Episode 105 - Investing in Partnerships with Johan du Preez

 

Subscribe to the Podcast:

Johan du Preez’s career is defined by ambitious initiatives and big results. He says,“Capital always has an agenda. Whether by design or default, explicit or subtle, positive or negative, the application of capital facilitates and drives a bigger agenda.” Find out how this philosophy guides him to invest in partnerships that benefit the Kingdom, not just the marketplace. 

All opinions expressed on this podcast, including the team and guests, are solely their opinions. Host and guests may maintain positions in the companies and securities discussed. This podcast is for informational purposes only and should not be relied upon as specific investment advice for any individual or organization.


Episode Transcript

Transcription is done by an AI software. While technology is an incredible tool to automate this process, there will be misspellings and typos that might accompany it. Please keep that in mind as you work through it.

Henry Kaestner: Welcome back to Faith Driven Investor, it is awesome to be back here with Luke, my great friend who has abandoned me, has moved to Nashville and some really great guests that we've got today, Luke. It's good to be back in the saddle has been a little while since we recorded a podcast and it's good to be back with you, brother. It is good

Luke Roush: to be back and it's good to be here with old friends.

Henry Kaestner: So indeed. And so today is another one of those special editions. You know, I talk about this all the time as we meet this great special edition. And indeed, today is just that. I love you one for many reasons. Just got a great heart for the Lord. But I also love the way that we've been able to challenge and encourage each other over the course of the last four or five years as we've gotten to know each other better. I can't remember when I originally met Johan, but when I did meet Johan, I really felt like I met this kindred soul, a guy who had been an operator who is now an investor who was really just leaning into his faith and trying to understand how he might honor God. But he was doing it, not in Silicon Valley, where I live, or Nashville, where Luke is or some of the other locations he was joining in South Africa. And I was just fascinated by that. And as Luke and I were talking about expanding the work of Faith Driven Investor to highlight fund managers people that were serious about their faith and who wanted to have spiritual integration and how they invested with excellence, I could think of no better story than Johan. And so as we get ready shortly to launch the African version of Faith Driven Entrepreneur and investor, we're going to do Faith Driven Entrepreneur Africa. We want to spend a lot more time focusing on the continent of Africa. We want to change the narrative a bit to help people understand the opportunities that are there. I don't know what your preconceived notion might be of Africa. Maybe it is one of great opportunity in a marketplace that is thriving and it's young and it's vibrant. But we're going to try to scope that out over the course of this year periodically by visiting Africa like we are today to understand what's going on in the marketplace in a way that hopefully you, the listener, might feel encouraged to participate, or at least pray about how you might be involved. So without further ado, Johan, thank you very much for being with us.

Johan du Preez: Great to be here. Thanks. And they always encouraged by this information.

Henry Kaestner: Thank you. So we'd like to do this, of course, with all of our guests. And we actually this is a special edition because not only do we have Johan, our great friend and fund manager, but we've actually asked one of his portfolio companies Job Jack Christian, to come on board as well, to talk a little bit about what it looks like to have a fund that invest and the relationship that a fund manager can have with a portfolio company. And ultimately, what happens on the ground? What is it the job Jack does? And then what does that relationship look like between the entrepreneur and the investor? So, Christian, welcome to we're looking forward to hear more from you at the end of the program, but glad you're here. Welcome.

Christian van den Berg: Thanks so much, Jan. Super blessed to be a part of this conversation.

Henry Kaestner: Awesome. Thank you, brother. OK, Johan. Who are you? Where do you come from?

Johan du Preez: Hey. So I was born in rural South Africa. Very small, actually on a farm closes town, probably 10 miles away. Great place to have an upbringing, I must say. My first recollection from my family were that they were glad to see me, that they liked me, and they probably believed I was going to do something good in life. So I never actually realized how big a blessing that was until later in my life. Yeah, so I grew up there, dad. Good business guy. One word for him would be integrity. You always wanted to do the right thing. Always did the right thing. Passed away about 20 years ago, but my mother is still alive and she's a woman of prayer, so she prayed for us as children. She's praying for us today. She's praying for this business today and for our investee companies. So that's just a brilliant privilege to have.

Henry Kaestner: Christian, did you know that we're going off script here? Did you know that Johan's mother is praying for you?

