especially the sports elements of the foundation was almost modelled on my life experience. On the sports side we have also launched the Titans cricket programme, which, specifically provides scholarships to extremely poor, previously disadvantaged kids. So we provide them with kit, pay all their school fees and pick them up from the township and so on, and just give them an opportunity to receive a private education and pursue cricket. Then ultimately, we are hoping that one of the Curro schools will eventually be one of the top cricket schools in South Africa. Maybe one of these days we’ll see one of our players on TV representing the Proteas, which I think would be fantastic. I am also hoping that we are going to produce a couple of CFOs who will eventually be on your show.

CIARAN RYAN: How do you get funding for that? That is a pretty impressive stat that you’ve just thrown out there, 1300 people have been helped through schooling. Where do you get that funded?

ADAM KAJEE: It’s 1300 bursaries that we’ve given over the last four or five years. But it’s quite a nice model that we’ve put together, so the foundation has access to basically 2.5 million PSG shares and through the dividend is how we fund the bursaries. So PSG being the seed funder or the main funder, and we have actually to date brought on another five or six sponsors that have now come on board, the likes of Capitec, and then three or four independent guys. So we’ve built up quite a nice funding base, so hopefully we can keep that going, as long as PSG and Capitec are paying dividends, we should be having many first bursaries in the future.

CIARAN RYAN: Interesting, okay, let's talk about the CFO position and how that's changing because you're quite a new or let me say a young CFO. If you go back ten years, and you probably would have been fairly well aware of this, it was regulatory issues, it was keeping the books but now you've got all sorts of other things. The CFO increasingly seems to be the CEO's shadow, he's expected to know things, in fact, he's expected to know just about everything. Is that something that you find challenging that you've really got to be this encyclopedia of knowledge, what's going on in the regulatory space, what's going on in the world of finance, how are things developing. What's your take on that?

ADAM KAJEE: As you said, ten years ago I was still studying at UCT, but I have no doubt that the landscape has changed over time. Typically, CFOs are usually highly qualified individuals and there is that expectation that you need to know everything. We do live in the age of information, where everything is at our fingertips and Google is just a click away and you can find the answer. I guess being a good CFO is not knowing all the answers but being able to find the right answers and I guess that comes down to surrounding yourself with the right team. So if we talk cybersecurity, it’s having a good IT manager or IT director who can ultimately help you from that perspective because to be a CFO and be a jack of all trades might be a step too far. But I think if you’re able to surround yourself with the right people and, as I said, find the answers, rather than know all the answers off the bat, I think you are on the right track.

CIARAN RYAN: There is some research that was done at Queen’s University in Canada, which is called from CA to CFO, and they identified all these different competencies that a CFO is expected to have. It's just very interesting when you start looking over these competencies, like cybersecurity, strategy, human resources, it just runs on and on. Of course, these are things that you don't learn in the academic environment. The South African Institute of Business Accountants introduced a designation called CFO (SA), which is basically to recognise CFOs who've acquired those competencies and skills through the work environment. It's something that CFOs aren't really trained through the accounting schools, that's the point I'm making here, they've got to be a sponge for knowledge and acquire these skills as they go, and a lot of them are soft skills. Do you find that's the case?

ADAM KAJEE: Yes, 100%, I couldn't agree more there. I always looked at university to think, why am I studying all these things, are you actually going to use it practically in the real world, and the answer is no to a lot of it. But what university does do is it trains your brain, as you said, to be a sponge. That honours year really is a tough year and you feel like you have accomplished something, taking in a whole lot of information, sitting down for a five-hour paper and being able to perform under pressure, I think that’s good training. So to your point, we are able to absorb and understand a lot of information, so I definitely do agree with that. You were talking about the softer skills and without a doubt there as well, interacting with the banks, the shareholders and so on, it’s something you can’t study, it’s something you need to experience in real life and have a good EQ in terms of being able to deal at that level.

CIARAN RYAN: When you’ve observed working with people like Piet Mouton from PSG and so on, and others, what has impressed you about the guys who have been very successful in business, the way they conduct themselves, what have you noticed that’s different?

ADAM KAJEE: I must say, it was quite interesting because when I got the job as executive assistant to Jannie and Piet, so Jannie was obviously extremely successful, ultimately started Capitec and PSG, he’s one of the top businessmen in South Africa, and Piet is his son, and you wonder, well is he the CEO of PSG because he’s Piet’s son or is it because he’s the sharpest guy and the right guy to have in that position. I must say, the first exco that I sat in it was very apparent why Piet was the CEO, he’s super bright, and his mind, he is able to figure things out very quickly, and he has a good understanding of South Africa and the world, and how things work. I think especially from his perspective and, as you alluded, you need to be a generalist, know a whole lot of things, so that you can figure things out for yourself or if things don’t look quite right, at least you have a high level understanding to be able to identify those things.

