South African billionaires making it rain

South African mobile operator Rain has some of South Africa’s most successful businessmen behind it, including Patrice Motsepe, Paul Harris, Michael Jordaan, and Willem Roos.

The story behind Rain starts with Paul Harris and Michael Jordaan’s investment in MultiSource, which provided a wide range of telecommunications services and products.

In 2015, MultiSource acquired Wireless Business Solutions (WBS) – the company behind iBurst – which gave it access to valuable 4G and 5G spectrum.

A year later Harris announced a multi-billion-rand investment in a new high-speed LTE-A national data network for South Africa using their spectrum in the 1,800MHz and 2,600MHz bands.

To roll out a national mobile network is extremely expensive and resource-intensive, but Jordaan and Harris saw an opportunity to make it much easier.

Vodacom was in desperate need of additional network capacity to serve their data customers, and Rain had valuable spectrum which could help Vodacom.

They struck a deal which would allow Vodacom subscribers to roam on Rain’s new network, giving them better coverage and less congestion.

In return, Vodacom helped Rain to build a national 4G network by giving them access to their infrastructure. The roaming agreement also helped Rain to fund its network rollout.

This new LTE-A network replaced the old iBurst network in 2017 and WBS was rebranded as Rain. A new mobile operator was born.

In June 2017, Rain launched commercial fixed-broadband packages in partnership with Internet Solutions.

Exactly a year later Rain launched its first mobile products, which offered data at R50 per GB and unlimited off-peak data for R250 per month.

The operator’s network rollout and product development cycle accelerated, and over the next two years, Rain launched numerous mobile and fixed broadband products.

New Rain products included uncapped 5G, unlimited 4G for phones, and unlimited 4G for any device.

Rain had 5,500 active 4G sites and 447 5G sites in April 2020, with plans to increase its 5G coverage to 1,500 sites by December 2021.

Rain has become synonymous with affordable uncapped data products, which is exactly what Michael Jordaan said in 2016 they wanted to achieve – “offer an affordable, simple, and fast broadband service”.

The people behind Rain

Some of South Africa’s most influential businessmen are behind Rain, including Paul Harris, Patrice Motsepe, Michael Jordaan, and Willem Roos.

It all started with Jordaan and Harris investing in MultiSource, which then acquired WBS and used its spectrum to roll out a national 4G network.

They used their deal-making skills to partner with Vodacom which created an excellent business case for the new mobile operator.

Other shareholders joined the company which provided additional capital to fund its 5G network rollout and help with its expansion plans.

One of these shareholders is African Rainbow Capital (ARC), started by Patrice Motsepe, which bought a 20% stake in Rain in July 2017.

Outsurance founder and former CEO Willem Roos is another notable shareholder who also ran the mobile operator from December 2017.

Not many people will bet against Harris, Jordaan, Motsepe, and Roos, but questions were still raised about the sustainability of a fifth mobile operator in South Africa.

Former MTN chief executive Zunaid Bulbulia, for example, said in February 2017 four, five, or six network operators in South Africa all building their own networks is not sustainable.

Commenting on Rain’s LTE network rollout, Bulbulia said they were wasting their money as they will battle to create a business model that generates enough volume.

“This is a volume game. This is about having millions of customers to justify the investments you are making,” he said.

Bulbulia’s scepticism about the financial sustainability of a fifth mobile operator in South Africa was justified.

Cell C, which launched in 2001 as South Africa’s third mobile operator, struggled to become financially sustainable.

Rain’s business model is, however, vastly different from that of Cell C in 2001. Rain generates most of its revenue through a wholesale roaming agreement with Vodacom and significantly reduced its network rollout costs through this partnership.

This means Rain does not have to battle with mountains of debt, which is behind most of Cell C’s financial woes.

ARC’s latest financial results confirmed that Rain’s current business model works and ARC valued the mobile operator at a staggering R15.03 billion.

This shows a lot of trust in Rain and is great news for the company’s early investors, who have seen a big return on their investment.

Rain shareholders

Rain currently has 10 shareholders with the top 5 owning 91% of the company.

The largest shareholder at 41.36% is Quarme Private Equity Investments, with Paul Harris and his daughter, Nicola Harris as directors.

Patrice Motsepe’s African Rainbow Capital is the second largest at 19.93%, followed by Willem Roos’ Pluvial at 11.75% and Michael Jordaan’s Montegray Capital at 11.53%.

The Ata Fund, with Nicola Harris and Kgotlello Sere as directors, is the fifth-largest shareholder with 6.42%.

A noteworthy minority shareholder is Institute X Idea Incubators, with Phumlani Moholi and incoming Rain CEO Brandon Leigh as directors.

The table below provides an overview of Rain’s shareholders and notable directors at these companies.

Rain Shareholders
Company Shareholding Notable Directors Value
Quarme Private Equity Investments 41.36% Paul Harris
Nicola Harris
R6.22 billion
UBI General Partner 19.93% Patrice Motsepe
Johan van Zyl
Johan van der Merwe
R3.00 billion
Pluvial 11.75% Willem Roos
Roger Grobler
Ravi Naidoo
R1.77 billion
Montegray Capital 11.53% Michael Jordaan R1.73 billion
Ata Fund 1 6.42% Nicola Harris
Kgotlello Sere
R0.96 billion
Arakot 3.41% Catherina Heunis R0.51 billion
Institute X Idea Incubators 2.30% Phumlani Moholi
Brandon Leigh
R0.35 billion
Employee Trust 1.70% R0.26 billion
Management 1.32% R0.20 billion
Pralene 0.28% Grant Gelink R0.04 billion

Now read: Rain’s biggest successes of 2020

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South African billionaires making it rain