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Pep Stores, take one

‘We made it possible for every family, every father or mother, to clothe their children properly.’ 1

Christo Wiese in an interview, 2013

After his studies, Christo Wiese joined Pep Stores on a full-time basis. The business had been founded by Renier van Rooyen, who married Wiese’s cousin Alice in 1954. After working for a mine and serving as messenger of the court, Van Rooyen acquired a single shop with his lawyer-friend Gawie Esterhuyzen. The store was known as the Bargain Shop,2 and was only five by ten metres in size. The shop sold all sorts of goods, from furniture to clothing and even donkey carts. As part of the deal, the previous owner, Gustav Gottschalk, sat with Van Rooyen each Saturday for two months to teach him the ins and outs of retail.

Soon after taking over, Van Rooyen noticed that clothing was selling better than the rest of his goods. And so he started concentrating on this part of the business and put more effort into procuring supplies. He made trips down to Cape Town a few times a week to source stock directly from factories there. He did so well that soon he couldn’t keep up and had to pull in family members to help with the business. It became clear that there were opportunities to expand.

In 1959 he opened a second shop and called it Upington Volksklere (‘People’s Clothes’). In the meantime, he refined his business model. His focus would be on selling clothing, shoes, blankets and bedding at discount prices in stores where shoppers could browse through the goods on display in their own time. He called the new stores BG Bazaars – the BG didn’t denote anything in particular. Later Van Rooyen quipped that it was short for bakgat (Afrikaans slang for ‘groovy’) or blêrrie goed (bloody good), according to Dr Anton Ehlers.3

By 1965 BG Bazaars had four outlets in various towns in the parched northern parts of the Cape Province. And business was booming. So much so that Van Rooyen described himself as ‘very well off, you know, well established with a nice business’.4 But his great dream was of a nationwide chain of stores.

If you wanted a shop in every town in the country, you needed a better name than BG Bazaars. The initials BG had in any case already been registered by a business in Potchefstroom so Van Rooyen was forced to choose something else. He wanted something that would resonate in both English and Afrikaans. It also needed to be punchy and catchy.

John Lee, a travelling salesman who later worked as a senior buyer for the group, came up with a list of ten names. Some of the options were Van’s, Up’s, NW, Ric’s, Ren’s, Jet and Pep. Van Rooyen immediately took a liking to Pep as it was a word he often used to motivate and encourage his team.

Wiese and his father, Stoffel, were aware of Van Rooyen’s shops, but only really started taking proper notice when he began to look for investors to take his business onto the national stage. But people in that part of the world were a sceptical lot, explains Wiese. ‘They would first suspect he was smuggling diamonds or dagga. If he wasn’t caught by the police, they surmised he might have a sound business sense and was doing something right. Only then would they approach him with the question “Don’t you need a partner?”’ 5

Van Rooyen needed capital – about R250 000. He tested the waters among friends and family in Upington. Many were interested so he felt encouraged to register the company Pep Stores (Pty) Ltd. But Van Rooyen had one condition: to invest in his company, you had to be willing to work for it. And if you wanted to work for the company, you also needed to be prepared to invest in it. This was too big an ask for some and eventually the investors contributed only R50 000. One of them was Stoffel Wiese. ‘My dad sold his businesses and invested in Pep and went on the board. The arrangement was that when I graduated from university I would join the business. Which is what happened.’ 6

In 1965, Christo Wiese was still in Stellenbosch, busying himself with law subjects, campus politics and res life. Later he said that, while still at university, he also invested R5000, half of which he borrowed from his father.7

The first branch of the new business was a shop taken over from BG Bazaars in the railway junction town of De Aar and rebranded Pep. In December of the same year a branch was added in Kimberley, where news of Pep’s low prices spread so fast that hundreds of people queued for the store opening and the local paper reported the next day on the ‘crush’ that ensued.8 A week later, another store opened in Postmasburg. It was now clear that the group was set to expand aggressively. Meanwhile, Van Rooyen found Pep Stores a warehouse in Woodstock, Cape Town, and relocated to the city with his family.

