Neal Froneman on his R6.7bn plan to put the Cape on the F1 calendar

Yeah. No, hi Alec, and nice to talk again. Well, first of all, let me tell you this is not too different to building a mine. And in this case, it's not even a brownfields project, it's a greenfields project. And to be clear, we are still in the exploration phase. That doesn't mean we haven't made significant progress. But what you probably don't know about me is, in my younger days, I was quite an accomplished rally driver. I then raced saloon cars, and actually on the old Kyalami track. I did well, but recognised that I was never going to be a Formula 1 or a world-class racing driver, and focused on my career. In my mid-40s, I went back and did a bit of single-seater racing. I raced Formula GTI for a number of years and did well as I could in the Masters. So, I've always had a little bit of racing in me, but this is far more about a commercial opportunity. I don't even watch Formula 1 on television every Sunday. I'm interested in the results, I'm interested in the technology. But this is very much a commercial initiative and something that is, in my view, in the national interest. And you're right — you describe the history of failed proposals to Formula 1. It's my understanding — I don't have exact information — but those were not good proposals. Lady R was certainly an issue, like many of the things in South Africa that don't help commercial opportunities. But certainly we have blotted our copybook with Formula 1. We are a bunch of professionals. And maybe I can just talk a little bit about the team. I'm the executive chairman. I suppose my skills are: I know how to run a business, I know when it's going to make money and when it's not going to make money, and I'm reasonably good at putting strategy into place. And the team I have consists of Bobby Hartshorne, who was actually the original founder. Bobby Hartshorne actually ran the last few Grand Prix in South Africa in the '90s. That's probably not well known. I got to know Bobby through his father. His father was the general manager at Finsch Mine. I've known Bobby ever since we were youngsters, and we used to meet up for breakfast once every quarter, and he used to tell me about his plans. Bobby, I think, is important to know, was instrumental in building Phakisa in Welkom, bringing MotoGP to South Africa. Bobby also, on behalf of MotoGP, made it a very popular sport in the US. So the links to motor racing are real. We have people in our team — and I don't include myself, as I say, I speculated in racing — but we have people in our team that know how to start a Grand Prix at 2:00 or 3:00, whenever it starts on a Sunday. They know how to organise that. They have the relationships with people like Bernie Ecclestone and, of course, MotoGP. We also have Robert Applebaum, a very accomplished lawyer who's got lots of contacts and legal expertise — a senior partner at Webber Wentzel — and then Venat, with the unpronounceable surname, who was the previous CEO at AngloGold Ashanti. And of course Venat and I worked in the mining industry together. Essentially, other than Bobby, who really approached me, everyone else has actually volunteered for this job.

Now, the only other thing I would comment on in terms of your introduction is that my interaction with the government is that they support a Grand Prix in South Africa. Kyalami looks like the obvious choice. There are certain challenges with an old-style motor racing circuit, which we can talk about. But Gayton McKenzie, Minister Gayton McKenzie, has said to me that he supports us. I can quote him publicly. And Formula 1, or Liberty Media, will decide where this Grand Prix happens in Africa. Of course, I just think Cape Town has an incredible competitive edge, which we can also talk about. One of the most important tourist destinations in the world, rated, you know, seven years in a row, one of the best cities in the world. You know, you couple that with wine and the cuisine and Table Mountain, Robben Island, the Atlantic Ocean, and the Swartland has access to all of that. You have an unbelievable destination which a circuit designer can't manufacture. So we think we have the best possible chance of having a sustainable outcome for a long-term period of a Grand Prix, and we can talk about the commercial aspects separately.

Yes. Yes. I was navigating before I even had a driver's licence. I'm one of those people that couldn't — you know, used to stand outside the licensing department in those days. It was very strict in terms of getting a driver's licence. But at university, in my first year of university, I had to go to university by bus because I was too young to have a driver's licence. But the first club I joined was the Witwatersrand rally club, and I competed with a friend as a navigator. So I love motor racing. I love mechanical things. Fast cars, fast boats, fast planes, all those sort of things, fast helicopters,

