SKINNY SBU AND R5 MILLION – THE CRISIS OF THE BLACK SOUTH AFRICAN ENTREPRENEUR’S LACK OF ACCESS TO BUSINESS CAPITAL

SKINNY SBU AND R5 MILLION – THE CRISIS OF THE BLACK SOUTH AFRICAN ENTREPRENEUR’S LACK OF ACCESS TO BUSINESS CAPITAL

In the past month Sibusiso Ngwenya, the founder of Skinny Sbu – the colourful socks brand, has been making news and social media headlines. The first headliner was his tweet on the 24th of September, where he basically came out about how the stress of running his business as an entrepreneur had taken its toll on him and had brought him on the verge of quitting. After this tweet Sbu decided to take a time out and also seek professional help, but people around him assumed he was missing and caused a stir in the media that he had to come back to Twitter on the 28th of September and say that he is okay and receiving professional help. Some three weeks after all that, on the 17th of October 2018, Sbu did an interview on an SABC News program hosted by Collen Lemawane, who had also invited Thulani Thabethe of 2Larnie Solutions as the other guest wherein – in culmination – Sbu said he needed R5 million to take his business to the next level and not “solutions”. The aftermath of this interview, and how Sbu handled it has been the talking point of the country on social media, and we have on the majority people who think Sbu was being a brat and arrogant, while there is also a grouping of people – mostly entrepreneurs – who understand Sbu’s exasperation, and feel that he was blatant about the reality of what he needs and it is what it is, not arrogance or entitlement.

Being an entrepreneur myself, I fall on the side of the grouping that really understands where Sbu is coming from, and I am going to use this piece of writing to explain the gist of what Sbu was saying from a black entrepreneur’s point of view and also account as to why his approach, which everyone has taken to be arrogance, entitlement and unwarranted anger that all make him a brat; because after all, Sbu did say in the interview that he was not alone in his situation, but representing the lived experience of many black entrepreneurs out there. I must put out a disclaimer, that I am not speaking on behalf of Sibusiso Ngwenya, but rather putting perspective into his situation as a lens to seeing the challenges of black entrepreneurship for what they are. So, here goes nothing…

THE PROLOGUE

Sibusiso Ngwenya rose to prominence as a fashion entrepreneur when he made headlines of his colourful socks company that he founded in 2013. By 2015, he was one of Forbes Africa’s 30 under 30 with a retail deal from Stuttafords, and the future looked bright for the sock fashionista from Tsakane, in the East Rand. Around May 2018, Sbu struck a deal with Markham (one of the retail stores under The Foschini Group) to sell Skinny Sbu through 20 Markham stores around the country on a trial basis for 5 months; by end of July 2018, Skinny Sbu socks had sold out at these 20 Markham outlets and as a result of this positive performance Markham extended Skinny Sbu’s contract to a year. One would then wonder why within 2 months after Sbu announced this success with Markham, he would come out saying that he is feels ready to call it quits. Well, there it was, the celebrity entrepreneur had publicly spoken out on the challenges that many entrepreneurs deal with, world throughout and how they were driving him to breaking point. The struggles entrepreneurs endure are romanticised for the most part, paraded as the stripes of the game, and those that fall by the wayside are chastised as not having the mettle required for succeeding in entrepreneurship. In all that, here was Skinny Sbu, a successful entrepreneur by all means considering that he has had a start-up business for 5 years when 90% of all start-ups fail within the first two years, and of those that make it past the first two years, 80% don’t make it to 5 years in South Africa. The statistic is pretty much the same everywhere, coming out about the challenges and forcing us to go back to the often nonchalantly dismissed topic of the psychological price entrepreneurs pay in pursuit of successful start-up businesses that they hope will one day be unicorns and big industry players. Secondly, Sbu was unapologetically bringing to the fore an issue that is treated with soft gloves in South Africa: the lack of funding avenues available for the entrepreneur, especially black entrepreneurs, thus making the prospects of start-ups soaring to success extremely dim no matter how good the solutions brought by these businesses are.