Wiese spent some of his university holidays working at Pep Stores, but when he joined full-time in 1967 – by this time he had a law degree – it was as company secretary and second-in-command. He was also responsible for recruitment.

His biggest job, initially, was to find suitable sites for new Pep shops. By the end of the 1968 financial year the chain had 29 stores. The following year Pep added another 29 and a further 57 the year thereafter. Wiese spent about 20 days of the month away from home as he raced across the country to open new stores and sign leases. ‘I slept in a different town every night,’ he says.9

The 1960s was a time of unprecedented growth for the South African economy. In the second half of the decade entrepreneurs piled into the retail sector. Kloppers, Pick n Pay, Clicks, Game and Dion all started vying for a slice of the growing disposable income of the middle class. At this stage, the middle class consisted mostly of whites.

But Pep Stores focused on basic needs and soon had a reputation for selling decent clothing at low prices. Van Rooyen’s sales philosophy was: ‘We don’t sell cheap clothing: we sell clothing cheaply!’ And these low prices quickly gained traction among thrifty consumers. Coloured and black shoppers visited the new stores in large numbers and Pep was soon well known for its children’s clothing and school uniforms.

Wiese recalls how, in the 1960s, you could clothe a child from head to toe for less than R1.10 Van Rooyen was serious about low prices and instructed his store managers to avoid talking about ‘sale’ prices. ‘The word “sale” is out! Everything is a sale.’

He was also very much opposed to granting credit. This was probably the result of his stint as messenger of the court, when he had to make lists of the possessions of people who had defaulted on their debt repayments. Pep was a cash business – it was good for cash flow and also helped prevent customers from spending when they could not afford to.

To touch the clothing on the racks, take it off and try it on was not the norm at the time in retail, but Van Rooyen encouraged it. He also let black and white customers use the same changing rooms. In this way Pep attracted customers of all races. It might be a given today, but in the 1960s, with apartheid in full force, it was not common.

‘There used to be an Act that prescribed that in an office building you had to have separate toilets for white and non-white women. We just decided in those days “bullshit”, we will have toilets for women and toilets for men, and that’s it,’ says Wiese. ‘We were breaking the law and that also came from, I believe, our small town background. You look at people differently.’11

After Van Rooyen’s passing in 2018 at the age of 86, one obituary referred to his stores as ‘islands of non-racism with no segregation of any kind’ despite often being located in very conservative towns.12 This helped him to lure the rands and cents of coloured and black consumers to his stores. And though they had little to spend individually, collectively they had substantial purchasing power.

‘We did so well that in 1969 Sydney Press of Edgars offered us R4,5 million. He threatened that if we did not accept, he would take us on directly. We were tempted but turned him down,’ recalls Wiese.13 Within six months Edgars had opened 25 Jet outlets to compete with Pep, but the stores could not get a foothold among low-income consumers and soon shifted to a more affluent segment of the market.

Wiese’s father, Stoffel, passed away in 1970. His estate did not contain a broad portfolio of investments, but he left his Pep Stores shares to his wife, Kotie. His will shows that he also held 33 500 shares in the company on behalf of his son, Christo.14

In 1971 Van Rooyen and his team converted Pep Stores into a public company and sold a 10% stake to Phil Morkel, a retail group in the Federale Volksbeleggings stable. The stake later increased to 25%, but the board and the new shareholder didn’t see eye to eye. Van Rooyen then bought back the shares with financing from the life insurance behemoth Sanlam, which enthusiastically supported Afrikaner business at the time.

Van Rooyen did not like to be at the mercy of suppliers and soon had plans to manufacture some of the products sold in Pep Stores. He bought Budget Footwear in Durban, as part of his business strategy of vertical integration – capturing a larger part of the value chain – and also to guard against stock shortages. By this time Pep Stores was Budget’s largest customer and problems on the factory floor in Durban carried the risk of leaving shoppers barefoot. Pep bought the factory for R200 000.

