Mark of suc­cess

Fin­ger­print­ing turned crime into money-spin­ning busi­ness

Finweek English Edition - - Property Compass - CHIMWEMWE MWANZA

WHEN Vho­nani Mufamadi, CEO of AltX-listed bio­met­rics firm Ideco, scoured the mar­ket for op­por­tu­ni­ties to start his own busi­ness, he set­tled on a ubiq­ui­tous chal­lenge fac­ing both Gov­ern­ment and busi­ness: crime preven­tion. Not in the tra­di­tional sense of out­moded counter mea­sures that re­quired the brute force of po­lice but smarter, techno-savvy meth­ods of pre­vent­ing se­cu­rity breaches in Gov­ern­ment de­part­ments and busi­nesses.

How, Mufamadi asked, could rapid ad­vances in sci­ence and tech­nol­ogy be har­nessed in a cost-ef­fec­tive so­lu­tion that would be both ef­fi­cient and sus­tain­able for po­ten­tial clients?

The an­swer, he says, was star­ing him in the face: iden­tity fraud. A mov­ing feast for in­ter­na­tional crime syn­di­cates and South Africa’s white col­lar crim­i­nals due to the ma­nip­u­la­tion of iden­tity doc­u­men­ta­tion. Cor­rup­tion, bribery and the in­ca­pac­ity in 1999 of the Home Af­fairs Depart­ment to mon­i­tor the in­tegrity of the process of is­su­ing iden­tity doc­u­ments was a reg­u­lar news fea­ture.

The an­swer to that prob­lem, Mufamadi says, was fin­ger­print iden­ti­fi­ca­tion. “Iden­tity goes be­yond an in­di­vid­ual’s or a busi­ness’s name,” he says. “For ex­am­ple, iden­ti­fy­ing my­self as Vho­nani isn’t enough. There’s a need for bi­o­log­i­cal proof in the form of, say, my fin­ger­prints, DNA or the iris of my eye.”

As it turned out, bio­met­rics – a tech­nol­ogy that helps peo­ple to use an in­di­vid­ual’s unique phys­i­o­log­i­cal fea­tures, such as body tis­sue, for the pur­pose of iden­ti­fi­ca­tion – was in fact al­ready big busi­ness world­wide. Es­ti­mates by in­dus­try body In­ter­na­tional Bio­met­rics project the busi­ness to grow to US$10bn (R110bn) by 2010 from a low base of just un­der $4bn (R44bn) just two years ago.

A lawyer by train­ing, 39-year old Jo­han­nes­burg-born Mufamadi’s next step was to es­tab­lish how the tech­nol­ogy worked. As he puts it, not many lawyers (other than those in foren­sics) would con­sider the busi­ness of analysing hu­man tis­sue sam­ples and pro­fil­ing an in­di­vid­ual’s iden­tity worth­while. Even more chal­leng­ing for start-ups in SA there isn’t a large spread of men­tors in this mar­ket to guide them through the early cy­cle of such a busi­ness ven­ture.

Be­tween 1999 and 2000 Mufamadi be­gan gath­er­ing in­for­ma­tion on the sci­ence of bio­met­rics from books and the cost and roll­out of the prod­uct from com­pa­nies al­ready op­er­at­ing in the sec­tor.

With all the nuts and bolts in place, Ideco tar­geted pub­lic in­sti­tu­tions in 2003, notably SA’s Safety & Se­cu­rity depart­ment, know­ing full well the SA Po­lice Ser­vice of­ten needed bio­met­ric in­put such as fin­ger­prints to track crim­i­nals.

An­other Gov­ern­ment depart­ment – So­cial Se­cu­rity, which dis­penses so­cial grants – also gave Ideco a head start. “We pro­vided the depart­ment with scan­ners that pos­i­tively iden­tify ben­e­fi­cia­ries. In fact, our tech­nol­ogy has helped to clamp down on fraud,” says Mufamadi.

Home Af­fairs’ on­go­ing R16bn project to digi­tise the records and fin­ger­prints of more than 45m SA cit­i­zens and per­ma­nent res­i­dents is an­other op­por­tu­nity that has bright­ened Ideco’s fi­nan­cial out­look.

It’s not only the pub­lic sec­tor that’s splash­ing out on its ser­vices. “Pri­vate sec­tor de­mand for se­cu­rity prod­ucts – such as fin­ger­print ac­cess con­trol, which en­ables only au­tho­rised peo­ple to gain ac­cess to spe­cific ar­eas within an of­fice – is on the up­swing. In fact, we’re grow­ing on the back of both pub­lic and pri­vate sec­tor spend,” says Mufamadi.

Last year the com­pany turned over more than R200m in rev­enue. But Mufamadi chooses to be coy on Ideco’s pro­jected rev­enue for 2008.

With hind­sight Mufamadi says Ideco’s as­cent in the in­dus­try was no stroke of luck. He went through a rugged phase be­fore set­ting up the com­pany, hav­ing at­tempted a few un­suc­cess­ful ven­tures, af­ter a stint at com­mer­cial law firm Ed­ward Nathan Son­nen­bergs. For­tu­itously, a com­mon char­ac­ter trait in lawyers is their tenac­ity and ver­sa­til­ity. And Mufamadi is rich in both.

Yet de­spite its ob­vi­ous op­por­tu­ni­ties most lenders were re­luc­tant to pro­vide him with seed cap­i­tal to kick-start the ven­ture. “Make no mis­take, this is a cap­i­tal-in­ten­sive busi­ness,” Mufamadi says of the po­ten­tial risks as­so­ci­ated with bio­met­rics. Banks were in­cred­i­bly wary about in­vest­ing money in a high in­put cost busi­ness.

To solve that prob­lem Mufamadi teamed up with Al­bie Gelden­huys, his co-found­ing part­ner and an en­tre­pre­neur also with an eye on the tech­nol­ogy sec­tor. The pair dug deep into their pock­ets to pro­vide the re­quired cap­i­tal. “The fact there were few bio­met­ric ser­vice providers in the SA mar­ket was in it­self an op­por­tu­nity.

Ideco next en­listed French elec­tron­ics and tech­nol­ogy so­lu­tions group Sagem as a strate­gic part­ner and listed on the AltX. “Our list­ing and part­ner­ship with Sagem (whose prod­ucts rate highly world­wide) have given us scale and a unique edge over the com­pe­ti­tion,” says Mufamadi. Which ex­plains Ideco’s de­ci­sion to tie up an exclusive dis­tri­bu­tion ar­range­ment for the French group’s prod­ucts in South Africa.

Ideco now en­joys an en­trenched po­si­tion as the de facto leader in SA’s bio­met­rics in­dus­try. But Mufamadi isn’t com­pla­cent: “Our in­ten­tion is to fur­ther grow our foot­print in the SA mar­ket. Given the grow­ing sup­port from the pri­vate sec­tor that ob­jec­tive is sur­mount­able.”

Tenac­ity and ver­sa­til­ity. Vho­nani Mufamadi

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