1 KEY POINTS OF THE INTERVIEW

Without going through the entire 15 minutes, I will focus key points of the interview that got the country talking.

a. The main theme of the interview was to get the conversation going about the challenges of entrepreneurship that are responsible for the sky-high failure rate. Sbu, having come out about these challenges three weeks prior, was the person to profile because his business is popular, and he is well-known himself.
b. The second theme was that “expert” advise is available to entrepreneur and they need not go through it alone as they can consult for “solutions” that can save them from failure, hence Thulani Thabethe was there as a marketing expert. Collen Lemawane explains both the themes in the opening minute of the video.
c. The interviewer, Collen, couldn’t differentiate between colourful socks – a type of socks – and Happy Socks – a Swedish brand selling that type of socks – until Sbu corrected him in the interview. Brand confusion.
d. Sbu was articulate about his brand, and how he sees it. He said that Skinny Sbu is a premium brand, and an equivalent in the shoe market would be a Carvela for instance.
e. Sbu was clear that his biggest challenge to date was distribution. That there was nothing “wrong” with the business aside from the fact that it needs to go to the next level and not stagnate in the hand-to-mouth, month-to-month phase in terms of capital where the entrepreneur has to always nurse the business with his own money to the point of debt. The key here is that he can no longer manage to service the business from his own pocket.
f. Thulani’s point of entry, where he speaks about brand perception is okay, but generalist in that it speaks to the business from outside in without interrogating if this is really the issue. It also negates that brand perception is created with marketing – which costs serious money as far as the entrepreneur’s business is concerned.
g. Thulani then goes on to say that entrepreneurs must delegate those skills they know they are not good at to consultants like himself, as if start-up businesses have marketing budgets. What he goes on to say from this point forward exposed that he didn’t quite study the socks market hence he said Sbu was the first brand of colourful socks and all the other guys (like Happy Socks) came in and clouded the market. Happy Socks was founded in 2008, Sbu wore Happy Socks before they became his competition. A little bit of a case study would have gone a long way.
h. Sbu is visibly exasperated by the skin-deep analysis of his business by people who have not actually looked into his business in the detail required to make constructive inputs. He has been in the game for 5 years and has gone through various talk shops and business training, he has received advise from some of the best people in business advisory – something he himself reiterated after the interview.
i. Sbu was clear that the first and last need was money for entrepreneurs and the government needs to create an environment that allows easier access to money. His specific need was also money, R5 million to be exact, that would take his business to the next level in terms of accessing distribution channels.
j. Sbu articulated that he is an angry black man – living in a white supremacist world is enough to make you angry, being an entrepreneur in a white supremacist economic system is just as angering. We will get into it further as we go.

2 SIBUSISO NGWENYA KNOWS HIS BUSINESS WELL

The first thing you learn from the interview is that Sbu knows his business well, he knows the market segment he is playing in, he knows what brand identity he wants to create and what exactly needs to happen for his business to turn profitable.

• Sbu highlights that he is a premium brand. Now in clothing fashion, you will basically divide retailed clothes into three basic segments: necessities, premium, luxury. Necessities would be clothes you buy from Mr Price, Pep, Edgar’s, Jet, Markham, Woolworths, Foschini. Premium would be the Kurt Geiger brand by AVI, Gant, Fabiani, Stuttafords, Zara. The Luxury brands are the big designer names predominantly from Italy and France that our politicians are known to have taste in.
• Sbu has three divisions from which he retails his product, direct sales, corporate sales and retail sales. While the first two divisions are doing well, they are simply not going to be enough because the space where the money is made is in retail distribution.
• Sbu knows the figures needed to be able to achieve his target, and this from the experience he has acquired plus the research made into retail distribution, as he has worked with Stuttafords and now works with Markham to distribute through a small percentage of their stores.

I am highlighting this because there is always this undertone where entrepreneurs are concerned that we don’t quite know our businesses or know about business, and we need to be hiring experts. There is nothing wrong with hiring experts, so you don’t have to be directly involved with every aspect; but because start-up entrepreneurship is not rosy, founders more often than not have to be everything for their business and understand every role intricately so as to deliver on their product/service in bootstrap mode, and even the support services like website management and maintenance, telephony setup, social media. Things that big companies will hire dedicated staff for or outsource to specialist service providers. A start-up company forces you to learn skills that would otherwise be negligible in ordinary corporate settings for one person to employ, just so you can save on paying someone else for the service, as every cent does count. Oftentimes rent, internet and salaries are a month to month worry with no cash reserves to fall back on if there is a hiccup somewhere.