Pep soon expanded its manufacturing business and within three years a quarter of the goods on its shelves came from its own factories. One of these was a blanket factory in Butterworth, today in the Eastern Cape, but in the 1970s part of the ‘independent’ homeland of Transkei. At the time the South African government incentivised businesses to set up manufacturing plants in places like Transkei and Ciskei as part of its policy of decentralisation and in order to create jobs in the so-called homelands. Pep Stores used lucrative incentives15 from the Xhosa Development Corporation to get its factory humming. This included loans at an interest rate of 1%, favourable leases on facilities and housing, income tax relief for employing black workers, and several rebates on goods manufactured in the area.16 The business was soon profitable.

With 115 stores by 1971, the chain was well represented in the Cape Province, but the rest of country’s consumers were waiting their turn. To finance a new wave of expansion, Pep Stores issued 350 000 shares at R1,50 each and disposed of them in a private placement. Later that year, Van Rooyen announced the group’s plans to open 50 shops a year for the next four years. He also gave notice that Pep Stores planned to list on the Johannesburg Stock Exchange (JSE) by the middle of 1972.17

But before the listing, the company’s head office and Cape Town warehouse went up in flames, only weeks before the busy festive season. Stock of around R1 million was destroyed in the blaze. Luckily some of the stock had already been distributed to the stores and the group could also rely on its warehouses in Germiston, Durban and Port Elizabeth. By this time Wiese, then in charge of recruitment, had already roped in his old friend from varsity, Whitey Basson, to join the business. Basson, as financial director, ‘deftly’ handled the insurance claim after the fire, according to Van Rooyen’s biography.

The listing of Pep Stores was a big event. By the time Wiese, as company secretary, announced in March 1972 that the company would list on the JSE, Pep already had 163 branches. Clearly this was only the start, because there were still relatively few stores in those parts of the country with the largest population. Investors wanted to share in the growth, knowing that Pep was the only clothing retailer that seemed to know how to tap into the massive market of black consumers.

Pep was also the biggest listing on the stock exchange since the crash of 1969, when a bubble, caused by speculative buying of unit trusts, burst spectacularly. By the time Pep Stores shares were trading in Diagonal Street, the bourse was still 60% lower than at its peak three years earlier.

On 6 June 1972, a share in Pep Stores opened at R2,75, rose to R3,50 and settled at R3,30. Nearly 440 000 shares changed hands on the day of listing and investors who bought at 50c a share in Upington seven years earlier could bank a healthy profit. ‘By that time in South African terms and in my environment, I had become a wealthy man, through the listing of Pep on the JSE,’ says Wiese. Shortly afterwards Wiese bought a painting by the renowned artist Pierneef for ‘R25 000, which was a fortune’ in 1973.18 You could buy ten brand-new cars for the same amount.

But the character of the group, founded by a closely knit group of retailers from a remote corner of the country, was changed somewhat by its growth and by its listing. ‘It had lost some of its magic as a family company,’ says Wiese. That was one of the reasons why he decided in 1973 to use his legal training in a more formal way. Another reason was that he wasn’t prepared to be someone else’s understudy in the long term. At that stage Pep Stores was known as ‘Van Rooyen’s Express’.

As a student at Stellenbosch it was already clear that Wiese was not the kind of person to remain behind the scenes. And this would become clearer in the decades to follow. But at Pep Stores, Van Rooyen was definitely boss. Although Wiese and his family were the largest shareholders, at that time – he recalled years later – Van Rooyen was number one. ‘I was not cut out to be a number-two man.’

He also had plans to marry a woman whom he had been courting for a while. He needed a more stable life that would see him at home more than ten nights a month and that did not have the hectic pace of Pep Stores.

‘I had decided, in any case, that I wanted to be a millionaire first before I got married.’19