Christian van den Berg: John, as mentioned it every now and and I just feel it in my spirit. So, you know, when you get that deal, it's all right.

Henry Kaestner: So when we're finished with this podcast, I'm calling my mom, OK. Let's go back to the story, Johan, please. By the way, when you're growing up on a farm in South Africa, is this one where you might be visited by wild animals?

Johan du Preez: No, not quite. So I can claim that one. But yeah, it was pretty rural, also the primary school. So we don't have middle school road. We have primary school high school in South Africa. The primary school that I was in, grade one to seven would have one hundred and eighty pupils in total, so we were like seven boys in a grade. So needless to say, you were pretty good at everything, right? You were an athlete, you were a leader, you were whatnot. So that's good for your self-esteem. So, yeah, that was rural and that was good. And then I went to Pretoria, which is a city in South Africa, to study pharmacy. Don't quite know why I studied pharmacy, probably in the town that I live. That was the only professional guy I saw. You know, we did some business on the side as well, so pharmacy was good for me, though no one. I met my wife in pharmacy school, which was still, to this day, the best transaction of my life. I've done a few, but that was the best one. I guess I'll do another few years of organic chemistry to get that privilege. But it also paved the way for me to get to the US, ultimately, which I didn't foresee because I developed a shortage of pharmacists in the US at some point and they were recruiting internationally. So that would pave that way for us there.

Henry Kaestner: Okay, so Johan, you're based in South Africa. And in the intro, I talked a little bit about how unique that is. And there are folks who are having a mental picture here of what South Africa is like, but you not only know it well, you also know the United States really well. So you've spent enough time in America and being an operator to have a perspective of what business looks like in America and what it looks like in South Africa. What are some misconceptions that people might have about what commerce looks like in the marketplace looks like in South Africa and does share a little bit about the landscape you're seeing?

Johan du Preez: OK? South Africa is an incredible country, as you well know, having visited here and before I get into the investing side just to say the people, I just love the people of Africa. I mean, people have real servant hearts. That's probably our number one asset. You know, you think about different countries like Israel being well known for inventing stuff like the US being having that gift of commercialization. And you think of Africa and people really have a heart to serve, which of course, have been misused over the years as well. But it's a great asset. I think from a misconception perception, you know, you have a first world infrastructure in South Africa, you have an excellent banking system. From a technology perspective, I would say superior to the US because we started later. So it's more mobile friendly and just advanced. The regulatory framework is excellent. Good central bank, good markets, very liquid markets. That's why our currency tends to fluctuate quite a bit because it trades so well. That's on the one hand. But then on the other hand, you still have a bit of a regulatory arbitrage in terms of not, you know, it's not that difficult. You don't have to have five licenses to operate, one business type of thing. You know, you still have a bit of room to move in. You can still do a lot with a little bit of capital. So that's the beauty of it in terms of significance on the African continent. Number three, in terms of GDP after Nigeria and Egypt, and number four in terms of GDP per capita. So it has huge influence on the continent, although it's only 5.5 million people. But we have a fair amount of challenges. We sitting with an unemployment rate of about 30 percent with the GDP of it, was just forty six percent a few years ago. Now we're sitting at 70 and heading for 19 three years from now. And that is a consequence of really a period where we had a corrupt president between 2009 and 2018. So great country all together. People probably underestimate the infrastructure, but if they think about Africa and they have a mental picture about South Africa,

Henry Kaestner: OK, that's good. OK, so before we go on, I just want to make sure that we share with our audience these two funds you run. Can you just describe what Saad is and what Tree of Life is, please?

Johan du Preez: Yes. So coming out of the first half of my career, which was as an operator and a turnaround CEO, then when God stopped and called me out run about 2006, I wasn't exactly sure what I should do. But I understood that it was about capital and I understood that it was about not owning it and just hitting it. So essentially created two entities a not-for-profit entity called the Tree of Life Foundation, which is a classic nonprofit. But that entity owns 100 per cent of a cutting edge investment company called Solid Investment Holdings, where we do investments, where we had a fund manager with a vision to actually be like an investment bank one day a significant player in South Africa in the financial services field. We call it the Hobby Lobby or the Chick-Fil-A of financial services. That's the way we're going. Although at the moment we are focusing primarily on private equity.