 

CA qualification is a great base for entrepreneurship


CIARAN RYAN: Tell us a little bit about yourself, where you grew up and your career journey. It seems like you've been extremely busy. Where did it all begin?

ADAM KAJEE: I'm a born and bred a Capetonian, so I have lived all my life in Cape Town, except for four years when I lived in Botswana from the age of three to seven four years from the ages of three to seven. So ultimately in Botswana it was extremely hot, I always loved sports and I fell in love with swimming because we were in the pool pretty much 24/7. So back in Cape Town, swimming was my passion and I really did excel at that. I was an SA swimmer until I was 14 and then I fell in love with water polo, so that’s when I went through to Rondebosch Boys. It’s one thing swimming by yourself but throw me in a pool with a ball and some mates, and then all of a sudden, I am extremely excited. So I fell in love with water polo and I played water polo all the way up to SA Men’s. As I mentioned, I was very lucky to get a scholarship to go to Reddam House on a water polo scholarship and then from there I got into UCT. As I mentioned I have always seen myself as a born entrepreneur and maybe that’s because I have seen my dad do it, he’s a CA himself. So when it came time to study I would always ask him, what do you think I should study. He said, well, CA is definitely the best route. I think if you are wanting to be an entrepreneur in South Africa, it definitely does give you a great base for that. So I studied business science, finance honours at UCT and then honours in accounting. Then I did my three-year articles at PwC and then, as I mentioned, my love for investments took me to Coronation, then to PSG and ultimately, to Evergreen. As I mentioned, going forward it’s going to be following my passion and driving ThembiSA fulltime from December 1.

CIARAN RYAN: How many years did it take you to do the CFA, if I may ask?

ADAM KAJEE: Fortunately for me it was only three years.

CIARAN RYAN: That’s pretty good going.

ADAM KAJEE: Thanks, maybe it’s got something to do with the swimming and the water  polo and the sport but I am quite a determined person, so when I set my mind to something I generally get it done. So when CFA came around there was no real option for failing. But as you said, five years at UCT, three years articles and then another three years of CFA, so eleven years. I am hoping that’s the last of the studying and now it’s up to using those skills and building some businesses.

CIARAN RYAN: Okay, so pretty much Cape Town-based, there was some time in Botswana, and a lot of studying in between all of that.

ADAM KAJEE: A lot of studying and a lot of sport.

CIARAN RYAN: I’m just looking at some images of you in the pool with a ball in your hand. Just a couple of questions as we wind down here. I want to ask you about the accounting profession, your opinion about the accounting profession, is it in crisis, given the scandals that we read about at Tongaat and Steinhoff and so on. If it is in crisis, what do we do about it?

ADAM KAJEE: I assume you’re talking about the audit profession, they certainly have had a bad run over the last couple of years but I wouldn’t say they’re in a serious crisis. From what I can gather, KPMG seem to be recovering and at the end of the day, companies from a statute perspective still need audited financials, so they're always going to have business. I guess it’s just more about how much reliance an investor or bank or reader of financials places on it but ultimately, there will always be a place for them. But they do have some making up to do, that’s without a doubt but, as I said, I don’t think they’re in a serious crisis, I don’t think the profession is going to fall away ultimately. Another one to look at it is if there wasn’t the accounting profession, how many more scandals would we have versus having them around.

CIARAN RYAN: It’s a good point, it is the science of good order and sometimes there’s slippage, and sometimes there are people turning a blind eye and all that kind of thing. I guess it does come down to the ethics of the profession and ethics is very much at the core of the profession, and I think some individuals might not take that to heart as they should. But I do agree that there does seem to be a recalibration of the accounting profession and a return to its ethical core. What do you think?

ADAM KAJEE: I agree fully, and I think they have no choice, they have to do that. As you said, the scandals, whether it's actually from negligence or whether it's a mishap, either way I agree that they need to take a turn.

 

‘Transformation isn’t happening quick enough; job creation is needed more than ever’

 

CIARAN RYAN: I actually wanted to ask you what book you would recommend because that's a compulsory question for everybody who comes on CFO Talks, but there's another question before that, you're busy actually on a fundraising exercise for ThembiSA, which is your new private equity firm, my question is where do you actually approach people for funding? Is it your track record, is it your connections that you’ve already built up in the industry, is it angel investors, how do you go about that?

