By Phapano Phasha
The story of Sam Molope remains one of the most barbaric stories of post-1994 Black Empowerment deals gone wrong, where a school dropout from Garankuwa became a self made millionaire. He was the first Black man to own a bakery in 1978, if not one of the first Black multi-millionaires who had to virtually fight for his business legacy. He was involved in a bitter civil claim with now Deputy President, Cyril Ramaphosa, who became the head of Molope Groups and subsequently sold the Group and substantially benefitted whilst Molope looked over as his hard earned sweat became a relic of history.
In 1995, Washington Post called Bra Sam “The rarest of rarities: a black South African capitalist”. Now I am not sure if the old man is still alive, but I wonder why his business acumen is not presented as a case study for emerging Black enterpreneurs. Molope blamed Ramaphosa for liquidating some of the Molope Group’s businesses and selling them to Rebhold, a company in which Ramaphosa became executive chairman and director.
In 2001, Ramaphosa sold the Molope Group shares for R300 million to Rebhold Group. He and four banks – Nedcor, FBC Fidelity, The Business Bank and Mercantile Bank – eventually controlled the Molope Group. In fact it was even believed Molope’s shares were worth more than 1 billion at the time when the shares were sold and there was insider collusion on the deal.
In 1995 before McDonalds even became a highly accclaimed franchise in South Africa, Molopw was already in the processes of entering into a deal with McDonalds to sell them rolls. Now the story of Sam Molope goes like this.
Molope was born in Rustenburg in 1934. Due to the economic hardship experienced by his parents, he left school after completing Grade 10 (Std 8). He helped finance his own education by working at a bakery during school holidays and was employed at a bakery in Pretoria after leaving school in 1956. It was during his stint as a foreman baker that Molope learned about bakery production, marketing and distribution. He set out to start his own bakery. He started working in a Pretoria bakery as a teenager and became indispensable to his Greek boss because he could speak Afrikaans, English and several black languages. He was given a chance to learn the business. He soon realized he could run his own. The obstacles were daunting and he was quoted in 1996 saying “Blacks in this country have been taught we are second-class, and very few of us don’t believe it,” he said. “It will take at least a generation for those attitudes to wear away.”
He had to battle for eight years with the apartheid government to obtain a permit to bake bread. When it finally came, there was a condition: he had to set up shop in a backwater rural area where members of his tribe, the Tswana, were forced to live because of the apartheid system of “separate development.” He got his own bakery licence in 1978 and started with a small oven which he operated in a backyard room until he was granted a loan by the then Bophuthatswana National Development Corporation to start the Ga-Rankuwa Bakery, the first black-owned bakery in South Africa.
In no time he had built a bakery empire consisting of the Ga-Rankuwa Bakery, Ru-Molope Bakery in Mabopane, Mamelodi Bakery, Atteridgeville Bakery, Crusty Bakery and Vita Foods employing about 8 000 people. With this came the need to establish a holding company. The LS Molope Property Investment thus came into being, followed by LS Molope Holdings. He owned 100 percent of the shares.
Sam Molope’s woes started in 1994 when the US Trade and Development Agency (TDA) gave him a R200 000 grant to finance a feasibility study for his flour mill in GaRankuwa.
Molope planned to use the flour mill to supply flour to his bakeries and for packaging maize for sale, but needed extra funds to start the mill rolling. The TDA saw the mill as a vehicle to serve the needs of US fast food companies in the region through a black economic empowerment company.
Before the TDA donation, Molope had invested R1,2 million on land and a small property in the North West which he wanted to use to produce wheat and flour for his bakeries. As one of the role models of black business in the country, he was visited by an American business delegation led by US Congressman Ron Brown and the US TDA in 1994. He showed them plans for his proposed milling company and took them on a site tour of the land.