Luke Roush: So one of the things that was really clear on from the first time that you and I met and I believe we originally met through Christian Economic Forum, but you are a relational person, and it's true, I think globally that relationships matter in terms of how we invest. But as you just think about your own work as an investor and some of the relationships that you've cultivated over. Years, you know, maybe just give us some observations in terms of what you look for in those kind of partnerships, in those relationships.

Johan du Preez: Right? So look, I mean, that's spot on. I think we all deal with relationships all the time, but you can never over emphasize the importance of that. In fact, I didn't actually have a clue. You know what Tree of Life meant when I named the foundation Tree of Life? And then because God just gave me that name, and then years later, I said to the pastor friend, and he explained to me the difference between the three of knowledge of good and evil and the tree of Life being a relationship with God rather than a contractual and transactional one, rather than a knowledge of good and evil being a father son relationship. So it's the foundation of what we do in terms of business first. All of the investee companies, but then also with co-investors, with ministries locally that we fund. I over the years have learned, you know, if someone doesn't have an ego, if they are willing to objectively look at themselves, if they don't see others as role players in their movie, but they have an outward mindset of seeing the bigger picture, then you know, you can go a long way with people like that. And it's one of the main criteria we look at when we invest is not only whether this would be successful or not, whether this would be a partner, that we can walk along the road we have that we can learn from. But then we can also sometimes share some knowledge with and they will objectively consider that.

Luke Roush: So that's helpful. And you know, I love the Paul Christian in here as well just to get his take. But you know, different ways to think about relationships and kind of building community. Some people do it, you know, based on proximity. Some people do it based on, you know, similar interests or different causes that you're drawn to together. Others do it in a way that's very tied into their church or to their faith. Any observations Christian from you in terms of what you've seen work well, what you want to do more of maybe what you want to do less of?

Christian van den Berg: Yes. So thanks for the question. I mean, you know, speaking of the father son relationship, you know, outlook and we've really come to appreciate that in English, it's not, you know, not coming to us for the country. You know, I'll take that really coming for the relationship behind it, for the discipleship behind it. And I think once you can put away those monetary politics, it's so beautiful to be able to move freely in a space where, you know, going for mentorship, where you're receiving feedback, choosing to accept that feedback or not. And so it's really been super liberating space to operate in. Does that make sense?

Luke Roush: Yeah, it's great. And maybe speak just a little bit on the on the length of time that you know, folks before you choose to partner with them.

Johan du Preez: So I think they also Praxis of could shorten their time. So I mean, oftentimes it would be great to know them for three years or so. But like, for instance, with Christian, I think our relationship via Traeger, which is the South African version of Praxis, you know, that's just shortcuts, because by the time someone has decided to take a year and enroll in a tree, pay good money to do that, but also that they want that in their lives. You know, if you meet someone in that type of forum, I think, you know, you don't need the same amount of time elapsed before you actually know them really well.

Henry Kaestner: So I want to go back to Christian for a second and Christian. You've got a company called Job Jack. So what is Job Jack? And then you also mentioned Trigger two, and maybe you can explain to us what triggers an organization that I've gotten to know well and admire a lot. But I'd love to hear about it through your lens. So why don't you give us like a little bit of a flyover about how you got into trigger, what trigger did and then what job Jack does?