ADAM KAJEE: It’s a good question and that’s obviously something I’m in the process of solving. At the moment it’s myself as the CEO and I am fortunate enough, as I mentioned, that my dad is coming on as the chairman and he’s quite an experienced businessman and doing it all himself. With the angle, very much the impact, social investing, job creation and transformation, so something like the PIC would be a potential funder, so looking to approach them. If you look at their budget, they look to allocate roughly R7 billion per annum. Hopefully Covid-19 hasn’t affected that budget too much. The way I look at it is that transformation isn’t happening quick enough, job creation is needed more than ever, the government’s problem is ultimately the PIC’s problem. So they are going to need a lot of black managers all working towards the same thing. The problem is so big that you need an army to almost fight this war. So that’s the kind of approach I am taking there. So using my network of wealthy individuals, various fund of funds and then also look to offshore investors who want exposure to the South African market, the private equity market. As I said, I think there definitely is a higher emphasis on impact on social investing, so it’s not just about the financial return you’re getting. As I say, that’s a great alignment because ultimately, that’s how I make my money but there’s a bit more to it than just the returns, it’s the impact that you have on the society that you invest in.

CIARAN RYAN: Exactly, I think if you're going to approach the PIC or any of the large funding organisations, you're going to have to come with an impact investing approach. By the way, for people who are not familiar with impact investing, just maybe quickly describe that.

ADAM KAJEE: It’s almost as I mentioned, so it's not just looking at financial return, so there's more to it, what impact do you have on the society that you invest in. For example, mine being job creation and then another agenda being transformation. The project can have very much a social element, so what kind of good do you do while trying to achieve financials returns at the same time.

CIARAN RYAN: Okay, great stuff, final question, are there any books that you would recommend, and they don’t have to be accounting books or investment books.

ADAM KAJEE: The Monk Who Sold His Ferrari by Robin Sharma is definitely one I would recommend. Have you read it?

CIARAN RYAN: No, I haven’t but it’s been recommended by somebody else. Just tell me what appealed to you about it?

ADAM KAJEE: It’s a great perspective on life and what true fulfilment looks like, so it’s really a good book. It’s about a lawyer who was very much in the high life, it was all about the money, let me not give too much away but Robin Sharma tells it in a very good tale, he’s a very good storyteller, and he brings a lot of life lessons through in the book. It really gets you thinking about what true fulfilment means in life. It’s amazing because when you’re young you think that being successful in business and making a lot of money that’s it, and as you get older you quickly learn that that definitely is not the case. For me, it’s more about how do you impact other lives and how do you influence other people’s lives. Coming back to the Ruta Sechaba Foundation, that’s something that when I look back is probably one of my biggest achievements. So that’s what life is ultimately about for me and that comes through quite nicely in the book, so I would definitely recommend that. Then one more book that I have actually recently read is Principles by Ray Dalio, I don’t know if you’ve read that?
CIARAN RYAN: Ray Dalio the hedge fund manager?

ADAM KAJEE: The hedge fund manager, yes. Apparently, he’s the best hedge fund manager of all time, who knows. But what he is very good at is explaining his principles through this book, so it’s life principles and work principles, and he’s got quite an interesting take on certain things, and he’s definitely an out-of-the-box thinker. When someone is that successful, how do you not pay attention.

CIARAN RYAN: I see quite recently he’s gone into Bitcoin. We’re starting to see some of the very big players going into the cryptocurrency space, which I find very interesting.

ADAM KAJEE: Likewise, because if you come from a background like Coronation or any kind of value investor, then the first thing they will tell you is how do you value it. So that is very interesting but once again, I think Ray Dalio definitely has a good world view on certain things, so the fact that he’s gone into cryptocurrencies is definitely interesting.

CIARAN RYAN: Yes, indeed. Wow, what a fascinating discussion, there are a lot of avenues we could have gone down, I guess we are just going to have to get you back in a few months’ time or early next year when ThembiSA is up and running that would be a good time to talk and maybe your first round of funding is settled and you’re starting to make some investments. The country does actually need this kind of funding and this kind of approach and viewpoint that you’ve just been talking about, how are we going to get this country back to work and prospering again. It sounds like you’re a pretty determined guy, I was going to say you should run for president but that might be a stretch too far.

ADAM KAJEE: [Laughing] That is no easy task.

CIARAN RYAN: No, they will eat you alive.

ADAM KAJEE: It’s definitely the politics angle there and that’s a different ballgame. Ciaran, it’s been a great discussion and I would actually love to come back on the show and hopefully, as you mentioned, in six months’ time I can give you some good news in terms of progress with ThembiSA, obviously getting funding isn’t an easy thing but, as you mentioned, I’m determined and, more importantly, determined to make a difference in South Africa. As I mentioned, we need a lot of young CAs or any kind of degree, but a lot of young people all driving a similar agenda, which is ultimately to live in a better country. As I said, for me, that is creating jobs so that everyone ultimately has a better life in South Africa.

CIARAN RYAN: Adam Kajee thank you so much for joining us on CFO Talks, what a great discussion, very lively and I just wish you the very best. Yes, indeed, let’s check in again in a few months’ time and see how you’re doing, but thanks so much for coming on.

ADAM KAJEE: Thank you, Ciaran, that was great, really appreciate it.

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