Dr. Hendrik van der Bijl: Role of State Epitomised

Dr. Hendrik van der Bijl: Genius

Recently I was invited by Johan Fourie (@JohanFourieZA) to The University of Stellenbosch's ERSA Economics of Apartheid Workshop. In a panel with economists and an audience of Economics students, I made some rather (evidently) unpopular statements about the role of state and state-owned DFI's in accelerating the participation of Black people in the economy and attempting to reverse the economic disparities caused by the scourge that was Apartheid.

My fundamental point was that the state can support exceptional talent to effect real change and restore the key thing Apartheid robbed black people of: DIGNITY. 

Here is an extract from my address:

"Black people came out of a very expensive and bloody struggle into political power. We now have some level of control of the state. We have virtually no control of the economy. Thanks to the good work of the government, Black people (generally) live substantially better lives than they did under apartheid. Which means they are becoming better educated, and more affluent. Like the Afrikaners, they are getting to the big cities and realizing that they are in fact not in control. At least not of the stuff that really matters: THE ECONOMY. 

Black Economic Empowerment (BEE) is a very sound economic transformation strategy. However, it's success relies on the "haves" letting the “have-nots” share at the table peacefully by incentivising them to do the right thing (carrot), as opposed to punishing them for doing the wrong thing (stick). 

For as long as this is the case, Blacks will be at the mercy of the established to let them in. Their dignity will not be restored. The dangerous culture of entitlement will intensify. We ALL lose. 

BEE needs to be about creating an enabling environment for entrepreneurs to flourish, create employment and grow the economy. The only sustainable way to grow the economy is to innovate and create new products, new services, new markets, not re-arranging deck chairs on the Titanic with more BEE deals. 

This calls for harnessing our own talents as South Africans. There is nothing wrong with using state leverage to do that. Look at the United States. Look at South Korea. Look at China. What's wrong with us? Why is it so wrong for the state to use its competitive edge to support the development of its people and create world class black owned and managed businesses. I fear less the risk of doing this, I shudder at the thought of NOT doing it.

In short: I think that harnessing the potential of a Siyabulela Xuza will serve South Africa better in future, than every the BEE deal done to date.

We need to harness the talent we have and build industries around innovators and entrepreneurs. And the lesson from the past is that the role of state is key. 

The 'wave of wealth creation by lamenting established capital in order to open the higher echelons for a few to be wealthy' is gone. This is OUR government now. There is no-one to fight anymore, no Apartheid, no Botha, no Verwoerd. Just us.

WE simply have to make South Africa work. End of discussion.

I would like to end with a life story that was first shared with me by a dear friend Veli Mcobothi (@McobothiOne), a revolutionary intellectual in his own right. 

I think the role of state in this story is worth noting:

HENDRIK VAN DER BIJL, the second son of Pieter van der Bijl was born on 23rd November 1887 in Pretoria. His parents were typical burghers of the Zuid Afrikaansche (i.e. Boer) Republic of the Transvaal. His father, Pieter, was the 7th generation of the original Dutch van der Bijl family to be born in South Africa. Pieter (Hendrik’s dad) build up a successful business as a merchant and property investor. He became quite influential, counting among his many friends such well-known South African politicians and future Prime Ministers as Louis Botha, Jan Smuts, and Barry Hertzog.

Young Hendrik’s education was disrupted because of the Anglo-Boer War. He attended the Staatsch Model School in Pretoria, but the school was closed down and converted to a prisoner-of-war camp. After the fall of Pretoria in 1900, the family moved to Gordon's Bay and Hendrik was sent to Boys' High School at Franschhoek, from where he matriculated. The boy was interested in music and literature, and philosophy interested him deeply, but it was the exactness and logic of science that gave him great satisfaction, the application of which he held in even greater esteem. The boy did well at school and continued his studies at the Victoria College (today the University of Stellenbosch).

ACADEMIC YEARS
At Victoria College he excelled at physics, but in 1908, when he graduated it was with distinctions in mathematics and chemistry, for which he was the Top Student. In those days opportunities for a man of his talents were somewhat limited. He could either become a lecturer and later a professor of physics or join the Department of Agriculture. On the other hand, he could further his studies in Europe. He decided on Europe and as the German universities were considered leaders in the field of experimental physics, he went to Germany. 

Within two years, van der Bijl completed his thesis to prove an electron carried the same fundamental charge in ionised liquids as in gases. Impressed by his talent and dedication, his supervisor recommended him highly and he was offered the post of Assistant in Physics at the Royal School of Technology at Dresden. At the beginning of 1912, the 24 year-old van der Bijl took up his new duties, having left university with the degrees of Masters of Arts and Doctor of Philosophy.