Christian van den Berg: Yeah, cool. Awesome trigger. I mean, I was a little reluctant when I heard of another accelerator. It's the buzzword for tech startups. But so what triggered is it's this amazing organization with the heart behind redemptive business to call entrepreneurs, to cool business people that have received the vision, whether they know it from the Lord or not, and to realign them into seeing what is the redemptive purpose behind why God is giving them that vision for that specific business. And so it's just accelerated. That takes a group of 18 to 20 entrepreneurs for profit and nonprofit and leads them in a space of a year with a few gatherings. That includes, I think, 40 mentors that have dedicated their time to really come and showcase life's lessons and what God's taught them as well. And so it's just incredible space where relationship is both in building business together, but also respecting what God's called each individual to do. And so that was an amazing blessing for us to be really opened our eyes into the differentiating factors between what we believe is your typical sort of pop and reasoning for growth as opposed to, you know, why God's called us to do something. Yeah, it's just it opened our eyes as founders, microfinance myself, but also we could relate that to our employees and to why we're doing what we're doing. To have that his base behind each decision and drug, Jack, as you go, Jack is a sort of tech start up company that focuses on automating entry level recruitment. So our hardest to see the world, the employed, we've noticed that there's a massive gap between your lower skilled type of jobs, jobs that don't require qualifications above high school, where there's a load of money being spent and wasted for job seekers that have to print out paper CVS and take public transport to try and find jobs. John alluded to it earlier, so unemployment rate in South Africa is bordering between 30 and 40 per cent. And if you include people that are despondent that on issue, even looking for work, it's close to 50 per cent. And so with this, this massive disconnect and loss of hope, we've come to see how we can remove those areas to access for opportunities for a market that has been overlooked from a technology perspective and to see how we can facilitate the marriage between employers, large employers in South Africa or small and large and the very living jobseekers that are looking for those opportunities. So we've made it legal for any data free for these types of jobseekers to get profiles and to get connected to a relevant job opportunities. And on your company's site to automate the entire process for them so that they're not struggling to find someone relevant. And you can place someone in a sustainable opportunity so that they can then look after their families and kind of the economy can grow from that point on.

Henry Kaestner: So my life as an investor, I like to look at deals from both the bottom up and top down if I can. And you spoke a lot to the bottom up. And Johan, I think I chose you very, very well for the program. And I love the trigger conference. When you get a young man or young woman who's so captivated by this sense of being able to make a redemptive product or service and just having faith be such a part of their life and their work. But there's also a top down element. This really intrigued me too, is, as I've heard, there are going to be more entrants into the job market in Africa over the course of next 20 years. And I think India and China. I mean, so it's a it's a big opportunity that's really growing. And so you've got this redemptive service aspect of what you're doing, but you're also in this massively growing market. Johan, I'm wondering if you could speak and just give us some more illustrations of some of the opportunities you see for, say, Western investors or non-African investors that are looking to participate in Africa and have thought their, gosh, you know, African investments. It's just it's another fair trade coffee deal, right, that I'm going to go ahead and we get bags of and I'm going to sell at church. There's something completely different that you're looking at. Give us a flyover about how you look at Africa, how you look at opportunities. What are the top down opportunities you see?

Johan du Preez: I think capital is scarce in Africa, specifically capital in certain pockets. So if we just talk about the investment landscape in South Africa for a moment and again, you know, the equity markets are really well structured and operate well. The big private equity funds operate well, listings, mergers, the listings, all of that stuff. But as soon as you get to a market capitalization of 20 million U.S. dollars and below, there's just a scarcity of capital. And the reason for that is also because you need some non-financial investment to unlock the financial capital. You know, these are typical entrepreneurs that have done something right and they are building a great business, but now they're running into those type of things that they've never seen before. You know, they've never put together an executive leadership team. They've never registered a patent. They've never had to think about how to structure the balance sheet for growth. They don't know a corporate banker. They haven't made a good merger lawyer. So I think you know where we see the great opportunities that actually come alongside those entrepreneurs and help them before you get to is different industries just generically in terms of size of the company. That's where the jobs are being created. That's what could change the country as well. But it is from a pure commercial investment management business perspective. It is messy. It's not as scalable as just investing capital and getting some reports. Every quarter of how the company is doing. It means seeing companies on a monthly basis, being there for them, rolling up your sleeves a bit. So I think that probably is a little bit different from the first world because we don't have the same level of social capital. Many of the entrepreneurs didn't grow up in a family where the dad was speaking about business at the dinner table, and that is where I see the biggest void.

Luke Roush: Mm hmm. So maybe just in terms of that context, recognizing that you have capital that you're providing to folks who kind of have a dream or a vision of how they're going to change society, how do you try to get to the answer of your ability to bring value beyond stroking a check, which is something that you know, makes a ton of sense to me? So we don't just want to be seen as a capital source, we want to be seen as. Someone who can really pour into other aspects of the business beyond just financial needs. And yet sometimes it's hard to unpack that when you are the one that's actually writing the check. Maybe just speak a little bit to how you approach that in terms of process in an African context.

