Early mover advantage pays off for Mdwaba
BY CLOSE OF BUSINESS on the day of our interview, Mthunzi Mdwaba had increased his equity in Torque IT – South Africa’s largest ICT solutions firm – from 31,3% to 38%. “Another black economic empowerment deal involving a multinational firm in which my consortium is poised to snatch a sizeable equity stake is on the cards,” Mdwaba said casually.
It turned out that two of Torque IT’s shareholders had divested from the firm, prompting Mdwaba to ramp up his stake, as allowed in a contractual clause that gives him first right of refusal. With 38% equity, he becomes the single largest black shareholder in Torque IT.
And that more or less sums up Mdwaba’s growth strategy. In a 2004 interview with Time magazine, Mdwaba said his greatest passions were transformation, local development and the growth of people. In a real sense, his stewardship of Torque IT has been variations on those themes – buoyed, of course, by an insatiable demand for IT services and the benefits of empowerment.
He sold a portion of the company to Kelly Group about a fortnight ago for R37,8m in a move he says will facilitate reciprocal growth for both companies. That means Mdwaba can now provide Kelly with apprentices graduating from Torque’s IT learnership programme, in line with his penchant for empowerment and skills upliftment in black communities.
His strategy moving forward is one grounded in an expansion of Torque’s presence outside SA. Mdwaba has already steered the company into 23 countries other than SA, including franchises in Kenya. This year Mdwaba set up partnerships in Nigeria and Ethiopia and is currently establishing a presence in Zambia.
Mdwaba has perhaps made a fortune by being one of the most gifted opportunists in empowerment. Even more fascinating for the entertainment lawyer turned entrepreneur is that he holds no formal training or qualifications in ICT. In fact, he once told an IT magazine he embarked on a career in law because lawyers, along with doctors and teachers, were revered in the poor Eastern Cape village where he grew up.
His unceremonious departure from Primedia in November 2000 (where he was MD of the group’s music division) was the turning point in his career. Says Mdwaba: “I was employed by Primedia CE William Kirsh with the mandate to improve the financial performance of its music division. Only months into my job I was told Primedia would be exiting its music interests, as it formed part of the company’s non-core business. I was disillusioned to the point that I vowed never again to work for someone else.”
A year later, and purely by chance, Mdwaba (41) met Torque IT’s Gary Chalmers at an MBA class. That was in January 2001. Almost instinctively he felt the world of IT (and not law) offered the challenges he was looking for. So when the opportunity to buy Torque IT came knocking in April 2001 he grabbed it with both hands. However, it wasn’t an instant meal ticket. The fact that it had just posted a cumulative loss of R36m was in itself a daunting prospect. Mdwaba’s first challenge was to build
a black-empow- ered company in a sector dominated by white companies. With that goal in mind his black consortium pitched a R9m deal to Torque IT – an offer its then parent company, JSE-listed IT counter Mustek, readily accepted.
Says Mdwaba: “I hedged my risk on SA’s growing demand for ICT skills. But most strategic in my business plan was the unravelling economic policy that would in future give black-owned and -controlled firms preference to procuring Government’s ICT business.”
However, eight years ago nobody would have predicted Government would be so stringent with its procurement policy. So it was risky when Mdwaba threw R9m into the pot.
The second challenge was to make money. “The company had good service delivery credentials but was perceived as being arrogant. Besides, it had a bloated staff headcount that only served to duplicate responsibilities. But those challenges where surmountable.”
As part of his turnaround strategy, Mdwaba dispensed with the luxury of a marketing and advertising budget. Senior management (including Mdwaba) had to forfeit their salaries for close to a year. Within two years of Mdwaba taking over the business, Torque was able to post a profit – a feat mainly credited for earning him the 2004 ICT Personality of the Year award. Between January 2001 and year-end 2004, Torque had grown 104% and 34% year-on-year.
His lesson? “My take is that you don’t need a mentor to take risks because opportunities vary. The problem in SA is that most aspiring entrepreneurs are averse to risk. They’d rather buy a stake in a profitable company and wait for dividends.”
In addition to Torque, Mdwaba has a 26% stake in IT group Stotech and a 30% holding in advertising firm Young & Rubicam (Y&R). He also holds a sizeable property portfolio, including office parks in Lynnwood and one housing Torque IT’s head office in Rivonia.
Risky business. Mthunzi Mdwaba