Ex-oligarch battered but not broken

Stephen Jennings says avoiding a collapse like Lehman Brothers was down to focus. Photo / Supplied

Stephen Jennings, the Kiwi who made a billion-dollar fortune in Russia, is home after being struck by the full force of the global crisis that forced him to sell down hundreds of millions and axe up to 6000 jobs from his global empire.

The turmoil of the past six months has seen him drop off the Forbes world billionaires' list, going from 1014 with US$1.1 billion to back in the field with all the other multi-millionaires.

Mr Jennings told the Weekend Herald the crisis hit with "disorienting speed".

To raise money, he sold a half-share of his Renaissance Capital investment bank for a fraction of its pre-crisis worth.

Once valued at US$4 billion, the half-share that would have gone for US$2 billion was picked up for just US$500 million by the kick-boxing oligarch Mikhail Prokhorov.

And to save money, his Renaissance Group made up to 6000 staff redundant - a ratio of about one in every four of its 22,000 employees - as part of a US$400 million cost-cutting programme.

Mr Jennings said Renaissance was firmly in the "crosshairs" as the crisis felled investment banks such as Lehman Brothers last September.

"When you have got clients who are worth US$40 billion one month and insolvent the next and myriad smaller examples than that it can be very disorienting."

He said avoiding collapsing like Lehman Brothers was down to "focus".

"You've got to stay focused. You've got to take your medicine. You've got to adjust. You've got to live to fight another day."

Amid the crisis, Renaissance Capital was hit by a US$10 million rogue trader described in Russia as "the country's biggest market rout in a decade".

In an example of Mr Jennings' "focus", he dismisses it as a "control problem".

He said the cost-cutting meant between 5000 and 6000 employees were made redundant from the 15,000 to 16,000 employed in his core companies and a further 5000 to 6000 in related interests.

"That's the most upsetting part. You build up fantastic teams of people with huge belief and they are inspired and they work very hard - and suddenly the environment and situation changes in a way it is just not sustainable."

Mr Jennings said the value of the business was still "extremely high" and many of its competitors had disappeared.

He said he had no interest in "rich lists" (Forbes once put his wealth as high as $3.5 billion), which "are inaccurate when things are going up, and just as inaccurate when things are going down".

He will this week deliver the Business Roundtable's annual Sir Ron Trotter lecture - it was originally set down for October, but postponed as he dealt with the fallout of the crisis.

Mr Jennings caused controversy last year when he spoke to the Weekend Herald about New Zealand losing its way and squandering its potential. He will give a similar message in the lecture.

He said New Zealand was reacting too slowly to a once-in-500 year economic adjustment of which the global credit crisis is just a symptom.

His solution includes changing New Zealand's international allegiances and abandoning MMP for an electoral system that allows the Government to make "bold" decisions.

New Zealand and other Western countries were prone to "kneejerk political reactions" characterised by the G20 meeting, where emphasis was put on tightening and regulating markets as opposed to freeing them up.

The Western world was now the "slow lane", he said.

"We've been part of this OECD club, the Western club, the rich world club. Well that pecking order is going to be rapidly dismantled."

Mr Jennings said New Zealand had to assess its international alignments and trade blocs, looking to the world's emerging economies.

Abandoning MMP for a system which delivered majority government was "a necessary condition if New Zealand wants to get into the high-growth league", said Mr Jennings.

"The change [in global economics] is only going to get more dramatic and more sweeping and, while I don't want to use the word radical ... we will need to make bigger and bolder decisions and changes."

Prime Minister John Key has undertaken to have a referendum by 2011 about whether New Zealanders support MMP.

Mr Jennings said although he would support a campaign against MMP, he would not fund it because the movement for change would have to be unified, rather than driven by an individual or small group.

He said the economic crisis simply reinforced his view that the West had "got itself in a deep hole" and was keeping digging, although he conceded that "sometimes you've got to put the fire out before you build the house again".

He said New Zealand had come through the economic crisis much better than the United States or Europe.

Mr Jennings said New Zealand needed to back itself and forget the myth that it is an isolated country.

Stephen Jennings:

*Born in Waitara, still has beachfront holiday home on Taranaki's Oakura beach.
*Forbes magazine put his wealth at US$1.1 billion last year; credit crisis saw him drop off the list this year.
*Chairman and chief executive of Renaissance Group, a finance company he founded in Russia in 1995 as communism gave way to capitalism. It is now expanding into Russia.
*Once described as "the only foreign oligarch in Russia".
*Two metres tall, enjoys rugby and surfing. Employs All Black great Sean Fitzpatrick.