Sbu having run Skinny Sbu for 5 years and moved from selling socks out of a brown paper bag to having space in major retail stores has gained experience that only running a business can give you, many concepts you learn about in business school are not just detached concepts you practice with someone else’s money in corporate, but are literally life or death business decisions you must apply with the risks that if they don’t work you close shop there and then. Every single day in a start-up is a gladiator match in the colosseum, where missed step can cost you your life; and for Sibusiso Ngwenya to be here after 5 years should highlight that a lot of stealth, experience and intelligence resides in him. Like all humans, he is not without his defects, but any black entrepreneur who comes out of a township to running a national brand does deserve to be commended because it is a nightmare surmounting the structural barriers designed to keep blacks out.

3 SKINNY SBU DOES NEED MONEY – LOTS OF IT

People seem to have been offended that Sibusiso was direct about the need of his business. However, no matter how you look at it, Skinny Sbu Socks needs money. There is no amount of business advice that is going to help his business grow beyond where it is today without money as it has reached a ceiling in terms of what a start-up in the fashion sector can achieve.

A typical start-up business goes through various stages in its metamorphosis to becoming a big business that is steadily turning in self-sustaining profits: Angel and Pre-Seed, Seed, Series A, Series B, and Series C.

Angel and Pre-Seed: This is money required to get the business off the ground, and will typically come from the founders, their friends and family, as well as close connections to relatively wealthy associates.

Seed: This is the money a business will get to take its product offering into market after having spent pre-seed money testing product offerings and doing market research. The ball gets rolling from here and institutional investors start to come on board from this point.

Series A and B: This is capital injection required to grow the company to the next level and get products in traditional avenues.

Series C: This is late stage funding typically acquired by companies that are rapidly expanding to widen revenue base and will usually come before an IPO if the company intends to list.

This is not set in stone, and not all companies follow this exact trajectory but for the most part this is how the metamorphosis will go. Using this model to analyse Skinny Sbu, I would say Skinny Sbu is now in need of Series A funding. The brand has proven its mettle existing in the periphery of the distribution landscape, and the cash injection the brand needs is to make it available at every fitting outlet. This is an expensive and tedious exercise, firstly you must convince the retailers that your product will sell and be able to service the retail space that they give you with your product. Skinny Sbu can fit in well at Spitz, which is owned by AVI for instance, but as a small business they will probably just sell him space first up, and his responsibility is to ensure that his socks are at every Spitz store. Spitz and Kurt Geiger (also owned by AVI as a mono-brand store) use RTT logistics to get the inventory around to different stores last time I checked; Sbu would probably have to pay some or all of the logistical costs to move his socks around to the store, pay for the in-store shelve setup if he is looking for a dedicated shelf and all sundry costs. This costs money, and there is no way around it. So, for Sbu to have Skinny Sbu socks in all Markham stores (not just 20), Truworths Man, Fabiani, Spitz, Edgar’s, he will need money in the bank that can finance this growth strategy, and quite frankly if R5 million is what is required to kickstart the process, then it’s a pittance in terms of business capital.

Many people have spoken about Sbu getting other products into the market, like underwear, vests, scarves and what not. However, what they are not mindful of is that for as long as the business is where it is – without access to proper retail distribution channels, then these products will reach the same fate that the socks are currently suffering, which is not being able to access the mainstream retail distribution space. Not only that, they additional products will weigh heavily on the business because they will require taking money from the business to start new production lines, market them and get them to sell in parallel to the socks, but then there are too many products you’re trying to get to the mainstream all at once and all of a sudden you have more variables you have to deal with – a vest factory, an underwear factory, a scarf factory and the logistics, the packaging, the brand positioning. It’s a nightmare for one entrepreneur and a skeleton staff complement. I stand by Skinny Sbu for having one product, seeing it through to mainstream as the ice-breaker, then all other to-be products if he wants them, will sail smoother through the conduit opened by the socks – it’s a very streamlined business model that is focused, and has worked for many big businesses (Google didn’t do anything else until the search engine was a success). Once Skinny Sbu is in the mainstream with his socks, he will have the relevant relationships in place to get any other product on the market far easier, because business is about relationships before anything – who do you know and how can they help your business. He will also be able to gain access to capital easier and hire the correct skills to manage the production lines and value chains of the new products.

