Hallo van Kaapstad!

Since my last posting leaving Jo’burg, I’ve had some time to learn some Afrikaans. I know it’s working: when I speak Afrikaans here, people are always smiling and nodding patiently. I’m a polyglot genius!

SIB’ers at the Cape of Good Hope

Other SIB’ers going cage-diving for great white sharks. It’s possible that their feet are being eaten in this photo.

I had started this posting from Cape Town with the full intention of having two updates from the beautiful Western Cape. The truth is, however, that I just had way too much fun and was way too busy to get any writing done. So this posting comes to you from 39,000 feet, on my flight from London to San Francisco, the second leg of my 24-hour journey back home.

Cape Town, simply put, was great. Perhaps it is its proximity to water, its nearness to amazing winelands, or its Twin Peaks-esque Table Mountain, complete with its own rolling fog layer, but I can safely say that the SIB team felt more at home in this city than in Jo’burg. But just as we did in that city, we kept to a grueling schedule of company tours, beginning with an all-day exploration of the South African wine industry in Stellenbosch. It’s not easy starting to do wine tours at 9:30am and continuing all day, culminating in a dinner-time talk on sustainable energy, ending at around midnight. It takes discipline and stamina: a certain beyond-yourselfness that only a Haas EWMBA exhibits. Our other Cape Town company visits included vineyards (Rustenberg, KWV, Tokara), clothing retail/retail finance (Woolworths/Woolworths Financial Services), manufacturing (Levi’s and Tenesol), and social entrepreneurship (The Hub).

Talking consumer finance and the challenges of building an emerging market segment at Woolworths Financial Services. Many thanks to Gideon Granville (Haas MBA 2004) for hosting!

Rather than a blow-by-blow account of all the visits we did, I thought it would be more appropriate to share a retrospective of the types of things we learned during our two weeks in South Africa. I’m sure that most of us on the SIB didn’t have an accurate preconception of South Africa before we arrived. We’ve since learned that the country sits at the nexus of the next growth frontier: Africa is going to be a huge market, and South Africa (whose economy is growing at around 5%/year) is the key, especially in sub-Saharan Africa. That said, South Africa has its development challenges: it’s a tricky thing for the government to navigate a bifurcated economy. At the one end, it’s very much a developing nation. Many people lack basic services: electricity, clean water, decent education. At the other end, it’s very much a developed nation.

Factory tour at the Levi’s plant. Those are 501s they’re making!

I’m fascinated by the fact that in many ways, the country is well on its way to integrating a previously segregated society — and we are less than 2 decades past Apartheid. Our SIB experience allowed us to look deeper. The government’s Black Economic Empowerment (BEE) initiatives have indeed started to redistribute wealth, but only for an elite class. An iteration on these policies has lead to Broad-Based Black Economic Empowerment (B-BBEE). From the conversations we had, we noted that there was overwhelming support for the spirit of the rules, but at the end of the day, regulatory compliance is, well, regulatory compliance. Many companies are spearheading innovative corporate social initiatives (CSI) to provide funding, logistical resources, and know-how for new small/medium enterprises. Sasol was particularly impressive in this regard. Among other activities, its ChemCity subsidiary is addressing the country’s housing crunch by looking at ways to convert ash into bricks.

A conversation on entrepreneurship at The Hub/Cape Town.

Along these lines, we also learned a thing or two about the entrepreneurial spirit in South Africa. At the lower strata of the economic pyramid, entrepreneurs are alive and kicking, but pushed there for lack of other opportunities. A group of kids in Soweto delighted us with their impromptu rendition of the South African national anthem. Then they charged us for the performance (and tried to sell us a soccer ball as well). At the top end, the severe shortage of skilled workers (amplified, in part, by employment equity initiatives) has meant that people exiting university and entering the workforce don’t see a need to go into business for themselves. At the same time, capital from outside the country still views South Africa (and Africa in general) as too risky. Certain groups, such as The Hub, the Silicon Cape initiative, and the Cape IT initiative, are trying to kick start entrepreneurship, the latter particularly in the high tech field.

But this leads us to another hurdle that we learned about: South Africa’s challenging Internet infrastructure. Fixed line access is dominated by the incumbent Telkom, and broadband penetration is relatively low (and expensive). This has several derivative effects: most Internet usage is in the workplace, but most workplaces filter Internet access. Online shopping, accordingly, isn’t as popular as it is in the US. It also means that connectivity via mobile phones is extremely popular.

By this point, you’ll have noticed that business opportunities abound in South Africa, but entry into this market requires an understanding of the nuanced complexities. I’d like to think that our 2 or 3 weeks in the country has at least given us an introduction to these complexities. If you’d like to know more, you’ll just have to sign up for next year’s South Africa SIB :-).

—Geoff

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