Billionaire businessman Patrice Motsepe's newly launched African Rainbow Capital could look to the South African Post Office to satisfy its need for a bank, says joint CEO Johan van der Merwe. Motsepe aims to grow ARC into a world-class black-owned diversified financial services business."You cannot do this without having a bank segment as well," says Van der Merwe, 51, who left his job as CEO of Sanlam Investment Management to become joint head, with former Sanlam boss Johan van Zyl, of Motsepe's new venture."So one of our building blocks will be banking."There has been speculation that ARC will buy a piece of Barclays Africa, 62.3% of which is being offloaded by British bank Barclays."We would be negligent, if it is up for sale and it's a good bank, not to look at that," says Van der Merwe.But looking at its market capitalisation of more than R100-billion, buying a meaningful stake in Barclays Africa would be "quite a big bite for us", he says.Motsepe has committed R10-billion to ARC, but in two tranches. This means that for now it has "only" R5-billion to play with.story_article_left1This won't be enough to buy the kind of stake ARC needs, he suggests."We want a stake in a bank where we can make a meaningful contribution."It has been reported that a consortium of investors led by the Public Investment Corporation will be meeting Barclays to discuss buying 10% of its shares in Barclays Africa.Van der Merwe says ARC has been approached to be part of the consortium.Not "directly" by the PIC, he says, but "by other players who are talking to them. And this is something we would consider. But we are not formally part of any consortium at this point in time."There have been suggestions that ARC may consider Nedbank. "That's an interesting one but we're not looking at Nedbank at the moment," he says.His reservation about buying into Barclays Africa or Nedbank is that they are "both quite big"."We're looking at ways - could it work for us? Otherwise, obviously, we have to go smaller."The smaller the base, he says - provided they can "bring some synergies and value-add to the party from an investment point of view" - the quicker it is likely to grow."Once you've got a bigger base it becomes quite challenging to have a decent growth rate."We're looking at internal rate of returns of 20%-plus on most of the investments that we want to make, and that is not easy once you have such a big base."ARC has already invested in insurance broker Indwe, online rental property manager PayProp and Metrofibre, which provides fibre-to-the-home broadband solutions. It is also interested in private education and healthcare.ARC has been talking to "some of the very big schemes, and we're quite far advanced in terms of those negotiations".He says ARC would be unlikely to invest in state-owned enterprises even if the government invited private sector investment."They're too big and would take too long to turn around."block_quotes_start Everyone's quite doom and gloom about the future. We're seeingopportunities block_quotes_endBut he is watching the progress of CEO Mark Barnes at the Post Office, he says."If he succeeds there, it will give us a lot of confidence that maybe things can be done with public-private partnerships."A revived Post Office is something ARC would be interested in, he says."It has a bank in every town in South Africa," he notes.Might ARC be interested in Post Office subsidiary Postbank?"Exactly. It will be cheaper than Barclays."He "bumped into" Barnes the other day and said he wanted to "chat about a few things"."Just give me three months," said Barnes."Well, we are giving him three months," says Van der Merwe.He says Postbank would tick most of ARC's boxes."There's nothing at this point in time, but that is the type of thing we would consider and see whether it's possible."Van der Merwe, Van Zyl and Motsepe go back 12 years to when Motsepe entered into an empowerment deal with Sanlam through Ubuntu-Botho Investments, a broad-based consortium that is majority owned by Motsepe's family trust, and which owns 100% of ARC.Through this transaction the consortium, whose shareholders include unions, community, women and church groups, built up an asset base of about R18-billion after repaying all debt.This gives ARC "a fantastic platform", Van der Merwe says."Hopefully, we [him and Van Zyl] also come with some expertise, some networks and experience in the market as well."Mostly, ARC will be investing in businesses that need empowerment partners.It will be concentrating on South Africa initially, because this is where the rich BEE pickings lie.Every increase in BEE requirements will be to ARC's advantage."It's got a lot to do with all the BEE codes of good practice, Department of Trade and Industry codes and charters for the different sectors."BEE is an important aspect for any company nowadays. It's a business imperative because the better empowered they are, the better they can compete in the market."The field of hopeful empowerment partners is a highly contested one but he believes ARC has a big advantage.story_article_right2"Lots of would-be empowerment partners are putting up their hands and saying: 'Well, here we are, we'll be your empowerment partner. But you'll have to fund it.'"And in many cases it is difficult for empowerment partners to add value to the business."We can come to the party," he says. With money, expertise and credibility.Not to mention Motsepe's formidable political connections. Deputy President Cyril Ramaphosa and Minister in the Presidency Jeff Radebe are family. How can ARC fail?"Maybe he's got some political connections but we don't bank on that. We bank on the fact that he's a well-respected businessman with very sound values. And obviously he's got quite a bit of fire power in terms of money that we can do deals with."He and Van Zyl have committed "quite a substantial amount" of their own money."Patrice was quite adamant that both of us have to take a substantial amount of our value and invest it in the business."He won't say how much, "but it's a substantial part of our net asset value".Their mandate is to go for stakes of 25%, which reflects the empowerment threshold set by the BEE codes. This will give them enough say in the businesses they invest in without exercising control."We want to invest in businesses we think are good, their management's good and we can just make them better. We don't want to run businesses."If the "once empowered, always empowered" rule is dumped, their opportunities will increase substantially as empowerment partners cash in and leave previously empowered companies high and dry.Van der Merwe admits that this would suit them just fine."If you can't fight them, you join them," he chuckles.Nor is he deterred by South Africa's political uncertainty, economic turmoil and the threat of a ratings downgrade.He "sees light at the end of the tunnel", he says. And for ARC, at least, it's not an onrushing locomotive."Everyone's quite doom and gloom about the future. We're seeing opportunities."..