The Big Lie of Small Business: Vusi Thembekwayo (Transcript)

Well, I’m here to tell you something new, and that is, it’s not okay. So in my own country, South Africa, we have these things called gotas, by the way.

Gotas are an institution. And here’s how it works. You take a loaf of bread, you cut it in half, and then you cut what’s left in half, and you’re left with a quarter of the bread, hence gota. What you then do is you remove the centerpiece of it, which is the soft bread, and inside you put in whatever you like.

The Significance of Gotas

So at the end, it could be French fries, it could be sausages with a bit of ketchup, and you overlay it with the soft part and you eat it. And please understand, it does something to the soul that a McDonald’s burger will never do. It is perhaps our greatest export, except here’s the thing, we’re not exporting it. So here are two businesses.

Kibo’s Gotas operates in Alexander, run by an interesting entrepreneur. He started his business in the year 2005. He turned over 53,000 rand for the year last year. Interestingly, there is a listed South African company which started a franchise called Gotajo, and they pumped in a bit of capital. They started in 2013, eight years after Kibo’s, doing the same thing he does, and last year they did 20 million rand in turnover.

My point? We are big business. So maybe this is an anomaly, right? Here’s a question. What’s a bank? A bank, ladies and gentlemen, is nothing more than a collective investment scheme. We all come together, we put our money in the central pot, we put it there usually as savings, with the idea that when you unlock that money and you need it future, you can get it.

The Role of Banks and Stockfells

What the bank does is it takes that money and it says to people, if you’re credit worthy, we’ll lend you the money and we’ll price it at a premium. Hence your ability to buy a car or a house. In South Africa, we have these advents of things called stockfells. It’s usually a group of black women who come together, and they put money in a pot, and at the end of the year they have money and they go to the shop right, and then they buy stuff, and then the next day the cycle starts again, right?

So here’s an interesting stockfell called Siangwa, but they operate in the Eastern Cape. Started a year after we achieved our democracy in 95. Last year, their collective investment, 300,000. Now if you bundle together 300,000 over the past 20 years, you can do the math about the kind of numbers we’re talking that they cumulatively over the past 20 years have put in the same place.

In 1991, four years before them, a bank was formed in South Africa known as APSA, which does in essence the same thing. The stock fell last year, 300,000. APSA is a 4.6 billion around the year turnover business. My point, our models of doing business are big business.

Unlocking Entrepreneurial Thinking

You and I need to unlock our thinking. It’s not okay for us to start small businesses. It’s not okay for us to be happy to be vendors on the side of the road anymore, selling fruits and vegetables. What we need to do is own the place that produces the fruit, own the road infrastructure that moves the fruit, own the retail infrastructure that sells the fruit, and own the banking system that transacts the whole platform.

And by the way, why don’t we just take the taxes as well? So the idea here is we need a radically new form of thinking. Now that we’re clear on this, let me explain to you why we’re not doing it. Because we could blame colonialism and in my country apartheid as long as we want, but there is a deeper problem.

And the deeper problem is our inability to understand the ecosystem and life cycle of entrepreneurship. All entrepreneurs start out as startups. Whether you’re Bill Gates or Steve Jobs, you start out as a one-man show with an idea. What makes the Americans and now more recently the Asians really good is they’ve created a huge pool of venture capital money, easy to access, cheap, and you can have it as patient money.

The Entrepreneurial Ecosystem

You can have it forever and never have to pay it back. That’s why they’re building large institutions. So it’s not a mistake that Xiaomi, a Chinese mobile company started five years ago, is now the third largest smartphone company in the world. Where do they sell their phones? 87% of their sales comes from China, the remainder from this continent.

We are big business. We all start out as startups. How do you know your startup is easy? You’re one guy. You go to the customer, you deal with him, you go back, you make the cookies, then you come back and you give him the cookies. And then Monday you phone him and say, can I please have my money? And then he pays you.

And if he doesn’t, you go to him and say, please, I’m going to clap you until I get my money. And usually you give him what I like to call an AAK, an attitude adjustment clap. But how do you know you’re a startup? It’s easy.

Identifying Startup Stages

If you are the value in the business, you’re a startup. If the customer wouldn’t trade with your business unless you were in it, you’re a startup. Move a little above that, you become what I see a lot of happening now in the rest of the continent. So for a bit of context, I run a VC fund.

And in our VC fund, we own an advisory business where we advise entrepreneurs how to start businesses and enterprise development businesses where we help them get into the supply chains of large organizations and then a fund where we actually finance them. So the entire ecosystem they need to succeed. We’re in six countries in the continent. So Southern Africa, Eastern Africa and Western Africa.

I like to call us what we are, the best kept secret in this continent. Nobody knows about us and I like it that way because then they can’t see us coming. So we see a lot of them start up as startups and then they become these survivalist entrepreneurs. The problem is a lot of them die at the instance at which they become survivalists.

The Entrepreneurial Journey

What are survivalists? I really need money month end to pay my bills. And how do you know you are one? It’s usually one person with three, maybe four people in his team. He’s operating in a small office and he’s just barely making it. And every month he must make money to pay for that month’s bills. Level above that is you then become success, right? And in success, you’re one guy.

You have a core group of people who manage people and then a core group of people who deliver the work and then where we should be at growth level. Here’s the question. How do we move from startup to growth in as fast as time as possible, minimize the risk and develop our own industries? The mindset has to change.

Perhaps the deepest thing about this is this. It’s not complex. Entrepreneurs need six things to succeed. Just six, just six.

Six Essentials for Entrepreneurial Success

You need an infrastructure. And what’s the challenge we have in our continent? If I manufacture something in Joburg, South Africa, how do I get it to Makoko in Nigeria? How do I get it to Luanda in Angola?

