Chapter 403: Divesting
Cape Town's decision to compromise was good news for Ernst. Now he could leave South Africa and focus on a more important matter.
In October, Ernst did not return to First Town but went straight to Nairobi.
At this time, the factories funded by the Hechingen Investment in Nairobi were fully built and had all begun operation. Meanwhile, Hechingen Bank's headquarters also moved here, prompting Nairobi to open a new zone specifically for hosting the bank's head office and a set of luxurious infrastructure facilities.
"Right now, how are our investments doing in North America?" That was Ernst's first question upon arriving at the Hechingen Bank headquarters.
"Your Highness, we've already begun our eleventh round of selling off assets, retaining only thirty percent of stable, high-quality investments. This has pulled in a large sum of money and earned us a nice profit. But based on North America's current economic conditions, we're essentially losing out. Those assets we got rid of are still increasing in value, with the market surging."
Ernst nodded. "Overreaching leads to trouble. We can't snatch all the good opportunities. How about Europe?"
"Following your instructions, we've sold off fewer assets in Europe than in North America, but we've earned more money. That's because the many brands under the Hechingen consortium have built a solid public image, making people willing to buy at high prices. For instance, in the big category of supermarkets—even locations poorly situated and hard to turn a profit in have been snapped up eagerly. But Your Highness, many of these buyers want permission to keep using the old names."
Ernst shook his head. "That won't work. We can continue providing them our supply channels, and we won't even take any cut, but they can't use the brand names we've registered. That's a question of credibility. Of course, if it's a franchised brand, we can introduce one to them."
Supply channels are the most crucial support for each supermarket brand owned by the Hechingen consortium. Being a full-spectrum business, widely active in light industry and the electrical industry, the Hechingen consortium is a unique super-giant in all of the German region. Heavy industry has only just started, with the main investment allocated in East Africa. As for Europe and North America, the Hechingen consortium can't break into the heavy sector there.
Its robust industrial chain lets Hechingen-owned supermarkets obtain a broad range of merchandise, primarily East African farm goods also sold via the supermarket network.
No one knows how many businesses and companies will go bankrupt during this economic crisis. The Hechingen consortium can't be entangled with them.
Ernst went on, "Also, from now on, clear out the bank's bad debts. Take advantage of the hot market and sell off every risky asset. Then raise our loan thresholds; reject every company with operational problems or unrealistic projects. All branch offices must focus on retrieving capital, ensuring we don't run short on reserves."
"Your Highness, that means our bank will lose out on a lot of potential profits."
"Just do as I've said. Any business wanting to last cannot ignore its own hidden troubles. Blindly chasing short-term gains while ignoring risks is unsustainable and harms the company's long-term well-being. Plus, we'd have to rebuild our reputation from scratch if anything goes wrong—that's a big waste."
Acting on Ernst's orders, the Hechingen consortium sold all assets it could, repeatedly slimming down. But this caused some negative effects. Because many properties were sold, some investors and depositors believed that Hechingen Bank faced operational risks—most likely a funding shortfall. Otherwise, why sell so many "premium" assets while the market is roaring hot? Right now, the entire global market is flush with confidence—people can profit even from selling "thin air" if they hype it well—so the Hechingen consortium's contrarian move goes entirely against the mainstream.
Hence many investors and depositors moved their money into other banks or into the currently popular railway sector, creating a brief "mini run" on Hechingen Bank. But it came and went quickly. Hechingen Bank was already cash-rich, and after selling off a lot of assets, they had reaped huge capital, so they were unafraid.
Later, Hechingen Bank released clarifications about that baseless slander: the bank was merely optimizing its investment structure and had no operating risk.
Nevertheless, the effect of such clarifications was mediocre (in a positive sense). In Germany, supported by years of trust and media outlets controlled by the consortium, they managed to calm depositors. Elsewhere, not so much. Especially the bank's rivals, who used all kinds of tricks to tarnish its image. Many financial institutions in London labeled Hechingen Bank a "high-risk" enterprise.
Hechingen Bank's wholly owned Sun newspaper tried to deny the rumors, but Londoners became even more convinced. Everyone knows what the Sun is like—spreading gossip or trivial bits is one thing, but talking about finance? Hardly credible.
Anyway, as the world's financial hub, London has countless banks and financial institutions, and the Hechingen consortium's share of that market is small.
Some depositors who followed the crowd, seeing their money withdrawn and no meltdown happening, realized the talk of a funding shortfall was nonsense and put their money back. That turned out fine. Because some term deposits had been taken out early, the Hechingen Bank saved on quite a bit of interest.
All this minor turbulence had no impact on Ernst. After giving his instructions to Hechingen Bank, he went to inspect various textile factories in Nairobi.
"Your Highness, our Nairobi-based textile operations can meet about 70% of East Africa's demand. The remaining 30% is supplied by our Far East factories. As for our German-area factories, we've sold them off. Meanwhile, the Far East factories dominate our exports to Europe, largely thanks to low labor costs. If we hadn't split up the Far East textile plants, we'd be making even more profit."
Overall, the textile factories that the Hechingen consortium had invested in at Jiaozhou in the Far East were divided into three parts: one part was sold to Shanxi merchants and Huizhou merchants, another part kept running—taking advantage of low costs to export goods to East Africa and Germany—and a third part was moved to Nairobi.
The Far East market is appealing. One, it's huge with strong demand, though yields smaller profits than Europe. Two, operating costs are very low, with abundant labor and raw materials. Three, there's less hassle. As a foreign-run enterprise, the Jiaozhou textile mill doesn't suffer official interference. Shanxi and Huizhou merchants, on the other hand, must not only pay taxes but also face demands from local officials. By contrast, if any official dares target the Jiaozhou mill, the East African consulate helps handle it, and nobody is reckless enough to stir trouble at the consulate's doorstep.
They also took the chance to improve the business climate of the Huaihai Economic Zone and the Zhuhai Commercial Zone. For example, in textbooks from the previous era, it was written that a famous modern national enterprise in the Far East, the Jichanglong Silk Reeling Factory, was relocated from Nanhai County to the Zhuhai Commercial Zone.
Historically, the owner of Jichanglong Silk, Chen Qiyuan, had founded the factory in his hometown Nanhai County but was nearly ruined at the outset, suffering fierce opposition from local people, officials, and scholar-gentry—unwelcome on all sides. Only by Chen Qiyuan's strong abilities did Jichanglong survive such harsh conditions and compete against foreign firms.
In this new timeline, it's different. In the Zhuhai Commercial Zone, most economic power is under the Xiangshan Consulate. The local gentry and bureaucrats have already been warned by East Africa. Guangzhou Prefecture keeps an eye on local officials and doesn't want to see another conflict break out.
Moreover, businesses in the Zhuhai Commercial Zone can enjoy the East African Kingdom's favorable policies, primarily more convenient access to loans. Among Hechingen Bank's global priorities, the Far East ranks alongside East Africa and Europe, equal to North America.
Ernst isn't worried about potential crises there. The Far East is a traditional agrarian country. In the current economic crisis, it's more helped than harmed. Even if they invest more, they won't lose money. Thus, while Hechingen Bank is shrinking worldwide, East Africa and the Far East are the only places getting further investment.
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