SIB South Africa – Day 1

Anne Sromek is a third-year student in the EWMBA program at Haas, and one of 20 students enrolled in Seminars in International Business: South Africa during the Spring 2014 semester. Class instruction is led by Doy Charnsupharindr, Professor Mark Rittenberg, and Ingrid Gavshon. The 2-unit course is comprised of several pre-trip evening meetings at Berkeley, during which students explored South African history, business, political climate and culture through guest lecturers and selected readings. The students also spend one week abroad to solidify the lessons learned and connect with a country outside of their own. 

This blog is assembled from the experiences and musings of the author for the purpose of showcasing the SIB experience for prospective students and future SIB participants.

Our first official SIB event took place on Sunday night at a private estate in Parkview, Johannesburg. Ingrid Gavshon’s family kindly hosted our group for an outstanding barbecue (Braai in Afrikaans) dinner in their lovely backyard. After dinner, we were treated to a talk by Professor Anton Harbor of Wits University and Justice Malala, social commentator and news columnist. Both men conveyed that they were neither pessimistic nor optimistic about the outlook for the New South Africa. There are many good things that they notice today, especially pertaining to the opportunities available to the black population, versus just twenty years prior at the beginning of the country’s democracy. As students, we were moved by how well these two men knew the hearts and minds of the people of South Africa, and how they downplayed their own sacrifices and involvement in the struggles against apartheid during their journalism careers. It was clear they love this country.

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Professor Anton Harbor (left), Justice Malala (right)

On Monday morning we began our day with a trip to Transnet’s Koedoespoort Plant, which produces train cars and locomotives for domestic and export markets. We were welcomed Richard Vallihu, Chief Executive of Transnet Rail Engineering, who gave us a detailed presentation of Transnet’s current business model as well as where the company was going in the next five years. Transnet is a state-owned, but privately-run company that provides low-cost, efficient service and machinery to ports, pipelines and railroads. Johannesburg is a city with major mining output, but no surrounding waterways. This situation lends itself to development of the rail system for low-cost transportation. Transnet currently owns and operates 21,000 km of narrow-gauge track, due to topography in South Africa that necessitates tracks to be built on hilly and curvy terrain. The company participates in some inspiring initiatives, including the Phelophepa Health Train, a rural railway project that brings healthcare to some of the most remote regions of South Africa. Residents of these areas line up the evening prior to the train’s arrival to benefit from cataract surgery, dentistry, eye exams and eyeglass production, which takes twenty minutes from exam to delivery. This train initiative won the United Nations Public Service Award for each of the last ten years.

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Haas Students at Transnet

We were escorted through the production lines, where workers employed six sigma efficiencies while assembling locomotive parts for a large contract with a foreign railway. We learned that a locomotive has an approximate 30 year life cycle, after which it can be returned to the Transnet to be refurbished repurposed elsewhere in Africa. The company counter-cyclically invests its assets to get ahead of orders, which inevitably pick up during times of economic upswing. Transnet plans on expanding a lot over the next five years and has made strong investments in its 18 nation-wide technical schools, which accept 3,000 students each year. This training program benefits both Transnet as an employer as well as other transportation and logistics-related companies within South Africa. In addition to the education facilities, the company runs a full-service medical clinic onsite for the use of all staff. The level of dedication that Transnet shows its employees is remarkable.

After the Transnet tour, our bus tour operator took us on a ride around Pretoria to the Union Buildings, where we took photos in the beautiful gardens and the 30-foot tall Nelson Mandela statue. The view from the grounds was beautiful – we were surrounded by green hills, beautiful private estates and thousands of jacaranda trees. We also stopped for lunch at Nando’s for their world-famous chicken sandwiches.

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Our second business meeting was with Herman Mashaba, founder of the Black Like Me haircare product line. He is now a private investor and the Chairman of the Board of Free Market Foundation in Sandton, where we met him after lunch. Herman gave us a detailed account of his life and how he found his entrepreneurial spirit. After losing his father at the age of 2, Herman was raised by a neighbor while his mother worked for a wealthy family in an all-white neighborhood. Seeing the great divide of wealth, he grew up resenting the segregation of people in South Africa. Herman took to gambling as a way to fund his education, as education was always important to him. He wasn’t able to finish his college studies because the army invaded campus during his second year at school. Instead, he took a job in a warehouse, after which he decided to try his hand at sales. Herman earned commission from products he sold from the trunk of his car. In 1984 he went in to business for himself. This was very brave given that he began his business during Apartheid, something unheard of for a black man at that time. He purchased a small 400 square meter factory space close to Pretoria to manufacture haircare products designed specifically for the black population. By 1988 he was able to buy a factory that was 6000 square meters in size, which was unfortunately destroyed by arson in November 1993. Herman downsized his business and moved back to a handmade production line, until Colgate-Palmolive purchased a 75% stake in his business in 1997. He later regained control of the company, which his wife currently runs.

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Herman Mashaba

We learned that Herman’s involvement in the Free Market Foundation is due to his beliefs on social protection from government intervention in all business matters – that government is preventing the establishment of new small businesses in South Africa by setting minimum wage levels that are out of reach for many entrepreneurs. The FMF proposes that the abolishment of government regulation around minimum wage would encourage small businesses to hire employees at a level they could afford, allowing the market to determine the wage rate. The downstream effect would be to drive residents who are on state-funded welfare programs to instead seek employment. The team of Berkeley students listened and questioned these ideas, and a lively conversation ensued. Though not all of the ideas of the Free Market Foundation were accepted by the students, the ideas presented by Herman certainly did get everyone talking.

Our last stop of the night was at the Gordon Institute of Business Science (GIBS) where Professor Nick Binedell, Dean of GIBS, gave us a crash course on economic and social factors in and around South Africa. The Berkeley students had the opportunity to meet GIBS MBA students over cocktails and appetizers. A huge THANK YOU to our friends at GIBS – we hope to return the favor and host you at Berkeley someday soon.

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