Johan du Preez: I think, look, the first common sense thing to do is to not invest where you cannot add value beyond capital, right? So really, to be honest with yourself as well, when you look at a company and realize, do we have what it takes to make a difference in this company? That's the first thing. The second thing is that you guys do so well at Faith Driven Athlete mean, you think about it as a movement and not an organization, right? And if you have the mindset of a movement rather than an organization, then don't try and just find everything in your company. We just did a retail investment enough last year. Go look and see that none of us have deep retail experience. Look for someone that she is your values. We found the ex financial director of a listed retail group have him co-invest with us and bring that benefit to the company that you're investing in. So looking then we as a country want to help you, not just we as a company and help those entrepreneurs find people in the economy that they wouldn't normally have access to to come and help with that.

Henry Kaestner: Are you on you talk about this concept of co-investing with people who are experts in an industry and look at my investment experience that's been really successful as we've looked in investing in foreign markets. I think especially in Indonesia, having local co-investors was really important. But then having people who have specific industry knowledge in on the deal with you seems to make a lot of sense. Is that something you look for in most of your investments? Just talk us through that a little bit.

Johan du Preez: Yeah, for sure. I think we have as we have a wide experience in the financial services industry. So for most of that, we have it within our closed network in terms of board members, in terms of employees and all of that. But as soon as we go outside of that, our default mindset is actually to look for people that's going to help. And I've just been amazed at how willing people are, especially people that may be retired, have sold the business and they are very keen to give back, but also at another level, sometimes just with a due diligence. You know, I've had asset managers just give me and analysts. The bank analysts had a company to give me their bank analyst for a week or two just to help us on the due diligence. People actually want to make a difference. And you must just create the opportunity for them to make a difference. So I think to answer your question, that's our default mindset is that we actually expect someone out there that's going to be able to help us and that we'll do a better job than we can and we must find him or her.

Luke Roush: You have to understand just your basic philosophy of investing and how you approach capital markets in putting capital to work.

Johan du Preez: So we think about capital a lot. You may have heard that we say capital always has an agenda. It's we like to make things simple for ourselves and for us. Capital always has an agenda, and our biggest job is to make sure that that agenda is Christ. So if you think about capital in the application, that all of it facilitates a lot of things. And if you think about capital markets or financial services markets, it really helps you to achieve something with your capital that you wouldn't have really been able to do on your own. But by coming along with other people that have the same agenda, you can achieve that. And that could be as simple as you want the 20 per cent IRR, but it may be as complicated as you want to change the world, and you may not be able to build an airport on your own. But if you join an infrastructure funds, just sure enough you can build an airport. You cannot insure your own health risk. But if enough people can join the pool, then between you, you can ensure each other. So for us, the notion of collective capital leaving behind a common purpose is just so attractive and such a no brainer for the Christian community as well to come along and say, Let's pool our like minded capital. For us, the sweet spot is really donor advised fund capital for that reason, because someone has already decided that they want to set aside this capital, that this capital is not going to be for them in their family. This capital needs to make a difference of some sort. And then you find that about 80 percent of what we manage is donor advised fund capital. The expectation for excellence is no less. The competence requirement is nothing less than what you would expect in a cutting edge private capital business. But the outcome is somehow different because whatever we can generate in returns, whatever impact we can have on an investment is in that realm of the like minded. Set aside capital and maybe briefly, if I may, you know, we see a few themes emerging as we thought experiment. With this type of capital, you find this thought up like Christiane, this is this is a business. This is a great idea, but I know the author of this idea is God, and I want to honor him in this business and I need access to capital. But I don't want capital with another agenda, someone that's just going to set the speed of my treadmill and, you know, doesn't want to hear about our purpose. So start ups, you see that early stage companies, you see it often in replacement capital to Christian brothers sort of business. It's all guns blazing and no one wants to retire now he or she wants to get fair commercial reward for what they've built. At the same time, they don't want to compromise, you know, on what they allow into the business. So, you know, that is really important. And I think to step into the shoes of that exiting shareholder, the most recent transaction we've done is a 74 year old gentleman who wants to go on and run this business until he's 90, but just in case something happens, which he sees as very unlikely. You know, he needs some other shareholders that can step in to that shareholders shoes of his. He's got the succession planning in the business, but he doesn't have the shareholder succession. But he's all about culture, all about Christian ethos. And it was so just so great to do a transaction with him where we buy 30 per cent, but we can also take up the risk over time. And he has peace of mind, but he can continue to run with it.