Van der Bijl then met Robert Millikan, the eminent American physicist. Millikan was impressed with the young van der Bijl and recommended the young scientist to the Western Electric Company. Van der Bijl accepted their job offer and set out for New York.

His research at this company on the thermionic valve, which was developed by Dr Lee de Forest, led to his treatise entitled The Thermionic Vacuum Tube and Its Applications. It became the standard textbook on the subject for more than 20 years. This research led to the use of these tubes in radio communication. The first successful transmission of speech by radio was made in 1915. Later that year speech was transmitted by radio over a distance of more than 8 000 km. Van der Bijl managed to get the amplifiers to work to the precise tolerances required over this very long distance.

He married an American girl and during the First World War was approached by the American government to assist them with the defence system of the country. He was also associated with the Bell Telephone Laboratories and by 1917 had made significant contributions to the development of the photo-electric cell and by this means also made significant contribution to the development of the television.

RETURN TO SOUTH AFRICA
General Jan Smuts had assumed the reigns of government in South Africa. Smuts thought that a scientific adviser would be an asset to his Cabinet. 

Van der Bijl was persuaded to return to South Africa and in 1920 he left the United States. He was formally appointed as Scientific and Technical Adviser to the Department of Mines and Industries, but was directly responsible to the Prime Minister. At first his work was unrelated to electricity, but soon he started with plans for a public utility to provide the industries with cheap electricity.

Van der Bijl wanted to combine the advantage of a state-controlled undertaking with those of a public concern. The capital would be provided by the State and the company would be run on commercial lines. These ideas had already occurred to van der Bijl while in the United States.

ESCOM ESTABLISHED
In 1923 the Electricity Supply Commission (Escom) was founded. As Chairman, van der Bijl borrowed R16 million from the State and began putting his plans into action. From the outset the undertaking was success and within 10 years van der Bijl was able to pay back to the State loan.

Under his expert guidance Escom progressed form strength to strength and within a short period of time van der Bijl was able to fulfil his promise: South Africa was assured of sufficient inexpensive power for its fast-growing industries.

ISCOR ESTABLISHED
With Escom progressing so well, this far-sighted scientist was able to direct his attention to the steel industry. Before long Escom had an industrial twin, namely Iscor (the South African Iron and Steel Corporation). In this instance the promise was to provide inexpensive steel for South Africa. In 1934 the first steel was produced.

During the Second World War, van der Bijl became Director-General of War Supplies and later Director of Supplies, appointments that afforded him the status of a Minister.

It was also during this period that he became a Fellow of the Royal Society, an honour he considered to be the greatest afforded him.

By the end of the war in 1945, Dr Hendrik van der Bijl could look back on 25 years devoted to serving his country. During this period he had been responsible for the founding of dynamic undertakings such as Escom, Iscor, Amcor, Vecor and the development of what we today still call Vanderbijlpark. 

The sources of this material are: A Symphony of Power – The Eskom Story, and Eskom: Golden Jubilee 1923 - 1973. "The Remarkable Dr Hendrik van der Bijl" Dirk J Vermeulen, SAIEE Historical Interest Group, The Proceedings of the IEEE vol 86 no 12, December 1998

FINANCING AFRICA'S POTENTIAL

Then: May 2000

Now: December 2011

This week Durban hosts the 5th BRICS Summit. We also anticipate talk of the establishment of the $50 billion BRICS Bank to gain momentum when the 5 heads of state and their delegations discuss strategies to strengthen and grow the world's most exciting developing economies. 

As I plan my week to attend the BRICS Summit, I am reminded of my remarks as a panelist at Columbia University's African Economic Forum held on 01 - 02 March 2013 in Columbia Campus, New York. 

Thought I'd share: 

"I am an Entrepreneur, a trained Accountant and former Banker. Like most African entrepreneurs I am a capitalist with a social conscience. You cannot be an African entrepreneur and not be as concerned about her socio-political future as you are about her economic potential. 

I am certain that many of us here today have seen many statistics and read many reports about the current and prospective future state of Africa. 

The basics of economics tell us that consumption, real savings and investment drives economic growth. The glue that ties all these together is Finance. The question is how do we attract the right finance, at the scale required.

Since the best finance follows the best investment opportunities, ours is to make the Africa investment case an attractive one. For this to happen, we need entrepreneurs such as James Mwangi, Adrian Gore, Stephen Saad, Patrice Motsepe, Aliko Dangote to continue having access to fairly-priced, well-structured financing to prove the case to foreign investors.

By its very nature, debt is premised on collateral. I do not think that secured lending is the model that will facilitate new entrepreneurs to spawn new businesses, create new industries and create sustainable jobs. I think more and more equity-type structured funding from Banks and Development Funding Institutions (DFI's), Venture Capital, is the type of funding that will achieve this.