Happy Socks, likely Skinny Sbu’s biggest competition in the country, was capitalised a number of times in its expansion to selling in about 90 countries around the world. When Palamon Capital Partners – a private equity firm based in London – acquired the majority share in Happy Socks, they shot up in value to R1.2 billion and that is just by selling socks only. So, who said the sock business is not lucrative? With the right capital behind you, you can make a profit out of anything humans want, because it is all about perception and creating desire to fit that perception. Again, Skinny Sbu needs money and not new products, or whatever other so-called solution. As an excerpt from the Bible will tell you, Ecclesiastes 10:19, money is the answer to everything. Swedish Happy Socks and South African Skinny Sbu are separated by money, and it will take money to bridge the gap.

The need for well capitalized businesses in fashion is the reason why most big luxury fashion brands are under the ownership of four luxury goods holding companies in LVMH, Richemont, Kering and Luxotica Group. The old saying that you need money to make money stands true, especially where big business is concerned.

My friend Sechaba Oa Selialia has run an apparel business before, he can tell you how difficult it is to run a brand successfully and get it to the mainstream distribution space. He started his brand, Scoody, around the same time Sbu started Skinny Sbu, and I don’t see why the Scoody (a scarf with a hoody) would not have made it if it had the capital to access retail distribution and support it with marketing. The common denominator is access to finance – zaka papa, imali.

4 SIBUSISO NGWENYA IS NOT THE ONLY ONE THAT NEEDS MONEY – ALL ENTREPRENEURS DO

During the interview, Sbu said something pertinent; that he was not a unique case, but he speaks on behalf of other entrepreneurs who have not spoken out or don’t have the same social currency to speak out and be heard because many people do say they need money, but it won’t be covered like Sbu’s outcry because well he is the celebrity entrepreneur here – “ama-levels” as young people say. Outside the jokes about levels though, it is an imperative factor to have access to capital in an entrepreneurship ecosystem that intends to go anywhere; and if the government is serious about growing the economy and catching up to the rest of the world where anything is concerned, then they must be prepared to blow rands in the hundreds of billions on start-up entrepreneurship to unearth unicorns in the rubble. To create the future, you have to water it now; it takes four to five years of watering a bamboo seed before any sprout even shoots out of the ground, but once the plant starts to grow the rate is a staggering 90cm per day it gains in length. The famed Tesla by Elon Musk has been existing as a company for 15 years, and it doesn’t even have 1 profitable year in its history. Earlier this month, the company announced only its third profitable quarter since it went public in 2008. However, the company’s share has risen by almost 2000% since listing and it has a market value of approximately R850 billion. Investors continue to back Tesla through its troubles, its missed deadlines, production hiccups and all other warts because they believe in the future value proposition of the car brand when it eventually makes it mainstream and turns profit – which won’t be for another 5 -10 years when the models after the Model 3 come to the fore. In ordinary circumstances, a company like Tesla would have died in 2008, Elon Musk saved it both because of the upfront investment he put in as an early investor and the social capital to be able to get Daimler to listen to them and invest US$ 50 million at a critical time, but the separating factor is that Tesla has had people with the money also believe in the vision it represents and back it with their money. The Optimal Energy Joule, a South African electric car, was not so lucky as the government pulled the plug on it in 2012 after R350 million. When I present my car, I am told by DFIs that they can’t risk another loss like the R350 million lost in the failed Joule project. They must go check how many billions Tesla has blown to date, still unprofitable. All entrepreneurs, black entrepreneurs, need is to be met by capital at the right time and it will solve 70% of the failure rate of start-up businesses.

To further drive my point home, I will take another Swedish entrepreneur and juxtapose him and his company against a South African entrepreneur and his company:

Filip Tysander is a 33-year-old Swedish entrepreneur who founded the watch brand Daniel Wellington (www.danielwellington.com) after meeting an Englishman by the name of Daniel Wellington while backpacking in Australia. The Englishman was wearing a Rolex Submariner with a classic NATO watch band, and the simplicity of the watch inspired Filip to start his own brand which he named after the Englishman. In 2011 he invested US$15 000 (approx. R120 000 in 2011) to seed the brand and went on an aggressive social media and online marketing campaign that attracted wide interest and by 2014 he had sold 1 million watches and had made a revenue of US$70 million (approx. R1 billion in 2014). Daniel Wellington watches are as simple as watches can get, they have clean dials and use classic NATO watch bands that are interchangeable with leather straps, so you can buy one watch and get many bands to wear it in different styles. The watches are manufactured in China using a Japanese quartz movement made by Miyota; so, there is no particular craftsmanship that goes into making the watches. It is not a Greubel Forsey, Patek Phillipe, Richard Mille or even a Rolex, it’s a watch as any you will find at Sterns or American Swiss; but what matters is that it sells – and sell it does (Prices range from R450 for watch bands to around R3800 for the expensive watches). In 2016 the company had a revenue of US$230 million (approx. R3.1 billion in 2016) and a profit of US$111.5 million (approx. R1.5 billion in 2016), causing it to be named the fasted growing company in Europe between 2013 and 2015 with a 4700% growth as announced in February 2017. Filip Tysander owns all of the company, he is on his way to becoming a dollar billionaire if the growth of Daniel Wellington persists in this trajectory. The key of Daniel Wellington’s success was influencer marketing; they are one of the brands that pioneered influencer marketing on Instagram especially, in the early days. Filip however had to have money to finance his marketing strategy, and to ramp up production and distribution channels for the demand that the marketing strategy generated. It doesn’t help that people want your product but can’t find it. The capital to meet your business demands is very important.

Now, Filip is not the only one who has a passion for watches. South African entrepreneur, Lufuno Lisoga Oscar, is a watchmaker whose brand – Ifreecan Timepiece (www.ifreecan-time.co.za) – is inspired by African people, arts and culture and incorporates these elements into the watches Lufuno makes. He is a craftsman, the watches are handcrafted, and the bands are handstitched, and his price range is around the Daniel Wellington range. How does Lufuno and his brand replicate the success of Daniel Wellington? The shortest answer is money. The product is there, and the product must get the marketing required to make people want a piece of brand. When the demand rises, Ifreecan must be able to meet it efficiently. Say the demand grew to 100 000 watches a month, to service this demand Lufuno will either have to train enough craftsmen to meet the product demand or he will have to automate the process. Either way, he must pay for the labor or the machinery that will automate the production; then he must think about efficient direct distribution for online sales, will it be in-house or outsourced to specialists and at what cost? Will jewelry retail outlets like Arthur Kaplan, Sterns, American Swiss, also come on board? What will it take to sell his watches out of these outlets? Can he also put them in the accessory sections of department stores? All these variables do involve cost, or the rapid growth opportunity is curbed, and the consumer interest dies out after some time.

To say entrepreneurs don’t need money, therefore, is an abomination, because it doesn’t matter the business, the industry it is in and the business model being employed in it, access to the necessary capital at the right time is sacrosanct and nothing can replace it. If you are Donald Trump, you have your father “loaning” you a million dollars in 1968 to start a real estate business; but for the rest of us, a million dollars is never that close.

5 AN ANGRY BLACK MAN

Sibusiso Ngwenya must have said it twice that he is angry, and in ending the interview he emphasized that he is an angry black man.

Now, at first glance anyone listening would decode this as him being overly emotional and even unprofessional in how he is representing himself and his brand; but Sbu’s emotions aren’t the problem here, the problem is the thinking that it is wrong for Sbu to be expressive about his emotions. There exists this toxic narrative in the world of entrepreneurship that the struggles ought to be taken with silence and grace, as I mentioned it above, and it is the reason why many a start-up entrepreneur ends up struggling with depression and committing suicide. Jessica Bruder wrote a very pertinent article in Inc Magazine back in 2013, tackling the issue of the brutality of being a start-up entrepreneur in the American start-up scene (www.inc.com/…/…/psychological-price-of-entrepreneurship.html), and what she speaks about therein stands true in all start-up environments – running a start-up business is one of the most emotionally, psychologically and physically wrenching things humans can undertake.

