Newsmaker The digital revolution has started without us, says Altron’s Mteto Nyati
Government stands in the way of the president’s 4IR vision
● The government needs to create the right enabling environment if it wants a Silicon Valley in SA, says Mteto Nyati, the CEO of information and communications technology company Altron.
President Cyril Ramaphosa told the fourth industrial revolution (4IR) digital economy summit in Johannesburg this month that there are “trillions of rands” waiting for SA to “grab” if it can keep pace with the digital revolution and create its own version of Silicon Valley.
“It’s important to have a vision, but we need to be honest about where the country is at this moment in time,” says Nyati.
Thanks to the government’s information and communications technology policy, SA is at least three years behind the digital revolution Ramaphosa talks about keeping pace with.
Ramaphosa is right about the transformative effect of a Silicon Valley on the South African economy, says Nyati. But first his government needs to create the right infrastructure environment to attract investment and skills.
Then it needs to get out of the way. Sorting out the lack of connectivity and high cost of communication will enable people to come up with ideas and solutions. “It’s just so expensive right now,” he says. “Where do they get the necessary infrastructure to write programming? None of that is present here today, largely because of government policy.
“So let’s sort out the basics. This will enable people on their own to come up with solutions. South Africans are entrepreneurial by nature, they have ideas. But they need an enabling environment. Don’t try and control it. People will come up with their own solutions.
“I look at the great, cutting-edge ideas and solutions to problems people have come up with at Altron by being given the right environment, and it’s amazing. So we have incredible people here.”
Create the right environment and there will be no shortage of investments for tech start-ups, he says.
“We’re known globally for being innovative. When people want great minds they come and recruit from this country.”
The problem is that without a conducive environment, South Africans with the skills and potential to make Ramaphosa’s dream a reality are leaving, he adds.
“So I like the president’s idea, but let’s deal with the problem that is stopping us from going where he wants us to go.”
Nyati, 54, a former executive at IBM and Microsoft, and CEO of MTN SA, has emerged as one of the country’s most successful CEOs after being recruited in early 2017 by activist shareholders Venture Capital Partners to turn around the former top-40 company founded by Bill Venter and run by his son Robbie, which was in free fall after a series of strategic blunders.
According to Altron’s recently released results for the year to end-February, Nyati has done just that.
Earnings before interest, tax, depreciation and amortisation rose 24% to R1.6bn, revenue was up 30% to R19.2bn and headline earnings per share jumped 50% to 179c. The share price is at an 11-year high.
He’s done it — and he’s only halfway through his five-year turnaround strategy — by turning Altron into a pure services company, disposing of assets that did not form part of this information and communications technology (ICT) future, reducing the head-office count from more than 100 to less than 50 and sharpening its role.
It has become more about driving strategy, accountability and providing operational support, and the skills profile has changed accordingly.
“We got people who could ask the tough questions,” he says. Only two from the head office he inherited remain.
“We were not focused enough on exactly what our customers wanted from us. We had nine different companies that operated as silos when our customers expected us to come as one company to them.”
By clarifying its strategy and communicating it, he attracted the right talent.
“Talented people who would never have thought of joining Altron want to come and join us because there’s clear direction, they know what we want to do and want to be part of that journey.”
He has grown market share in a stagnant economic environment that has badly hurt many of his rivals.
Most of this growth has come from selling more to existing customers rather than competing for new customers, he says.
“So even if we don’t win another customer for the next five years, we’ll continue growing our business.”
Seventy-five percent of growth will be organic with only 25% acquisitions — “but very targeted acquisitions that help us gain capabilities in the cloud space, in data analytics and security where we don’t have them”.
Too many acquisitions in the past added little or no such value, he says.
Although it has 20,000 business customers in SA and 5,000 in the UK, including a recently signed R2.7bn five-year contract with the National Health Service, 49% of its revenue comes from the UK.
The reason its UK business is growing so much faster than its South African business is because customers in the UK have embraced digital transformation, he says.
“SA is three years behind. We can’t talk digital transformation in this country without affordable connectivity.” This involves a combination of high-frequency availability, which government policy “is still holding back”, and installing fibre networks around the country, which dysfunctional local government is “making very difficult”.
Getting the necessary permissions takes forever, he says.
“It’s an area they don’t understand. They’re not sufficiently resourced to handle these requests, which is delaying the roll-out of digital infrastructure.
“We’re trying to work with them, guide them and provide capacity, but it’s a very frustrating process.”
Nyati says he’s having growing doubts about SA’s New Dawn.
“For me, what is concerning is the state of the ruling party. The New Dawn is struggling to be born because of the challenges within the ruling party.”
Ramaphosa needs to take tough decisions.
“You don’t handle these challenges by trying to be nice to everybody. You’ve got to be decisive, you’ve got to make some key decisions and some unpopular calls. It’s part of leadership.
“Trying to satisfy too many competing interests is not going to take us anywhere.”
SA is three years behind. We can’t talk digital transformation in this country without affordable connectivity