Institutions such as The African Development Bank, The World Development Bank, The Industrial Development Corporation of South Africa, Development Bank of Southern Africa, The Land Bank, The National Empowerment Fund etc are our best immediate opportunity to support the development of the African entrepreneur today. 

Venture Capital is also a much needed model, as our entrepreneurs continue to struggle to secure seed capital to develop their ideas. This capital is often small in quantum yet not available from Banks who would, once again, prefer secured lending. 

DFI's have supported and continue to support feasibility studies, and market research work that entrepreneurs typically need to do prior to embarking on a new project. If we cannot find a sustainable way to fund early stage entrepreneurship then we will struggle to facilitate the creation of more Dangotes and Motsepes. 

Outside of retail banks, DFI's can have a "game changing" impact on the development of entrepreneurs and infrastructure in our continent, which in turn will not only grown economies but also facilitate foreign investment.

However there are many challenges that contribute to our currently, less than ideal investment pitch for Africa to foreign investors.

For starters, we are not The United States of Africa. We have 54 sovereign states in our continent. This means many fragmented rules, regulations, stakeholders, markets and thousands of languages and cultures. Yes, as a continent we have been said to represent 1 billion people, $2 trillion in total GDP, but this is not a homogenous market although efforts are under way to forge a Free Trade Agreement that attempts to address this in some way.

Furthermore, Intra-African trade, as a proportion of Africa’s overall trade, has reportedly remained flat over the past 10 years at around 12%. This is very low proportion when compared with intra-regional trade proportions in other parts of the world. Intra-Asian trade, for example, is over 50% of total Asian trade and for Latin America the proportion is close to 30%. This also does not help our investment case.

We have also often heard about the challenges around a lack of integration of systems that allow the movement of people, goods and services across borders. We know about our poor infrastructure which actually makes it easier and cheaper for neighbouring countries to import goods from across the oceans than from their neighbours.

These challenges have historically limited the banking industry's appetite for mother Africa as an investment destination. However things are changing. Very quickly.

Just recently, the shareholders of ABSA, South Africa's 2nd largest bank overwhelmingly voted in favour of ABSA acquiring Barclays' operations in the rest of the continent. ABSA paid approximately R2 billion for Barclays' African interests, based on expected growth from the continent. This has reportedly increased Barclays' stake in ABSA from 55,5% to 62,3%. Why would ABSA and Barclays do this? As one article put it "ABSA and Barclays are seeking to boost profit by combining products and customer bases across a continent with faster growth rates than developed nations". Simple as that!

Nedbank also announced that it expects to convert its $285 million loan to Ecobank to equity in the bank with the largest footprint in Africa, somewhere between November 2013 and November 2014. In comparison, Ecobank has branches in 32 African countries, while the South African Bank is active in Lesotho, Swaziland, Namibia, Malawi and Zimbabwe.

We also had Old Mutual, one of the largest insurers in Africa announce that it has deployed R5 billion towards investing in its Sub-Saharan business.

These are just a few examples of a financial services industry that is starting to see the continent as a compelling investment opportunity. I expect many other industries to follow suit.

The average African's role in maintaining this momentum is to continue to tell the positive African stories. Recent research by Ernst & Young showed a stark contrast in the investment potential of Africa between those already doing business in Africa and those who have not, with the latter still associating her with instability, conflict and corruption. 

This is despite the fact that in the World Bank's most recent Ease of Doing Business rankings, 14 African countries ranked ahead of Russia, 16 ahead of Brazil and 17 ahead of India. This is also despite the IMF listing 7 African countries in the 10 Fastest Growing Economies between 2010-2015.

We need to change these stereotypes and demistify Africa. 

Like the Ernst & Young's Sustainability Report puts it: "Africa is a compelling investment proposition as it has natural resources; rapid economic and population growth; maturing political systems; a rapidly improving environment to do business and investment returns second to none". 

We must play our part in re-inventing Africa from an aid recipient to a trade and investment destination. 

AK

Source: Building bridges - Ernst & Young's 2012 Attractiveness Survey

THE ARMED ECONOMIC STRUGGLE

A Mother Remembers - Alf Khumalo

This weekend I was part of a business delegation invited to attend the ruling party’s January 8 Statement activities in Durban, KwaZulu-Natal. Much has been written about what was said (or not said) by the new ANC leaders that informs policy reform, at least for the next twelve months. The more I listened to the Statement and shared in social conversation with many other business leaders, the more I thought about the struggle for economic freedom. 

I wondered, how did South Africa win political freedom? Are there lessons from that difficult and costly struggle that can be applied to this newer, but equally challenging fight against systemic economic inequality plaguing our society? What will it take to beat this system? 

