Moving with the Times
Changing your Business to suit the Economic and Political Climate
Renee Horne – Johannesburg 9 May 2011
The global economic rollercoaster ride has seen start ups and established businesses battling to make ends meet. This struggle can be further exacerbated by the change in the political landscape in a particular country. A case in point is South Africa, where since 1994 official economic policies had to cater for young black entrepreneurs at the expense of established white business. So what do established businesses do to make sure they are still viable and profit making companies within this additional political context? The answers are simple; to move with the times and seriously think about changing business strategy. “We’ve ebbed and flown on the basis of the business concentrating itself on what we call bridging the gap between the first (formal) and the second (informal) economies”, that’s the word from Toby Chance, Managing Director, of Adele Lucas Promotions. Chance is convinced that in this economic climate, through business, entrepreneurs can bridge the gap between the racial disparities that often hamper business in South Africa. As part of “African Business Voice Series”, the World Entrepreneur Society (WES) brings you an entrepreneurial case study from South Africa, which argues that long standing businesses who have adjusted their business strategy due to political and economic change can succeed.
Three Decades of Transformation and Innovation
“The business was founded in 1979 by a lady who still attaches her name to the business – Adele Lucas. She was essentially the die-hard of social business in South Africa; this was way back in the early 80’s. She was the first white business owner to come and stage an event in a black township; that was the Soweto’s Homeowner Festival which ran from 1983 to 1985. Since then, the company has grown and is very much at the cutting edge of marketing and promotions. She came out of retirement pretty much to restage the Soweto Festival back in 2005 and that’s when I joined the company” said Chance. Of course, the 80’s was still a decade away from ending apartheid, so how difficult are you finding it, as a white business, since the new democratic dispensation in 1994, taking into account that South Africa currently caters for racial redress that offers Black Entrepreneurs more of the upper hand? “Well, we operate in a particular market which is dominated by Black Business and we see ourselves as one to facilitate this. Indeed, how do we create opportunities for SMMEs to compete in the formal economy and to provide a bridge between an informal and a formal economy? One of the ways in which to do this is, is to stage a large Expo. The Soweto Festival Expo is now in its seventh year and it involves substantial training programmes. This is a commitment to training which involves a series of curriculum aimed at providing basic business skills to small business owners who have never had the training before and are given an opportunity to take an exhibition stand. We provide them with exhibition space, with marketing materials and with advice on how to merchandise that product and sell that product effectively”.
Finding your place in the Sun
By working with Black Business, has your company effectively found their place in the South African sun? Chance argues; “It is difficult to do business for us, in a sense we are white people. Let’s put it this way, we are trying to assist in a black economic environment and so people do sometimes question our motives. In other words they say you’re just there to enrich yourselves and not to help small business people. To which we respond, there are easier ways of making money and doing what we’re doing. We’re not doing it purely for self-gain but, because we have a bigger picture of self-vision, we see ourselves as social entrepreneurs as well as anything else and we trying to export our model into other townships in SA”. Perhaps a change of mind set is in order? “It’s absolutely vital because over the decades in SA, Black people have been told that they are second class citizens and that they are useless. They don’t belong in a white economy; this is changing but has to change in a more rapid pace and one of the ways that it should change is through changes to the mind set of business”.
Business Upturn or Downturn
So since 1994, and lately, the introduction of Black Economic Empowerment, do you feel that your business has basically taken a knock or grown? “I think it’s a bit of both I think it has forced us to readjust our thinking as to how to do business. The old rules of doing business don’t apply anymore, you have to empower through employment of previously disadvantaged people which is Blacks on the whole, but you also have to seek new markets and seek new alliances, which is what we have done. We’ve formed partnerships in Soweto, with greater business forums, so if it weren’t for the fact that we were recognised as being legitimate, it would have been difficult for us to continue this business, and now that the adjustments have been made in all dealings we’re doing this in other partnerships. We know from these partnerships, we have a local partner and that gives us the legitimacy, additional support, investment, further government endorsement and so on.
I think we have been through a consolidating phase and certainly on a growth path again”. So are there downturns in your business? “Well yes, I think there have been knocks; I would not want to deny it. I think the knock has been to our perception to what it is to be in business in SA. I mean the corporate sector has gone through a huge structural phase. BEE has had an impact if you look at the various Charters, for example. The Mining Charter is forcing business to find ways of getting black shareholders into their business and we have been faced with the same challenges. We are a level one company in the list of BEE companies which is as top rating as you can get. In other words, we have been rated by an official rating agency as the most empowered you can get. We do that with a variety of things. 25.1% of our business is black owned, mostly by black staff. I’m pleased to say we have senior management comprising of black people, we spend a lot of money on black development and skills training and those factors together has given us that level one rating. This is rare as you don’t find many companies that have this in SA. We have taken these challenges head on. We haven’t been reactive or defensive about it; we’ve been much more proactive in terms of facing up to the reality of the changing situation in SA”. Do you not think that BEE hampers investment as it is a bureaucratic dogged with a tick box approach? “Yes, if you adopt a tick box approach you not going to succeed to grow your business”.
So, what’s your message to the companies not making ends meet in the new democratic dispensation? What’s your message to the budding entrepreneurs? “That’s a big question - if you are an entrepreneur you got to just stick to it and never give up but learn from mistakes. If you have a good idea it will succeed. Apply the rules of entrepreneurship, that is change and adjust, look after your customer, look after your prices”. So if you want your company to survive, it is all about staying competitive but at the same time changing and adjusting to move with the times.
This case study clearly illustrates that while you may want to make a profit, however the political and economic climate of a country may push you towards being a social entrepreneur where you have to give back to communities that are less fortunate. So is it about profit or enhancing society? Readjustment and change of business strategy, does this put your business at risk or shows some flexibility or ingenuity? Have or your say, or why not tells us your entrepreneurial woes or success through our forum. Join us next week for the next instalment of the Africa Business Voice series.