Being a black entrepreneur compounds this problem, because of the lens the world uses to see you. White supremacy has said you are not capable, despite institutionalizing structural barriers to drastically inhibit your capabilities; and when you do speak out you are accused of laziness, wanting free handouts and thinking that the world owes you something. So, when the system intentionally excludes black entrepreneurs from access, they go around internalizing it as their fault that they are not good enough, that they are not innovative enough, and perhaps they should just stick to looking for employment in traditional (read white-owned) corporate. It has nothing to do with a capability that the most successful start-ups in South Africa at the moment are in the Western Cape and are owned by white males predominantly, it has everything to do with the access being a white male gives you in the order of how things are run. Cape Town is the capital of asset management, a largely white space; and no matter how brilliant and qualified you might be as a black person, your blackness will always matter. Tinyiko Ngwena, a well-known investment professional, told her story of why she felt she had to leave Cape Town back in May 2018, and blackness had everything to do with it (www.fin24.com/…/why-i-moved-back-to-Johannesburg-from-cape-…). The experience of blackness, and its socio-economic realities means that you don’t have that uncle who can organize you an easy million rands or hundred thousand rands in angel investment, or one who knows someone who can get you a strategic meeting at a corporate that will be your first major client. This is an issue of relationships because I must reiterate that relationships are imperative in business and capital is tied with relationships. This is why most venture capitalists work on personal referrals, having someone who can vouch for you no matter how good your idea or product is. The exclusion because of who you are, the colour of your skin, and not what you bring to the table is excruciatingly painful – it’s structural, institutionalized exclusion you have no power to fight.

To take it to another level, being a black man in the schema of what manhood is in the white supremacist order of the world is quite an emasculating experience since this schema has a real man as one with financial means to be a “provider” and has his kids aspiring to be him; only to realise that as a black man you are antithesis of this reality since first encounter with whiteness and the dispossession it brought. You are historically conquered, poor, and your kids want to do better than you in every generation; you are a reference point of what not to be.

Anger is the natural state of blackness once you are conscious to the way of the world. How can we blame Sibusiso Ngwenya for being an angry black man? When it might very well be his blackness that is gatekeeping his access to the necessary capital to turn his brand to the next Happy Socks, or Tom Ford as he says in the interview. When the fact that the big retail chain groups aren’t yet paying him upfront for orders and giving him enterprise development assistance to see his socks in all stores might very well be attributed to his socio-economic background and the relationships it fails to bring with it in the world of business. It’s a treacherous and lonely place when you are in the correct echelons for success, but the stumbling block is that no one who looks like you and understand the hurdles you had to hop over, is anywhere near to help you and back your case in the boardrooms where cut-throat business decisions are made.

Another conundrum of black entrepreneurship is that you exist among your own kind who have no sense of what group economics is; and they will instead of supporting you, compare you to big companies whose businesses are heavily capitalized and have been in existence for eons. They will seek to exploit at every turn by seeking freebies and call it exposure, or contest your pricing without so much as an understanding about the development costs of the product/service you are putting on the market; because who are you as a black guy to want to price yourself alongside Levi’s, Ray-Ban, KPMG, Rolex, The Creative Council, Roger Wilco, or whatever other company? White supremacy has predefined you as de facto unable to match quality and service offered by white business, so you constantly – at your expense – have to prove that you don’t fit the stereotype, which even after you prove yourself, you will still be too expensive or this and that to an infinite number of excuses that people like you, from your community, find to not support you but take the money back to the established white businesses. Black people are the only group of people in the world who cannot support each other and use collective bargaining to negotiate for better collective socio-economic standing of themselves as a people. A black person cannot have a black doctor, black grocer, black butcher, and whatever other everyday services they can get from black people to circulate money in the community, empowering different people along the way before it leaves the community. We are in excess of 45 million in the country as black people, but we have failed at establishing a black bank that speaks to us and our needs. Portuguese people, who are mostly known for running supermarkets, general stores and fish and chips joints ensured that as a community they had a bank that spoke to them – Mercantile Bank. This bank is owned by the government of Portugal (they are selling it currently), and for many years its bread and butter was SMME entrepreneurs mainly from the Portuguese community, even when they made it big, Portuguese people still banked with Mercantile Bank. Take Cartrack, the tracking company, it is owned for the most part by Zak Calisto who is Portuguese; you don’t have to guess from which bank does Cartrack operate its transactional accounts. Now the Portuguese community is South Africa is well under a million, but their collective bargaining means they can get things done. Another example? Find out the rough number of Muslims around the country and ask yourself why all big banks offer Islamic Banking pockets to bank Muslims according to Sharia law. How come such a small group of people can make banks change their processes to accommodate them? Yet here we are boasting the numbers, but we are charged ridiculous interest rates on everything, from personal loans, to home loans and car finance; and we never have access to the kind of finance we need to really make a difference in our socio-economic standing from the same institutions.