I think our choice of policy for accelerating effective participation by black people in the economy, was negatively affected by the Convention of a Democratic South Africa (CODESA) as well as the process that culminated into a negotiated political settlement. It is widely accepted that during CODESA certain concessions had to be made. In summary, we agreed to a ‘evolution’ of Black economic participation, and not a ‘revolution’. So the new government was to take a more transformational outlook and not a radical one in getting the scores of poor Black people into the mainstream economy.

I fear that it may take one very costly series of events to render this 'peaceful' economic struggle useless and the people may revert to an 'armed' struggle.

Does this sound familiar? Let me remind you. 

The African National Congress (ANC) was formed in 1912. The ANC Youth League of Tambo, Mandela and Sisulu was formed in 1944. The Youth League brought more vigor to this resistance and successfully argued for a more militant approach. They drew up a Programme of Action calling for strikes, boycotts and defiance. This Programme of Action was adopted by the ANC in 1949, the year after the National party came to power. It led to the Defiance Campaign of the 1950’s. 

But even then taking up arms was NOT on the agenda. So, for more than 4 decades, the ANC largely carried out peaceful demonstrations of resistance to the apartheid government. The 'peaceful' struggle continued and in 1955 African, Coloured and Indian political and social organisations organised themselves in Kliptown and released a progressive document: The Freedom Charter. 

It called for the people to govern and for the land to be shared by those who work it. The document also called for houses, work, security and for free and equal education. How did the government respond to this peaceful gathering and progressive outcome? They claimed that the Freedom Charter was a communist document. Since they had banned communism in 1950, they resolved to arrest ANC and other political leaders and brought them to trial in the famous Treason Trial. 

As if that was not enough, the government then announced that women must also carry passes. Guess what happened? Yet another 'peaceful' campaign was mounted by women countrywide, in 1956.

And then one day, something happened that would change the political struggle forever.

The PAC started a campaign on the 21st March 1960 where people were asked to leave their passes at home and gather at police stations to be arrested. People gathered in large numbers at Sharpeville in the Vaal and at Nyanga and Langa near Cape Town. At Sharpeville the police opened fire on the unarmed and peaceful crowd, killing 69 and wounding 186 people. 

The massacre of peaceful protestors at Sharpeville brought the era of peaceful protest to an end. 

On 30 March 1960, ten days after the Sharpeville massacre, the government banned the ANC and the PAC and declared a state of emergency and arrested thousands of its  activists. 

The massacre of peaceful protestors and the subsequent banning of the ANC made it clear that peaceful protest alone would not force the regime to change. The ANC took up arms against the South African Government in 1961 putting an end to 49 years of a political movement hoping to bring revolutionary change through peaceful resistance. 

From 1961, the ANC effectively became a new movement altogether. In 1990 the ANC was unbanned. In 1994 it won South Africa’s first democratic elections. It’s been in power ever since. 

So, its safe to say, it was largely because of the pressure of the armed struggle that the unwilling counter party was forced to the negotiation table, holding very little leverage leading to political emancipation. 

It is also worth noting that at the time, the emphasis was largely on socio-political freedom. Not to undermine the work that had been done before 1961 by ANC leaders in exile, the "straw that (eventually) broke the camel's back" was how the armed struggle rendered South Africa ungovernable forcing the hand of the oppressors. 

Do you think that ordinary South Africans don't remember this? Do you think our generation has forgotten how one day changed, and perhaps accelerated, the course (and cause) for political freedom? 

This BEE thing is not working.

This 'peaceful' economic struggle is not yielding any real results. How long will it take for an organised group of people, severely disenfranchised by a lack of socio-economic progress, to be adequately agitated and opt for a more aggressive approach? Especially, one that has been proven to work in the past. In fact, one that they, ironically, owe their very political freedom to. 

It should come as no surprise that after 19 years of a 'peaceful' and 'passive' offensive to get black people to be an integral part of mainstream economic activity, one is starting to hear calls for revolutionary means. And therein lies the danger: If we think this is about ceasing economic power from white hands to black hands, we further from the solution than we realise.

What we need to focus on is key levers of growing the economy into one that is controlled by ALL South Africans, equitably so. That means we must establish enabling legislation and supportive policies that will ENFORCE (as opposed to encourage) this behavior, otherwise it is only a matter of time until someone works out that this 'peaceful campaign' we call BEE is not working and we need a more aggressive strategy. 

By then, we may not be able to influence the outcome. The tide may be too strong. Time for rational thinking may be up.

How long before people start saying: "We've seen this before. Peace didn't work against a minority force resolute to keep their political power in 1950's. If anything, whilst we were protesting peacefully, they retaliated with the might of military power. Why should it be any different today? There hasn't been any genuine, scaleable commitment from the "haves" to broaden the ownership and control of the wealth, that was effectively seized from the indigenous people of this land. How much longer are we going to be in 'evolution'. 