You know, I'm a bit restricted on what I can say. Let me say we have had our first interaction with Formula 1. We are a long way from being into a negotiation process. But when I review previous bids, I think, you know, it used to be about a motor race, and you're right, in those days, if you were a Formula 1 driver champion, that would count a lot. Today it's a spectacle. It's a completely different business. It's an entertainment destination. It's a week-long festivity. And it's a lot more about the destination. Many of the historical tracks — Zandvoort, Imola — are almost history now. You are seeing a completely different evolution of Formula 1. In fact, there are more women that support Formula 1 than men now. And you will notice it from the branding and the sponsors of Formula 1. It's a spectacle. Alec, so it's not so much about the motor racing — it's almost a catalyst to something else. Liberty Media have taken Formula 1 from a motor race, which I think was very well done by people like Bernie Ecclestone, to a spectacle. And Liberty Media is about entertainment, and Liberty Media has artists like Taylor Swift, Beyoncé, and so on. So there's a completely different thought process. Of course, the motor racing part is very high standards, high technology. You know, the motor racing is important, don't get me wrong. But I also think that there's been a lot more coverage and outspokenness by certain Formula 1 drivers, Lewis Hamilton being one of them, about a need for a Formula 1 race in Africa. And of course, when you start thinking about infrastructure, medical facilities, you know, the sort of networking, internet connectivity — there's not many African countries that are anywhere near where South Africa is, which then positions us with such a competitive edge. As long as you understand what drives the commerciality of Formula 1, I think we can be successful. And certainly, as we progress, we will try and involve people like Jody Scheckter. There's a lot of upcoming racing drivers that are, you know, trying to make it — South Africans trying to make it in this very competitive world — that I think could become ambassadors for what we're doing. But if you don't have a strong commercial underpin and you don't have this compliance to — there's something like 8,000 formal requirements for a Formula 1 approved race. If you don't comply with that, and very little has to do with previous Formula 1 champions — they're important ambassadors, but there are strict requirements to be considered by Formula 1 and Liberty Media.

We have it under option, Alec, and it's — you would understand this — it's a bit of an iterative process. It's like a circular argument. You're not going to get your equity funders to commit unless you have an agreement with Formula 1. Formula 1 are not going to agree unless you have the funding in place. And of course we can't buy the land until we have the funding in place. But there are ways of managing those risks also for your investors. So going the option route was — which is still expensive. It's still costing a significant amount of money to secure that land. This is a four-year process. There's two years of approval, and those approvals are things like environmental approvals, you know, doing the detailed engineering, preparing essentially a feasibility study. So there's a phase of seed funding which is still going to cost about 120 million rand, which is going to come from high-net-worth individuals, venture capital — it's sort of almost venture capital. And only then, when you have been able to demonstrate your ability to have an equity funder, your ability to have bank financing — because the model is based on 40% equity, 60% debt — it's only once you can demonstrate all that to Formula 1 will you eventually end up with a contract, which would then trigger the actual funding from your equity and your debt funders. So we are, let's call it, if I use the equivalent terms, we're in the pre-feasibility phase. Once we raise the seed funding, we'll complete the detailed feasibility. That's going to cost us about 120 million, and then of course the 6.7 billion of capital should be in place and ready for approval, as long as we get all the other approvals in place.

Yes. Perhaps with one area where, to mitigate the risk for our seed funders, we will still always have the ability to do the high-end real estate development. I just think it'll be better and unique if you could say that it incorporates a Formula 1 venue approved by Formula 1. But even if you are unsuccessful with Formula 1, you will still have very valuable land that underpins this that you could continue with the real estate development.

So, yeah, we obviously — it hasn't been a secret that we have been working on this project, but we really wanted to get some substance behind us so that when we did actually come to the market in the way we came — and I'll explain how that happened — that we had substance that wasn't just hot air and smoke and mirrors. It took six months, six to nine months, Alec, to find the right piece of land. Land north of Cape Town is very tightly held. And of course, it's all complicated by the Koeberg nuclear exclusion zone. There's some beautiful land, but you just can't develop it. And you know, we learned very quickly that promoting a Formula 1 event was creating a difficulty in acquiring land at a commercial rate. But eventually we got that right. And it happened to be right next to KBAR Skilpad in the Swartland. And what we also found is that the Swartland municipality is known as the best-run municipality in South Africa. I think Midvaal is second to Swartland in terms of municipalities that are well-run. So the combination was very good. We found that right early on. I went to see the Cape Town mayor, Geordin Hill-Lewis. I met with the premier of the Western Cape, Alan Winde. It was wonderful to receive unequivocal and unconditional support in the national interest. We don't often find that in government, I'm sad to say. And you can understand why the Western Cape is as prosperous as it is, because these individuals, including the municipal manager at Swartland, act in the national interest. And it's been so easy for us to work with them, and they've been very supportive. And a lot of that happened behind the scenes. We were not public about that. Then what happened is the Western Cape government wanted to hold an investment conference, and they asked us to participate at that conference. And we thought that we had enough under our belt to have a more public release of the project and its details. And that's how it happened. We would have preferred to have run probably a bit longer, get a little bit more under our belt, but in support of what the Western Cape government was trying to achieve, the timing was reasonable. So we spent a bit of money and a little bit of effort on getting a proper release, public launch, and it's been overwhelming. I've never had so many WhatsApps, LinkedIn requests, people offering help. It really is wonderful, and you can see why this actually is in the national interest. I've had ex-Formula 1 racing drivers reach out to me offering their assistance. So it's become quite international, and it's exceeded our expectations. But Alec, that's how it happened.