04 MAY 2019
In business, big and small go together
by Andile Khumalo: Chartered Accountant (SA), former investment banker, investor and operator of businesses in media, marketing, communications, technology and financial services.
On a recent trip to Cape Town I honoured an invite from a young entrepreneur, Velani Mboweni, who wanted to present his business to me in pursuit of potential investment.
Founded in 2016, LÜLA was created to combat the problem of traffic congestion in SA, the high costs of owning a car and unreliable public transport infrastructure.
It's an app that connects corporate commuters to private shuttles and since its inception, LÜLA has managed to raise more than R3.7m from local and international investors, securing nine local corporate companies as clients.
Recently LÜLA launched a crowdfunding campaign, which I duly participated in, seeking to raise more capital in order to now take the application to market. I must confess, I love the business, really admire its model, but most of all I'm really impressed with Velani's resilience and hunger to succeed.
But it was something I didn't know before the meeting that caught my attention about LÜLA and its co-founder — the start-up accelerator that he has been working under called StartupBootCamp AfriTech, and the unique model that they use to incubate, support and take their entrepreneurs to market.
StartupBootCamp AfriTech is the African chapter of a global accelerator founded in Copenhagen with a core mission of supporting the world's best entrepreneurs through all stages of their growth. LÜLA is part of this accelerator and in fact the one occupying most of the space at its Cape Town offices.
StartupBootCamp AfriTech utilises a unique model that makes so much sense I wish I had thought of it myself.
Its founders have figured out that the South African economy, and many others on the continent, are littered with oligopolies, and the best way to get start-ups to go to market is to partner with the corporates — the start-ups bring innovation that is not always easy for chunky, large conglomerates, and the corporates bring loyal customers a base built over decades — something that start-ups only dream of.
You don't have to be a rocket scientist to see that the lion's share of most industries is controlled by a handful of players. The resources industry is controlled by a few miners, telecommunications is controlled by MTN, Vodacom and perhaps Telkom, banking is controlled by the top five banks, and so on and so forth.
I saw the same principle at play when I hosted the Coca-Cola Beverages SA's (CCBSA's) supplier development conference. The conference was packed with black suppliers either already part of Coke's enterprise and supplier development programme or trying to get in.
CCBSA has committed to spend R3.9bn with black-owned businesses in the three years between 2018 and 2020, which is an average of R1.3bn a year. In 2018 alone they spent R1.5bn.
But anyone can throw around big numbers. The real question is to what extent does this spend compare to total company spend?
The company has committed to reach 40% of total spend going to black-owned companies by 2020. Yes, by next year they want to get 40c in every rand spent in manufacturing, distributing, marketing and selling its world-class products to be procured from black people.
And just to be clear, they define black-owned as a company majority-owned by black South Africans.
By the end of 2018 they were already at 21%.
It is clear that a key lever in transforming our economy is going to be the ability and the will by big business to find ways to work with smaller businesses - not because they are nice people trying to do the right thing, but because it makes good business sense to do so.
This, however, will depend on the social consciousness and orientation of the leaders of big business. In other words, to what extent does the CEO recognise the need to work with entrepreneurs in the first place? After all, "nobody gets fired for buying IBM" — as the old adage used to say.
Velaphi Ratshefola, the MD of Coca-Cola Beverages SA, not only opened its conference but stayed the entire day mingling with entrepreneurs, visiting almost every exhibition stand and, most of all, just listening.
When I closed the conference at 4pm and saw him seated exactly where he had been at 9am, I knew then why this company will likely do well and achieve its goals.
He sees the business imperative. Imagine if all our business leaders did.
This article first appeared in The Business Times, Sunday Times on Sunday, 10 March 2019.
Source: khumalo.co is the investment office of Andile Khumalo, a Chartered Accountant (SA), former investment banker, investor and operator of businesses in media, marketing, communications, technology and financial services. Visit our web-site at: https://www.khumalo.co/.