You don't have to a be a heart surgeon to figure out what kind of power and leverage resides with 90% of any society that is gripped in poverty, feels highly disenfranchised, with a proven record in organizing behind a common cause. 

Bottom line: We need a Plan B on Economic Transformation. Fast!

AK

Sources: www.anc.org.za

What Does Mangaung Mean to Entrepreneurs

In the short time I have been working on the launch of StartUpSA (Twitter: @MyStartUpSA), I have been really encouraged by the many tweets, emails and chance meetings of many people who keep telling us how much we need StartUpSA. Thanks for all the well-wishes and rest assured we are working very hard to deliver a really powerful tool.

The truth is we are a country of very enterprising people. The problem is and has always been that we do not have an adequately enabling environment to harness that entrepreneurial spirit. We have also not promoted entrepreneurship as a real opportunity to address the many social ills created by inequality, unemployment and poverty.

So I decided to take some time out to go though the ruling party’s discussion documents on their policies, as published on its website. I wanted to see whether entrepreneurship would feature at all in the party’s discussions, as just under 5,000 delegates go into conference to decide on the policy direction of South Africa’s nearly 52 million people.

Whether you like it or not, decisions to be taken in the country’s legal capital between 16-20 December 2012 are going to impact you, as an entrepreneur.

So I picked up the “Economic Transformation – Policy Discussion Document March 2012” to try and gauge if Mangaung may deliver any progressive thinking about entrepreneurship and perhaps promoting it out of the obscurity it finds itself into the centre of policy formation and strategic direction of South Africa.

The document opens by stating: “We have an opportunity and an obligation to deliberate on actions which could best enable the economic emancipation of our people”

The Oxford dictionary defines emancipation as ‘the fact or process of being set free from legal, social, or political restrictions; liberation’.

The word “entrepreneur” appears twice and the acronym “SMME” appears 8 times, in a document where the basic thrust and master plan is: In order to get South Africa economically transformed we need a more labour intensive economy. The simplistic argument is that to get South Africans out of poverty, they need to be employed, and for them to be employed the economy needs businesses which rely on employing people. Okay?!

The first time the word “entrepreneur” is mentioned is in the context of the many complex decisions the state would need to make around new ideas and keeping what works. In a way, entrepreneurs are made out to be the alternative to that which has worked over the years. It presupposes that the two cannot co-exist.

“Should we look for new investors in mining in order to open new opportunities for black entrepreneurs, or should we go with more experienced existing companies?” the document questions.

We need to educate our government that there is a big difference between an entrepreneur and a business owner. We need to educate our government that there is a big difference between Entrepreneurship and SMME Development.

The one is a Plumbing business that has hired 15 people in the past 10 years and will continue to hire 15 people for the next 10 years. The other is a malaria testing kit made by two Coloured gentlemen in Cape Town, which currently hires 10 people and because it has signed up an international pharmaceutical is about to build a factory in Goodwood.

One of these is an SMME. The other is an Entrepreneur.

The first time the document mentions “SMMEs”, one can clearly see the confusion:

“The SMME sector plays an increasingly important role as an engine for economic growth SMMEs are a critical source of innovation. They have a higher degree of labour intensity, and tend to adapt more rapidly to changing conditions than larger organisations. They also provide opportunities for aspiring entrepreneurs, especially those who are unemployed. However, SMME’s continue to face challenges of access to finance, markets, support and information. We should target the creation of new firms, especially black owned SMME’s if we are to achieve our employment creation goals”

Here the document is talking about entrepreneurs, not SMME’s. An education is required to enable our government to support Entrepreneurship accordingly.

Whilst I don’t have the privilege of being a voting delegate in Mangaung, I hope to tell anyone who cares to listen that if we really care about the future of this country, we should bring entrepreneurship into the mainstream debate as it provides us a real chance of changing the game and making progress in creating ‘a better life for all’.

Here's to a Ministry of Entrepreneurship. I dream.

AK

Just Do It! Yourself

Because of my busy weeks, whenever I come across an interesting headline on my Twitter timeline, I favourite it and read it later. Last week I saw a headline that read “Can Entrepreneurs Be Made” by Anthony K. Tjan (@AnthonyTjan) in the Harvard Business Review (@HarvardBiz).

The article discusses the big question of whether entrepreneurs are born or made. Do they carry a genetic formula that destines them for success or can anyone, with the correct interventions, be an entrepreneur. As you know I have covered this question before, albeit from one Prof Muhammad Yunus’ point of view, in my blog instalment Every Single Human Being Is A Potential Entrepreneur.

