Initially Rembrandt had to compete with the giant United Tobacco (UTC) for prime advertising space in South African media, but within a very few years it had to publish advertisements warning rivals of prosecution for misusing its name. Its aggressive marketing campaigns blazed a trail in the advertising industry. In addition to the emphasis on marketing, Rembrandt’s factories were soon more mechanised and its operations more capital intensive than those of competitors, while Rupert kept an eagle eye on productivity.
In 1950 an article in Inspan, organ of the FAK and the RDB, hailed Rembrandt as the most successful post-war cigarette company in the western hemisphere. It lauded the company’s far-sighted leadership: quality control was superb, probably unique in the country; so was its scientific management, which included sophisticated costing techniques; the latest technology was imported from abroad. The article also referred to Rembrandt’s policy of providing employment for white girls in an air-conditioned workplace with comfortable rest rooms, and training white boys in the cigarette industry. The pride expressed at the success of ‘the first Afrikaans cigarette factory’, situated in Paarl, birthplace of the First Afrikaans Language Movement, was linked to nationalistic feelings among Afrikaners: ‘Each nation needs its own – things that are really important – its own language, its own land, its own factories, its own success . . .’14 An earlier article in Volkshandel, official organ of the AHI, also noted approvingly that with its employment policy, Rembrandt had succeeded in ‘bringing down labour costs to below the world average’.15
In Rembrandt’s early years there was a strong emphasis on Afrikaner culture. In 1949 the group sent 63 female employees in Voortrekker dresses, supplied to them by Rupert, to the inauguration of the Voortrekker Monument in Pretoria. A well-known Afrikaans cultural figure, Dr PJ (Piet) Meyer, a later chairman of the AB and chairman of the board of the South African Broadcasting Corporation, served as the group’s head of public relations from 1951 to 1959.
Rembrandt’s financial statement at the end of the first year showed a loss of £63 000. Rupert has described it as ‘the most critical time in my life’. Yet he did not lose his nerve. ‘In times of crisis I am always calm.’16 The following year Rembrandt registered a profit of £104 000. Rupert denied that it was all merit: 99% was sweat, the rest was plain luck − factors beyond their control. But it was a turning-point just the same. After that they never looked back.
Yet Rupert’s competitors initially underestimated him. At a gathering of tobacco manufacturers where some referred disparagingly to Rupert as a presumptuous upstart, one man − Bertie Levenstein, an executive at Rand Tobacco and Cavalla − disagreed: ‘I think this man is dynamite!’ Years later he said: ‘I didn’t get it quite right; I should rather have said this man is an atom bomb.’17 When Rembrandt eventually took over Rand Tobacco and Cavalla, Levenstein became a director.
Rupert himself regards 1950 as the year of Rembrandt’s great breakthrough. At the group’s first annual general meeting in February 1950 the chairman Dr Nic Diederichs announced that its current monthly profit stood at £10 000. By the end of that year, with a turnover of £2 million, it was able to pay its first dividend of three percent on ordinary shares. The South African economy was reviving from wartime austerity, and the industrialisation that had formed part of the war effort was having a ripple effect. It was the type of development that prompted the historian CW de Kiewiet’s much-quoted observation: ‘South Africa advanced politically by disasters and economically by windfalls.’ Rembrandt exploited the favourable climate, expanding its market share in the face of fierce competition − at one stage there were more than 80 brands of cigarettes vying for supremacy. Rembrandt won hands down. It was not just Afrikaner support any more. With Rothmans as its second leg it had a foot in both language camps.
By 1951 its market share was ten percent. More whites were smoking Rembrandt than any other cigarette in the country. A new, longer cigarette, Rembrandt van Rijn, proved particularly popular. The productivity of the female workers in Paarl was rewarded when Rupert announced in 1953 that he was raising the minimum wage for white females and young boys to £1 a day, almost double the wage other tobacco manufacturers had negotiated with a trade union a short time before. This was a prelude to the higher minimum wages for coloureds with which he would cause a stir in South African industry ten years later.
In the starting years Rupert not only sold shares with great enthusiasm, but also bought shares out of his own salary in the Rembrandt Trust, the holding company of the Rembrandt Group. Rembrandt Tabakkorporasie was listed on the Johannesburg Stock Exchange in 1956 and, like TIB and Tegkor, it became an investment of a lifetime. In 1999 Rupert pointed out that shares of R1 000 in the Rembrandt Group bought in 1948 would be worth R17 million, not counting the dividends. In 2002 it was calculated that the first shareholders who bought shares of R1 000 would have earned a spectacular sum of more than R30 million, if the value of Remgro, Venfin and Richemont is included. Rembrandt has made many people millionaires with shares that have increased 3 000 000% in value.
In a welcoming letter signed by Rupert that was sent to each new shareholder in the early years, he asked people ‘not to sell your shares lightly. Conserve them for your children.’ He heeded his own prophetic advice, and others who did likewise also reaped the benefits.
In 1953 Rupert remarked that the success Rembrandt had achieved up to that point had dispelled the illusion that Afrikaners could not compete with their English and Jewish compatriots in the business world. ‘It was essential that someone should break down the illusion.’
Despite Rembrandt’s increasing competitive edge and a rise in demand that necessitated extensions to the factory in Paarl, Rupert was aware of the fact that a price war could damage his group. He decided to extend his operations overseas in order to build up profitable new markets, and in the process also came up with innovations that left competitors behind and changed people’s smoking patterns internationally.
Chapter 8
Innovation leads the way
Rupert distinguishes innovative ideas and innovative products as two of the main reasons for the Rembrandt Group’s success. His innovative thinking was not just limited to the business sphere.
At the Tweede Ekonomiese Volkskongres (Second National Economic Congress) in Bloemfontein in 1950 he advocated partnership as a business philosophy, a partnership that had to be extended to the black population as well. This was an almost revolutionary notion given the spirit of the times, yet he saw it as the only way of turning the benefits of private enterprise into a blessing for all.
Rupert delivered his speech entitled ‘The Afrikaner in Industry’ two years after the National Party had assumed power. While the political kingdom was now under Afrikaner control, the economic terrain still had to be conquered. The aim of the congress was to take stock of economic progress in the previous decade and draw inspiration from it for the future. In the decade since the First National Economic Congress (according to a 1949 FAK survey) Afrikaners’ contribution in respect of turnover in the private sector had almost doubled, but cross-sectorally it still amounted to a mere eleven percent.
Rupert had just turned 34 and was addressing an audience of mostly older and more experienced men. He reminded his listeners that Afrikaners’ contribution to industry was still barely six percent – it was too soon to start removing the scaffolding from this small national edifice and start building bridges to others. With regard to those who dominated the economy, he said: ‘We are always ready to work with you, but not to work for you in perpetuity.’ And he quoted Kestell’s words from long ago: ‘We ask no favours. A nation must save itself!’
He provided an overview of South Africa’s industrial development in the preceding 25 years, comparing it to an industrial revolution. In this period South African industrial production had rocketed by 700% − faster even than that of Russia and America. This was partly thanks to legislation introduced by Hertzog’s NP government after 1924 that led to the establishment of institutions like the iron and steel corporation Iscor, as well as the role played by entrepreneurs such as Hendrik van der Bijl, Hendrik van Eck and Frikkie Meyer in building up the country’s biggest basic industries.