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Tekkie Town | Actis | PartneshipBraam van Huyssteen (left) and Bernard Mostert completed the 2014 Two Oceans half marathon.
January 2015

Tekkie Town finds a suitor

A cash injection of R720-m from the new Tekkie Town partner opens up exciting opportunities for the retail chain

The next business race could be into Africa for Tekkie Town executive chairman Braam van Huyssteen. A substantial investment of $65-m (R720-m) by UK private equity firm Actis for a 42.5% stake in his sport and lifestyle footwear retail chain, could just be the impetus needed to head north.

The investment — of which Van Huyssteen will receive a portion — values the business at R1.7-bn.

But, nothing much will change at Tekkie Town, says Van Huyssteen. “Our team will continue to run the business as usual.”

He will remain the majority shareholder and executive chairman and Bernard Mostert will be CEO. Van Huyssteen and Mostert will be joined by an Actis representative on the three-man board of directors.

He does, however, not rule out the possibility of a listing ... when the time is right.

The Actis investment will give them the capital and expertise needed to expand broadly in Southern, and possibly West and East Africa. Tekkie Town currently have ten stores in Namibia and one in Lesotho.

But, as Van Huyssteen has often said, they will proceed with caution and careful planning as “the African market is still in its baby shoes.”

They have been considering many suitors over the past five years, says Van Huyssteen, and found the right partner in Actis. He was attracted by the fact that the UK firm has experience of doing business in Africa, including running shopping malls, and therefore know the challenges faced by companies who want to expand further into the continent. Actis has many investments in emerging markets, including $1.6-bn in businesses across Africa.

The fact that Tekkie Town targets the emerging consumer, has a strong management team and is a cash retailer that shows good growth in a challenging environment, attracted Actis to invest in the retailer, director David Cooke told UK media.

For many years Tekkie Town was a strictly cash retailer, but a couple of years ago they entered into an agreement with RCS bank to issue a Tekkie Town card. This is, however, a low-risk arrangement for the retailer as the bank does the credit vetting and carry all the risk as they pay the stores at the end of the month for goods bought with the card.

To say that Tekkie Town had shown good growth is a bit like saying that Usain Bolt can run. An understatement.

Over the past five years they have been opening between two and six stores per month. In the past two years they have grown their number of stores by 38% while the recession closed other stores at about the same rate. As they like to say: We don’t understand the recession. We are trading right through it.

Despite growing so fast, they only funded the new stores from within the company. Most of the growth had been in the north, although they had also expanded in KwaZulu-Natal.

By early next year they’ll probably have 275 stores, as they are continually negotiating with landlords and looking at new retail opportunities in rural towns. This is an art that Van Huyssteen has perfected over the past decade.

They are, however, not comfortable with opening more than 25-30 stores per year, he told Alec Hogg on the CNBC Power Lunch Show. Van Huyssteen and his team had built the 265-store Tekkie Town chain in 15 years, but his retail roots date back to his childhood, when his mother owned a ladies boutique.

After completing his compulsory military service as an accountant at the training college for women in George, he and his brother opened the Tropica store in Mossel Bay in 1989. They had R20 000 to buy stock. This was followed ten years later by the first Sport City store in George, which developed into a small chain. These stores were later renamed and merged with the Tekkie Town stores he started opening in 2001, to form a new chain.

His business model resulted in growth at a gallop. He had large warehouse space, footwear brands had over-runs and returns: he made them an offer they could just live with, sweetening the deal with forward-orders for their latest ranges, which he sold at prices consumers liked.

They also realised that consumers are drawn by low prices, but not by cheap-looking stores, and redesigned their stores to create a pleasant shopping experience.

Accolades won

This business model won Van Huyssteen the Ernst & Young South African Entrepreneur of the Year award in 2011. Early last year the World Economic Forum selected Tekkie Town as one of the 16 African global growth companies with a clear potential to become global economic leaders.

The new CEO, Mostert, has been job-shadowing Van Huyssteen for the past three years, but they have known each other for nearly two decades. Mostert’s mother was Van Huyssteen’s daughter’s teacher in the Mossel Bay school where his father was principal.

“He is extremely very well qualified, and has a good understanding of finance — he was one of the top MBA students of his year,” Van Huyssteen says about Mostert, who was CEO of golf course developers Golf Data before joining Tekkie Town, where “he adapted to the company culture like a fish to water.”

The rest of the seasoned Tekkie Town team will continue running the business as they always have, says Van Huyssteen. “We have a great team”.

Most of them share a long history with Van Huyssteen. Gert Claassen, responsible for projects and marketing, joined the Van Huyssteen brothers as early as 1996 to manage their Tropika store in Mossel Bay. Michael Brown, responsible for procurement, joined the company in 2001 when the Sport City stores became Tekkie Town. Danie van Niekerk, operations manager, joined the following year and will be back again this year after a period away.

The transaction still has to be approved by the Competition Commission, but because Actis has no other retail interests in South Africa, Van Huyssteen does not foresee problems.

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