But what really caught my eye in Tjan’s article were two points he made at the end of his article. They resonated with me deeply.

“Entrepreneurs start from that place we call Heart, inner passion and desire that is not easily malleable. We are what we feel”

I am sure you have heard many entrepreneurs say don’t start a business with the sole objective of ‘making money’. Others have gone further to say “Money is not Everything”. Ever noticed how that always sounds better when it’s said by someone who HAS money, yet when you hear it you can’t help but think “Are you out of your mind. Why else would I start a business if my ultimate objective is NOT to make money? That’s why it’s called a business right?! And besides money may not buy you everything, but it certainly buys MOST things”

My view is ‘yes and no’. Let me explain.

Tjan talks about what drives entrepreneurs, or what makes true entrepreneurs in the context of whether they are born or made. Just like ‘anybody can father a child but not all are fathers’, anyone can make money but not all are entrepreneurs.

Just like making a child, making money really isn't that hard. Buy something for R100, and sell it R120. There! You have made money. That doesn’t make you an entrepreneur, though.

Entrepreneurs take risks for greater reasons than making money. It’s that Heart. That desire to achieve something of greatness. For some greatness is writing and publishing African language books for children and for others it’s inventing the Internet.

So please, don’t choose the life of entrepreneurship if all you want to do is make money. Choose it for more than that. Create something sustainable. Something that changes human behaviours. Something that changes lives. Something that makes the world a better place for you, those you love and your community at large. That, requires "heart, and inner passion".

However, money is important. Life is a lot easier WITH money than WITHOUT money. An entrepreneur WITHOUT money spells doom for the entrepreneur, the enterprise and those supporting the entrepreneur.

As one veteran entrepreneur once told me many years ago, “Andile, you must make sure your business can feed you my boy. You see if the stomach is empty, all your mental strength is driven by the empty stomach. So effectively, you start thinking with your stomach. And that’s the beginning of the end for you. You see stomachs weren’t made for thinking. We have brains for that. Ok?”.

I remember nodding slowly and hoping that all of this will make sense to me one day. It did.

Make no mistake money is important, in fact its critical. It supports the lifestyle you want to live. It supports those that support you as an entrepreneur and for some, it serves as a scorecard!

So by all means, please make money, make tons of it! But don’t become an entrepreneur just for the money. Find that inner passion and desire, first. You are going to need it.

Tjan goes further and says: “Turning that passion into a business reality obviously requires executing on it. It requires Guts. Unimaginable amounts of potential lie dormant because people don't have that minimum threshold of Guts to just initiate and not overthink it”

Over my years in business, I have grown to appreciate, immensely, the art of DOING. Most entrepreneurs want to see themselves as the Thinkers, the Strategists, the Innovators. Nobody ever wants to be the Doer.

In fact, once we have conceptualised the idea (which any case is often by chance rather than design), and strategized how we are going to take it to market with all sorts of innovative technologies and marketing stunts, we want to bring in someone else to EXECUTE.

Many entrepreneurs often think this is the way to do it, because of what they read or see about other entrepreneurs who have made it big. They see the likes of Steve Jobs, Bill Gates, Jay-Z and Richard Branson dishing out instructions to staff and delivering great products to the world and they figure “I need to be the ‘ideas’ guy. I then need to get some people to execute. Then I have arrived”.

No dude, you haven’t even taken off!

You see, what most people forget is that it’s not always been like that for these guys. In fact, quite the contrary! All of the examples I have mentioned above got their break into big business, by EXECUTING THEIR OWN IDEAS.

Writing about Jay-Z, a BBC article journalist says:

“As a young rapper he worked hard on getting his flow perfect, on making his lyrics full of the right references, on never writing down a lyric. When he couldn't get a record deal for this first CD, he and friends used the same street entrepreneurial skills they had used to sell drugs in Brooklyn's Marcy Projects. "We knew we had something the people wanted, so instead of quitting we built it ourselves," says Jay-Z. They sold copies of his first CD out of the boot of their car next to Gray's Papaya, a famous hotdog store on 6th Avenue and 8th Street in Manhattan. Jay-Z was determined to become the rapper with the best flow, and if selling his CD himself on the street was necessary to achieve success, so be it”

So Jay-Z conceptualised HIS own album, memorised HIS own rhymes (Yes, he doesn’t write his raps), and then recorded his own album and when he couldn’t get a record deal, HE sold HIS own album out of a boot of a car.

So, you say you want to be an entrepreneur, huh? Stop talking about it then. Just do it! Yourself.

 

AK

Every Single Human Being is a Potential Entrepreneur

I've been reading this book "Banker to the Poor" by Muhammad Yunus, the economics professor, turned social entrepreneur. He started the micro-lender, Grameen Bank, in Bangladesh that changed the lives of the poor women of that country and beyond.

