It is unsurprising that billionaire businessman Vivian Reddy has a stable of famous friends in high places.
The Durban entrepreneur is as charming as he is hardworking, qualities that have undoubtedly both been employed in equal measure during his decades-long career.
Speaking to finweek from his lush Sandton offices, the self-made billionaire moves enthusiastically between recounting tales of his business travels with former president Nelson Mandela, and extolling the features of his latest endeavour – the R4bn Oceans Umhlanga mixed-use development in KwaZulu-Natal.But Reddy’s foray into property development is a recent one, and follows decades of success in the electrical transmission and distribution industry.
Having started an electrical firm under his own name in the 1970s, with “only R500 and a bakkie”, Reddy soon encountered the challenges of the apartheid system and struggled to secure contracts with government and the private sector.
It was only after he changed the name of the company to Edison Power Group – after light bulb inventor Thomas Edison – that he began to see a turnaround in his business.
“When people asked to speak to ‘Mr Edison’, I told them that he was out of the office and that I was a senior manager and could assist. Today, we are the biggest power company in South Africa, employing over 3 000 people and with over R3bn worth of projects around the country. We’re also the oldest at 39 years,” he claims.
Edison Power met with massive success during government’s township electrification programme in the early 1990s, when white-owned and -operated firms were reluctant to work these areas, which were often volatile.
“We were the only ones willing to go into the townships, and we were well positioned, and that gave us a big boost,” he says.
It was during this time that Reddy met Mandela, a man whose effigy can be found throughout the Edison Power Group’s headquarters, and who Reddy regularly references as a mentor.
“Mandela taught me to communicate in business, and that everything can be worked out if we just talk to one another. He reinforced my belief in honesty and integrity, which is the way that I have always run my business,” he notes.
It’s perhaps because of this approach to business, coupled with his impressive list of contacts – including troubled President Jacob Zuma – that Edison has been responsible for several multi-billion-rand programmes, including the electrification of large portions of the City of Joburg as well as Sun City.
The property bug
With the electrical business remaining the “bread and butter” of the company, Reddy decided to leverage these financial gains to branch out into the development of casinos – his “personal passion” – and property development. His most recent project, set within Durban’s affluent Northern Node and due for completion in 2019, currently demands much of his attention.
In close proximity to the Umhlanga Ridge commercial zone, Reddy explains that the 231 000sqm Oceans development will look to take advantage of Durban’s position as one of the fastest-growing urban centres in Africa. The development’s signature feature will be two oval-shaped residence towers, offering 412 apartments and penthouses, and a third tower housing a Radisson hotel.
The lower level will boast a 40 000sqm shopping mall with over 100 high-end stores, including Burberry, Versace, Armani and Paul Smith. Rich in novelty, it will also house SA’s first indoor snow park and ice bar.Reddy, whose primary residence remains in Durban, believes that the Umhlanga Rocks area is primed for rapid development and growth.
“Umhlanga Rocks is the next Cape Town,” he holds. “There’s a shortage of undeveloped land and the demand for a high-end residential and lifestyle offering definitely exists. Within a 10-kilometer radius of the site, there are over 2 800 dollar millionaires. This is why the mall is catering for those that fall within an LSM of 7 to 10,” he outlines.
According to the Durban local, the residential portion of the development has in particular seen interest by first-generation university graduates that are looking to purchase “aspirational” property.
“Parents in townships such as KwaMashu and Phoenix made great sacrifices to send their kids to university. These children are now long out of university and are wanting to buy property in a high-end area, such as Umhlanga Rocks,” Reddy asserts.
Reddy’s flagship development has not, however, been without its controversy. At the launch of Oceans in 2015, Reddy announced that he would offer “ordinary South Africans” an opportunity to buy shares in the hotel portion of the development, issuing shares at R20 apiece with a minimum investment of R1 000.
The R2bn offer was aimed at the working class, with 80% of the investments between R1 000 and R10 000. The developer expects a yearly dividend of between 8.6% and 10% and an estimated 350% increase in asset valuation of between R1.6bn and R2bn over a 10- to 15-year period.
“One of our shareholders is a waiter who has worked in hotels for years and has invested R7 500 in the hotel.
He now considers himself a part-owner, which is heartening to see,” he relates.
Shortly after the announcement of the share scheme, however, the business maverick was forced to defend his decision to approach the market after accusations that he would substantially benefit from the savings achieved by using shareholder money rather than interest-bearing debt to fund the hotel.
He told Mail & Guardian at the time that this interpretation of his company’s prospectus “sadly reflects a cynical and almost mischievous appraisal” of a solid investment.
Share subscription has since closed, with over 30 000 individuals having purchased shares by 22 May.
Reddy has not allowed criticism of the funding offer to dull his enthusiasm for the property development, and over the next five years plans to be responsible for the development of over R20bn worth of property throughout the country.
The electrical transmission and distribution arm of the group – currently managed by his son Shantan Reddy – will remain the company’s core income stream.Vivian, meanwhile, alludes to his gradual departure from the company, sanctioning the second generation of Reddys to take over the commercial empire.
“In family businesses, the father often becomes so authoritarian in his decision-making that the children aren’t able to contribute. I’ve groomed my son to take over the power business, and hope that my other son will take over the property business.
If you give people a position of responsibility, you must trust them, and not police them,” he concludes.
This article originally appeared in the 15 June edition of finweek. Buy and download the magazine here.