You see why being a black entrepreneur will leave you angry?

6 WE NEED ECOSYSTEMS THAT ARE CONDUCIVE TO BETTER HOMEGROWN ENTREPRENEURIAL SUCCESS IF WE HOPE TO BE A SUCCESSFUL ECONOMY

I cannot overemphasize this, because it stands true for any hope of a successful and self-sustaining both as a country and as a continent. Access to quality education and entrepreneurial success are two things that ensure we build all the necessary skills to be competent as a producer of knowledge and creating the economic spin-offs of that knowledge into leading businesses that produce solutions to our society and the rest of the world. Silicon Valley is such an ecosystem, it combines quality education (Stanford University, UC Berkeley, Caltech) with the large pool of venture capital that ensures entrepreneurial success is guaranteed and that is why “The Valley” churns success after success for generation after generation and attracts talent from all over the world to service these high-tech start-ups. It’s a simple model, equip people with skill and give them money to use these skills effectively by creating new solutions.

Luckily, how people access education has changed a lot over the past 20 years, and online education is gaining traction. This will bridge access restrictions in the near future, so we can be able to meet entrepreneurs in their backyards and create ecosystems in very province or region that are conducive to nurturing the sector of business we want to grow there. So, now we need the political will to avail the funds to create these ecosystems, Developmental Finance Institutions, Banks, Government-Backed Venture Capital, a Sovereign Wealth Fund, all need to come into play in the creation of the ecosystems that will ensure entrepreneurial success and ultimately economic sovereignty that no longer needs to depend on foreign companies investing in the country for job creation and economic growth.

Capitalism is not about benevolence; any investment is about a return on investment, and the question you then have to ask is: what is the cost of the ROI to the country in the long run? Right now, we are sitting with a problem of Illicit Financial Flows that are by Global Financial Integrity projections at over US$500 billion per annum as a country, and no one knows exactly how they are going to stop this criminality that is cheating the country out of a further 40% of the R1.2 trillion revenue SARS collected for the 2017/18 fiscal year. In the future, as the world becomes more globalized, what will be the cost of dependence on foreign investment and the intellectual property owned by these investors? How much are we prepared to lose now in order to be self-sustaining in 50 years’ time, the same way the Asian countries in Japan, China, and South Korea have done from the 1950s, and India is doing now? The entrepreneur is the key to economic success, and we have to learn these lessons now or miss being leaders of yet another industrial revolution. It is not that we don’t have the skills, it is that the skills are not supported. Anything that you can think of, we have, and we have done it; it just never receives relative support. China, however, gives support to every alternative of a product that comes to the west, so its citizens need not rely on western products/services for solutions they need.

IN CLOSING

No matter what we can say, what fuels entrepreneurship is money and every other appendage you can stick to supporting an entrepreneur is likely going to cost money too. We do not need to be shy about it, in fact we have to speak about it now more than ever that lack of access to capital is the biggest inhibitor of entrepreneurial success in this country. What is sad is that most of the solutions we need, lie in the start-up world, from cutting-edge technology to solving the unemployment crisis. The nature of big corporates is to maintain the status quo and introduce new technology that will benefit their bottom lie, this means a mining company is likely to bring robots to replace mineworkers to aid their bottom line for instance. The nature of start-up companies on the other hand is to disrupt industries, so even if the start-up is the company building machines that will replace mineworkers, it will need people with an array of skills to design and build these machines, and that means it will by the nature of a start-up’s anatomy always create employment. Facebook is closing down newspaper entities around the world because of advertising, but it employs 33 606 people around the world as of 30 September 2018 and will likely employ more people as it expands its product offering and grows avenues like Workplace and Marketplace. Now for a country with the highest youth unemployment in the world, it will help us a great deal to have companies that are going to be absorbing the youth labour force as their fathers and mothers are getting retrenched by today’s corporate giants in the thousands weekly. We, however, won’t have these new age companies if we don’t fund them into existence.

Always remember, if you want to solve a problem – Ecclesiastes 10:19.

Written by Yamkela F Spengane

This article was originally published on Yamkela F Spengane’s Facebook Note

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Nigerians in South Africa
Nigerians in South Africa 1553 posts

We are about democracy, human rights, public opinion, political behavior, civil rights and policy aimed at improving the human condition, with a focus on African countries.

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