He says something in the book, which I find extremely profound about entrepreneurship:

"Microeconomic theory, which plays a central role in the analytical framework of economics, is incomplete. It views individual human beings as either consumers or labourers and essentially ignores their potential as self-employed individuals. This theoretical dichotomy between entrepreneurs and labourers disregards the creativity and ingenuity of each human being and considers widespread self-employment in Third World countries as a symptom of underdevelopment”

Talking about changes he proposes in the basic features of capitalism he continues to say:

“The first change relates to this overblown image of a capitalist entrepreneur. To me, an entrepreneur is not an especially gifted person. I rather take the reverse view. I believe that all human beings are potential entrepreneurs. Some of us get the opportunity to express this talent, but many of us never get the chance because we were made to imagine that an entrepreneur is someone enormously gifted and different from ourselves.”

“If all of us started to view every single human being, even the barefooted one begging in the street, as a potential entrepreneur, then we could build an economic system that would allow each man or woman to explore his or her [own] economic potential. The old wall between entrepreneurs and labourers would disappear. It would become a matter of personal choice whether an individual wanted to become an entrepreneur or a wage earner.”

Part of the reason why South Africa’s unemployment problem will take longer (than it should) to resolve is precisely what Yunus is talking about. Entrepreneurship is not seen as an option. Human beings in our economy are largely either seen as consumers and/or labourers NOT as entrepreneurs.

Like Yunus, I am convinced that entrepreneurship must climb up the agenda. Surely the recent emergence US start-up businesses, now worth billions of dollars and employing hundreds of thousands of people, should be driving a shift in paradigm from our policy makers. And I'm not only talking about the Google’s and Facebook’s. I'm also talking about the Microsoft’s and Apple’s.

Every single human being is a potential entrepreneur, yes even the barefooted beggar. Profound!

AK

Afrikaans Capital, African Consumption

This week I read about the imminent listing of Transaction Capital, the investment firm led by Massmart Chairman, Mark Lamberti. It was reported that the company plans to raise R500 million from next month's JSE listing.  Other than Mr Lamberti at 7%, the company's shareholders include Ethos, a leading SA private equity firm at 10% after investing R100 million; and Futuregrowth, which has invested a whopping R340 million of equity in the venture.

Now, at this point I'm thinking: “Wow, how amazing is this: a brand new business, likely to create hundreds if not thousands of jobs in our economy, about to list on the JSE, with THAT calibre of shareholders, who have committed THAT much equity. This is awesome”. 

Think about it, if Ethos' 10% is worth R100m then this is (at least) a R1 billion business before it even lists!

So, I was intrigued. I wanted know what is it that could've convinced the stubborn minds of Fricker Road to invest at such levels. So I did some research, and the activist in me, saw more than I should've.

Transaction Capital has 4 subsidiaries.

Subsidiary 1: MBD Solutions, is a company that collects debt for retailers such as Woolworths, Truworths, Edgars and Jet, basically the Wooltru and the Edcon groups. This business turns over R635 million, and delivers a Profit Before Tax of R91 million. Very nice! I wonder who holds that much debt in retail purchases.... oh of course it must be 'those people'....

Subsidiary 2: Bayport, is a company that provides unsecured lending to consumers that were historically ignored by "traditional" banks. Historically ignored???? By traditional banks??? Mmmmmmm, who could THAT be? Aha! Its 'those people'!

Bayport turnover is R1,4 billion per annum. I couldn't find any profit numbers but keep in mind that unsecured lending tends to be a very profitable segment in retail lending (think: High risk, High return). 

And whilst everyone is ranting and raving about the risks of unsecured lending growth in SA and even comparing it to the US sub-prime crisis that sparked the global economic meltdown, Lamberti is quoted as saying "Unsecured lending in the country is about R110 billion and our book is just under R3 billion, so we can afford to be very selective about who we grant credit to and how we grant credit". 

Translation: "Don't stress my fellow investors, there are enough Black people in SA who have no assets to place as security but are responsible enough to pay your loan back with interest (priced just below uMashonisa rates), simply because they are good, gainfully employed, responsible citizens of the country who want the best for themselves and their families. Trust us, not everyone is a Julius Malema. We’ve done the research!"

Subsidiary 3: Paycorp. This is a clever business that consists of "off-bank" ATM's. You know these. These are the ones you find at filling stations, with no identifiable retail bank attached to them. Yes, the ones which you tend to always encounter when in an emergency for cash and have no time to drive around to find ‘your’ bank’s ATM. Funny how you always think: "This withdrawal is about to cost me a lot of money”, but you always withdraw anyway.

