Needed: Busi­nesses to drive the SA econ­omy

The IDC is look­ing for a new gen­er­a­tion of black en­trepreneurs to make stuff, peo­ple who are will­ing to roll up their sleeves and get their hands dirty

CityPress - - Business - NICKI GULES nicki.gules@city­press.co.za

If Ge­of­frey Qhena, the CEO of the In­dus­trial Devel­op­ment Cor­po­ra­tion (IDC), was an entrepreneur with R5 mil­lion to spare, his in­vest­ment de­ci­sions would sur­prise you. He be­lieves that South Africa and the rest of the con­ti­nent present a world of op­por­tu­nity, but only if you know where to look. “If I was an entrepreneur, I would in­vest 50% in man­u­fac­tur­ing. I would in­vest half of the re­main­der in tourism, and the other half in new in­dus­tries: things that we see as tiny now, but which we will see get­ting big­ger into the fu­ture,” he says.

Although spend­ing the bulk of his fic­ti­tious entrepreneur’s bud­get on man­u­fac­tur­ing may sound risky to some, to Qhena it makes per­fect sense.

“We have re­sources here in South Africa, most of which, by and large, you can source for man­u­fac­tur­ing. We are very close to the mar­kets that are very un­der­de­vel­oped, which is the rest of the African con­ti­nent. So those two, for me, make sense,” he says.

“Let’s say I want to man­u­fac­ture fur­ni­ture. We have forestry here, and also on the rest of the con­ti­nent – it de­pends on the type of wood you need. I look into the con­ti­nent and it is de­vel­op­ing hous­ing, proper hous­ing, and there is a de­mand for fur­ni­ture, with the growth of the mid­dle class, so that gives you that mar­ket.”

There are other un­ex­ploited op­por­tu­ni­ties in the sec­tor, such as equip­ment man­u­fac­tur­ing, which is only done in South Africa and, to some ex­tent, Egypt. One can eas­ily spot this by ex­am­in­ing where the steel plants are. But to many, steel is now a dirty word.

“I know the steel story is prob­a­bly not the best now be­cause it goes through dif­fer­ent cy­cles, but it’s be­cause we have not fo­cused on the in­fra­struc­ture re­quire­ments on the con­ti­nent,” he says.

Man­u­fac­tur­ing also has, he says, a lot of legs, “but you can’t just do it naively”.

Qhena cites pre­mium just-in-time man­u­fac­tur­ing in the tex­tile in­dus­try for tar­geted mar­kets with low-vol­ume, high-value out­puts and tight dead­lines, as one such ex­am­ple of how en­trepreneurs in­volved in tra­di­tion­ally strug­gling sec­tors can make things work for them.

“So it is really where in the man­u­fac­tur­ing sec­tor you po­si­tion your­self,” he says. “You have to be re­spon­sive, ef­fi­cient and quick. You have to also be con­scious of your cost struc­ture. You have to find bet­ter, more in­no­va­tive, ways of man­u­fac­tur­ing. You have to look for niche mar­kets. You have to be mod­ern.”

Tourism makes a lot of short-term sense to Qhena be­cause of the favourable rand/dol­lar ex­change rate. And, pro­vided you are not want­ing to en­ter the ho­tel or ac­com­mo­da­tion busi­ness, it needn’t take that much cap­i­tal.

“Look on the ex­pe­ri­ences side,” says Qhena. “The other day I was in Soweto and I saw this guy on a quad bike, and be­hind him were 15 tourists all on quad bikes, in­ter­act­ing with peo­ple on the street. It’s dif­fer­ent, it’s niche,” he says.

There are also a sig­nif­i­cant num­ber of new in­dus­tries to choose from, in­clud­ing the en­ergy stor­age in­dus­try, which in­volves big­ger and bet­ter bat­ter­ies such as those which Elon Musk’s com­pany, Tesla, is man­u­fac­tur­ing right now. These can solve a va­ri­ety of prob­lems, from in­creas­ing the dis­tances elec­tric cars are able to drive, to sav­ing the en­ergy power sta­tions pro­duce at night, which oth­er­wise goes to waste.

“We have lots of plat­inum and we need to cre­ate a mar­ket, so we have fuel cells here that can use it, which we are look­ing at,” Qhena says.

There are also many op­por­tu­ni­ties in the phar­ma­ceu­ti­cal in­dus­try for those who are able to make cheaper medicines, which gov­ern­ments across the con­ti­nent will bet­ter be able to af­ford. New in­dus­tries, Qhena says, are crit­i­cal. “If you don’t as a coun­try con­stantly rein­vent your­self, you are go­ing to be left be­hind,” Qhena says. “I was at the World Eco­nomic Fo­rum in Jan­uary and they were speak­ing about the fourth in­dus­trial rev­o­lu­tion, and that was in­no­va­tion.”

So which sec­tors are hot for en­trepreneurs at the mo­ment, and which are not? Next five years: FY 2015: Past 5 years: Past 10 years: Past 20 years:

In his Hot col­umn, Qhena places re­new­able en­ergy, be­cause the coun­try still needs plenty of power de­spite the fact that two gi­ant coal-fired sta­tions are com­ing on­line soon.

“There are also op­por­tu­ni­ties on the con­ti­nent, be­cause some places have even bet­ter sun than we have, and plenty of wa­ter for hy­dro­elec­tric­ity.” COBUS PRINSLOO, Graph­ics24

R100 bil­lion R11.5 bil­lion R60 bil­lion 98 bil­lion R143 bil­lion

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