The US delegation was impressed and Spruce Corporation, the US black-owned Brooks Sausage Corporation with vast business interest in South Africa, including Pepsi-Cola, offered Molope US$4 million (which amounted to R16 million at the time) for a 10 percent stake in Molope Holdings. “I was later invited to the US by Spruce Corporation, where I was told their involvement in Molope would be through their associates in South Africa, namely Antony Simon Bock,” Molope said. He was later contacted by Bock who said he was acting on behalf of Spruce Corporation. Bock also offered to buy a further 40 percent share from Molope at a fee equal to that of the Spruce Corporation.
“I insisted I would rather retain 51 percent and this was agreed,” he said. Bock then established Dunbush Investment, a company he used to negotiate the buying of shares in Molope Holdings. The two companies remained separate entities. The agreement for the purchase of the shares, which involved those pledged by Spruce, was entered into through Dunbush and Molope in September 1994.
Bock then established the Molope Group Investment, of which he controlled 50 percent together with Spruce, and he became the Molope Group CEO while Molope became chairman. Molope retained his 100 percent shares in both Molope Holding and Molope Investment, pending the payment of the 50 percent shares by Bock and Spruce.
In the agreement the Dunbush directors undervalued the property and assets of Molope “by R5,7 million to avoid paying transfer duties,” he alleges. He said the agreement was despite the fact that Bock and his co-directors in Dunbush Investment and Spruce Corporation had not paid a cent to Molope Holdings as part of the deal.
Dunbush had promised to pay R6,6 million as part of their deposit when they signed the agreement. The money due to Molope for the 50 percent shares in Molope Holdings amounted to R80 million.
“Bock said the money to acquire the shares would be raised by Dunbush Investment through a bank loan, but I never saw a cent of this,” Molope said.
Instead, he said Bock started shedding some of Molope Holdings’ assets to raise extra capital for new business ventures, which included a mining services subsidiary, security firm and food distribution services and catering.
Among his businesses sold by Bock for R5 million was the Ru-Molope Bakery, but he allegedly never saw a cent of the money.
“He said this was to reposition the company and formed part of the restructuring process,” Molope said.
He said when he again confronted Bock about the money for the shares, Bock and his co-directors, who included Michael Hirschowitz, John Michael Davies and Lazarus Mittel, insisted that Molope Group Investment Group be listed on the JSE to enable them to raise funds and secure bank loans.
“I agreed to this on the grounds that my 51 percent in Molope Holdings and 100 percent in Molope Property Investment, which was not part of the deal, would remain untouched and that the chairman of Molope Group Investment be a black person as my dream was to empower blacks,” Molope said.
He said Molope Group Investment was listed on the JSE in 1996 and Cyril Ramaphosa was brought in by Bock in August that year as executive chairman, while he remained non-executive chairman and director of the group.
At the time the business interest of the group had increased to include cosmetics, health services, vegetable distribution and maintenance services. Bock and Hirschowitz introduced Malope to Ramaphosa at the home of Hirschowitz’s son David in 1996. “They said Ramaphosa had political clout and was very influential,” Molope said.
“I had personally approached Wiseman Nkuhlu to become chairman of the group but he was unable to take up the position. I did not sign any agreement with Ramaphosa when he came in or negotiated his salary or gave him any power of attorney over my shares,” he said.
In 1995 he owned four bakeries and a flour mill, employed 600 people and was competing for a contract to supply hamburger buns to McDonalds, which was planning to open its first restaurants in South Africa in 1996.
Ramaphosa said the decision to sell Molope Group was taken at a board meeting and Sam Molope, as one of the board members, had been involved in the decision to sell the company. But how much did Sam Molope, if indeed he agreed, make out of the deal – he was virtually penniless.
The story died down in 2003 when Sam, who was then an old man, and Cyril made a joint statement. Sam said, “Mr Ramaphosa has been supportive and assisted me in ensuring that the outstanding issues between myself and the Molope Group are resolved.”
“With the finalisation of the liquidation of the Molope Group all the outstanding issues regarding Mr Molope have been resolved and finally laid to rest”, said Ramaphosa.