Paycorp, puts about R22 billion through its 4,000 ATM's every year. The business is busy with plans to grow into remote areas to complement their footprint in forecourts and shopping malls. Who lives in these remote areas? Yes, you guessed it: "those people"...

And now..... *drum roll please*..... for my personal favourite:

Subsidiary 3: SA Taxi. Yes, you heard me, the company is called "SA Taxi". SA Taxi provides lending services and insurance products to more than 20,000 taxi operators. This business is said to be poised to benefit from the taxi industry when the national taxi fleet is renewed as the current fleet is aging. Who OWNS taxis? Who DRIVES taxis? Who RIDES in taxis? Yes, you guessed it again: "those people".... "I like your perm, but not on my window". I wonder if Mr. Lamberti has ever seen one of these?

The Transaction Capital group's overall income is R3,6 billion. Their total loan book is R6,7 billion. In short, if you add up all the credit they have granted to Black taxi owners and loans to the many Black families with no assets, plus 'who knows what', these add up to R6,7 billion. That will buy you two Avusa's, plus some healthy change to take back home!

I have lots of respect for entrepreneurs. In fact, the concept of making something out of nothing, other than an opportunity, a great idea, a conviction, has taken over my life and arrested me and sentenced me to a life-long dedicated entrepreneur.

I am fascinated by how Transaction Capital has identified gaps in the market and the markets in those gaps. Look at a business like Bayport. Most banks have literally fled from these unbanked Blacks with no assets to put up as security for loans. Bayport is in there and most importantly is making tons of money doing it. This is good. This is very good.

How about a business like Paycorp? The big 4 retail banks have had to be forced to create "access to financial services" sites in remote areas for Black people, who have historically not been considered part of the economy, except as the necessary "cheap labour" evil. Should Paycorp succeed in providing ATM services to remote areas, this means our people in the many remote villages of the country can have access to basic electronic banking services offered by a simple ATM. This is good. This is very good.

I, therefore, have great regard for what Mr Lamberti and his colleagues have achieved to date and I wish them every success in their listing and beyond. It is no simple feat to build a R100 million business let alone a R1 billion business. So well done, gentlemen.

However, reading the story I realized something that is NOT an indictment of the entrepreneurial team of Transaction Capital but a SERIOUS INDICTMENT for the Black people of South Africa.

The story of: Afrikaans Capital, African Consumption.

Why is it that the largest financier of unsecured lending is an Afrikaans run bank?

Why is that most Black taxi owners borrow from white run (and controlled) banks? 

Why can't Black people think-up, develop and roll out these ideas for themselves by themselves.... to themselves?

Is Stellenbosch going to continue to be the economic capital of South Africa, whilst Africans, in their townships and villages, remain the systematic consumers of its myriad of goods and services?

Think about where you do groceries? Afrikaans Capital.

Think about where you bank? Afrikaans Capital.

Who grows your food? Afrikaans Capital.

And if Stellenbosch has its way, your children will go to an Afrikaans capitalized private school, pitched ‘not as expensive as St. Johns, but not as cheap as Orlando High’. And you and I know, we will send our kids there. Not because it's funded by Afrikaners, but because it a great idea developed by great entrepreneurs. Except that these entrepreneurs are not Black. And yes, Political Correctness aside, that is an issue as it creates a systematic threat to the continued stability of the democracy we hold so dear.

Black man, wake up! Your 'real' freedom is being outsourced to the minority, whilst you occupy yourself with meaningless politics and tenders. You are busy drinking skinny cappuccinos in Melrose Arch, whilst your markets are being penetrated by those who dare to dream, and do. Access to capital is a poor excuse. I keep saying, and will never stop saying “Great ideas, always secure funding”. Transaction Capital has proven it so far, and I have my money on them to prove it when they list.

So, what is it about Blacks that make us comfortable being market takers, and never market makers? Why are we not leading in market segments that sell to our people? We understand the cultural behaviours and disparities of Black South Africans, more that any research house could, simply because we ARE the market. Yet, we take this invaluable IP and do nothing with it.

To borrow from the leader of the Black Consciousness Movement, Steve Biko, we are sitting and spectating in a game that we should be participating in.

Asked about how he juggles what must be a very demanding Chairmanship of leading retailer, Massmart (yes, the one that has just been bought by Walmart) Mr. Lamberti concludes by stating that Transaction Capital takes up 12 hours of his day and he is "having a lot of fun".

I'm sure you are indeed, having a lot of fun, Mr. Lamberti.... as you should, you have earned it. I, further wish you and your colleagues all the best in your business endeavours.

In the meantime, please excuse me whilst I try and wake up my sleeping brothers and sisters who are more concerned about Mangaung than Stellenbosch and are too blind to see the relationship between the two.

AK

Sources: Sunday Times, May 13, 2012