Mustaq Brey, a chartered accountant by training, battled to find somewhere to complete his articles in the 1970s, but eventually succeeded in becoming one of the first black CAs in Cape Town. His determination has stood him in good stead. He is the co-founder and CEO of broad based black-controlled company Brimstone Investment Corporation, which listed on the investment companies sector of the JSE Securities Exchange in 1998, becoming the first Cape-based empowerment company to do so. Brimstone, which has a portfolio of strategic listed assets, trading securities and private equity investments, is one of the Western Cape’s few empowerment successes with 2006 revenues at R378 million and headline earnings exceeding R1 billion. Its JSE market capitalisation increased to R1, 65 billion from R963 million at the end of 2005. The company’s strategic investments are focused on financial services, branded consumer products and technology.
Brey first set up his own business in 1985, after realising that South Africa was simply not producing enough black accountants to meet market demand. He built a national practice, KMMT Brey, consisting of 16 partners. In 1994, he and Fred Roberts, who is today the deputy chairman of Brimstone, visited the US as part of an initiative to encourage investment in South Africa. “That was when we discussed the fact that there were several empowerment companies that had been established in Johannesburg, yet not one in the Western Cape,” recalls Brey. “We agreed that we would set up our own BEE initiative on our return home.” The two came back to a fishing industry stand-off and, as a result of their standing in the community, were asked to intervene. This gave them exposure to Oceana fishing company. “We asked them to sell us shares in the company, which they agreed to do on condition that we raised R3 million without going to the banks. Fred was a teacher and I had all my money tied up in my business, so we agreed that we would each borrow R25 000 which we got from Investec. It was important to do this because we believe that you work much harder to win when your own money is in the game.”
They succeeded in raising a total of R11 million from shareholders drawn mostly from the Cape Flats. Brey highlights the company’s commitment to its investors and to making sure that Brimstone continues to place shares in black hands. “We have always had strong community backing and our aim is to be profitable, empowering, and make a difference to the lives of the people we are involved with.”
But Brey has faced his fair share of challenges too. After Brimstone listed, there was a correction in the market and the company’s share price fell from R4 to R1. “The vultures came and suggested to us that we de-list and sell out to them, but we refused,” says Brey. “We got a terrible fright though, so we sold off our assets by June 1999 and paid out dividends to all our shareholders. That was when we decided to rebuild the company and keep it small.” Brimstone’s big break came in 2003, a year in which the company focused on partnerships. It acquired a 25% interest in Lenco and doubled its stake in Sea Harvest to 21,5%. But its most significant deal was involvement in the acquisition of Afrox Healthcare, at R3,5 billion the biggest empowerment transaction outside the mining industry.
“The most important lesson we learnt along the way was that you have to control your growth as you move forward. It’s important to set limits. Today we are far more cautious,” Brey says. Brimstone has undergone a consolidation phase over the past year and has sold off a large asset that has left the business cash flush and made investors very happy. “Our underlying philosophy is to involve Brimstone in ventures that deliver sustainable, quality earnings for our investors, and enable us to have a positive social impact.”