Mark of success
Fingerprinting turned crime into money-spinning business
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