Luke Roush: So, yeah, as powerful, you know, I love that. And you know, we talk sometimes about the capital markets and the cycles that businesses go through are oftentimes more of a relay race than they are an individual race. And so there's times when you know individuals need to be able to pass the baton to someone else who hopefully has alignment, not just in terms of the potential for the business, but also in alignment around the values and the culture that underpins much of the business of success. So I really appreciate you sharing that powerful Christian.

Henry Kaestner: Did you have any save rounds?

Christian van den Berg: Yes. So I think something that I'd really like to emphasize the value. And John spoke about capital having an agenda, the value of having your first large investors having a kingdom mindset has been so crucial because it's the first time you have possibly someone else sitting on your board, you know, another director that's already a tough transition for anyone. And now you've got someone that shares that like mindedness that can keep you accountable to why you're doing what you're doing because things get sticky on a good month on a bad month. The first thing we have a discussion about when we walk into a board meeting is not how's the business going? I'm proud of you because you've made money or I'm disappointed because you've lost my money. How's it going with your family? Are you putting them first? How's it going with your relationship with the Lord or you're putting him first? And I think moving into a growing business, it's so key to have someone from the outside that if walked the hard yards, really be able to keep you accountable in that. And as we start taking on new investors, that's formed our base. And so it's immovable, established in God's ways as a do.

Henry Kaestner: That was really good. That's really good. I'm really glad we asked. I'm really glad you answered.

Luke Roush: You know, one of the things we like to do on Christian is just cause each episode by hearing what God is teaching you right now. So what are you found in God's word that has stuck out to you recently? And how does that maybe impact the work that you're doing day to day so above for both of you to take a cut at that one?

Johan du Preez: So I'm in business and otherwise I go narrow and deep rather than wide. So, you know, that is helping business with focus. It has its downsides as well. So I'm stuck in the Book of James this year so far, and I think I'm going to be there for probably a few months more. And what just strikes me and challenges me about James and that book is about the conversion of a belief system into real practical deeds, the outward mindset, again, that we spoke about earlier and the dependency on the wisdom that we receive from God and the humility that we need in order to unlock that flow of wisdom. So there's a bunch more in that book, but those are probably the highlights this fall for me, and I'll have a few more in a couple of months.

Luke Roush: That's good. Christian, how about for you?

Christian van den Berg: Yes. So I think something that's hit me quite hard in the past few months is that the tough decision making when it comes to business, I'm still quite young. Twenty eight, and you get faced with quite a few tough decisions, whether it be having to let someone go or having to make the tough financial decision. And what really struck me, especially with the wisdom and the discipleship that we've received, is that because God's given us this mission, it's ours to steward and it's our steward excellently. And so if I can approach every day with that mindset as to this is not mine to mess up or mine to again, for myself, it's mine. Just do it for the Lord. It just makes this decision so much easier to operate in freedom and in wisdom instead of guilt and frustration. And so still practicing with the application of it, but it's been super liberating to. Richard, that mindset as well.

Luke Roush: Well, I love that and you know, there's a narrative at times kind of within this intersection of faith and work that that somehow kind of alleviates or makes it too that you don't have to make difficult choices. But you know, the reality is when you're leading an organization, as you said, stewarding an organization, you've got to be able to make difficult decisions for the health of the organization in the mission. And so what really comes first is not necessarily individual people, but the mission. And sometimes that means hard conversation. So I appreciate you sharing on that.

Henry Kaestner: Christian, Johann, Christian, it's great to have you guys on board. Thank you for helping us to understand your investment philosophy, what it's like to invest in South Africa. Hopefully, our listeners have a little bit of a different perspective. Hopefully they've heard some things, whether it's about thinking about co-investors or just top down versus bottom up. And then just just a vision into what it looks like to have this relationship between the entrepreneur and the investor, which I think is really, really key. And what I heard from Christian and picked up from him is that he's grateful that you're involved in his company. And I'm grateful you're both involved in our podcast. So thank you.

Johan du Preez: Thank you very much.

Christian van den Berg: Thanks so much.