It still persists in our own continent that I can’t put it on a single rail track and move it to that part of the world. So we need an infrastructure that opens up our markets. We need capital, money, funding. And dear governments, here’s the point.

The money doesn’t have to be cheap, but it does have to be patient. It’s not okay anymore that when entrepreneurs fail in our continent, we bank them. And after that, we then put them on these things called blacklists and they can’t access credit anymore. Because what you’ve done is you’ve taken somebody who’s failed and learned from failing and you’ve now made him that he can’t operate economically for the next five years.

The Need for Assets and Market Access

So, they need assets. They need access to markets, strong administration, and then people. And here’s the thing about the people challenge. What is the first thing top talent does in Africa? It leaves. Think about it. If you think about the top Africans shaping the rest of the world today, they’re not likely doing it in our own continent. They’re somewhere else doing it.

And a part of the narrative we need to reshape is, how do we bring them back here to build what is jointly ours? There is a huge mass of knowledge in the African diaspora. We need to bring them back in here. And this is how we reshape it.

So, there’s really four reasons people start businesses: to live well, to leave something for your kids, to sell it, or to change the world. That’s it. So, what does Google say? Google says, “We exist to do no harm.”

Corporate Philosophies and Lifestyle Pursuits

Apple says, “Because the people who are brave enough to think they can change the world are the ones who do.” So, they live on a philosophy space where it really is about changing the world. And the reward is much, much higher. Here, we live lifestyles. We get access to public sector opportunities. We call them tenders. And here’s the thing about a tender: once you get it, people must know.

So, the first paycheck goes to getting you that Ferrari. And of course, because we don’t have Ferrari dealerships, what do we do? We import them in. And not only that, I’m offended to be seen living in a certain suburb.

The Contrast in Business Mindsets

So, what we do is we encumber our ability and opportunity purely by wanting to live a fancy lifestyle. The Asian people are different, specifically Indians. You see a lot of this in my country. They build legacy businesses.

The great grandfather gets a corner shop, and he opens up a dry cleaner. His son, the father, opens up a fast-food joint. His son, you, opens up a hardware store. And your son will then open up something else.

But here’s the thing. Generation on generation on generation, they don’t close these shops down. They keep them running in the family as legacy businesses. The environment I work in is where we sell businesses.

We build them purely for the purpose of selling them. Why? Because if you build to sell, you build for value. It means you’re going to live scrappy.

Innovative Business Ventures

You’re going to keep costs low. You’re going to take a long-term view because you’re building this thing genuinely to create enough push pressure in the market that you can sell it. I was on Dragon’s Den in South Africa. So, I invested in myself and the other dragons actually invested in a business that is fundamentally shaping the entire floral market in the world.

Not just here, but in the world. They’ve created an Uber but for flowers. So, imagine a situation where you would go on your phone and you wanted to get flowers for your loved one. And when you pull up the application on your screen, it would show you the local florist and what that local florist has available right now and the price.

You would then buy from that local florist. He would receive the order and deliver the goods in a split second of a time. Why? Because he’s closer to you. Does it work? Of course, it does. The local florist wants access to the market. You want to get the goods to the customer, and here’s a business that’s reshaping it.

Rethinking Business Objectives

Why do we do it? Because we know it’ll disrupt not only here, but globally and a huge opportunity to sell. So, the question really for us is, why are we building our businesses? I would argue that we don’t build them for the right reasons.

If this is true, and I would argue that it is, how do we fix it? We need to do four things. One, we need to change the conversation. The conversation needs to be, how do you build a business with a philosophy in mind?

It’s got to be greater than you. It’s got to be about changing the very way our very own continent works. It’s got to be about bettering other people’s lives and making sure that in the innovations that we bring to market, we have something that nobody else has in the rest of the world and they can only get it here. It must be based on a philosophy.

The Importance of Mentorship and Delayed Gratification

Anything else is too weak. Second, we need a strong system of mentorship. Let me take a moment to pause here. So, here’s the thing about the mentorship thing, right?

In my family and in South Africa specifically, we come from a deep past of subjugation of the majority of the population, black people, my people. And because of that, black people were never allowed to own businesses. So, in my family, and I imagine it’s the case for most of us in the room, when I started my business, everybody thought I was crazy because you were raised in a system where you grew up, went to school, got good grades, went to varsity, got good grades, got a job, and got married. And when you want to disrupt the system, society doesn’t understand it.

What it then meant was when I did start my business, I had nobody to whom I could go and seek mentorship. Why? Because they themselves didn’t know what they didn’t know. And so, incumbent upon us is to create a system in our social spaces where we can access mentorship to think differently.

This, I would imagine, is our deepest challenge socially. Third, we need to start creating a culture of delayed gratification. Fast money will fast in, but it’s also really fast out. And here’s the other problem with fast money and this culture of delayed gratification.

Addressing Economic Disparities

Let’s be honest here, and this is not political. We also live in a continent where, in truth, we have two economies: the connected economy and everything else. Everything else is where most of us here live. The connected economy is where the uber elite and the politically connected live.

So, it’s not by mistake, for instance, that the wealthiest woman in the continent also happens to be the daughter of the president of Angola. I’m not by any means trying to put any aspersions on her qualifications or her abilities, but I would argue differently. Would she have the same opportunities if she were not the daughter of the president? In my country, South Africa, we’ve seen a huge accumulation of wealth of family members linked to our own president.

Why? Because we’ve created that narrative and we’ve made it okay. The connected economy where if you’re in, you’re in, and if you’re not, well, that’s just tough. So, it’s about creating a culture of delayed gratification.

It says build it, build it for the next 10 years, next 15 years, save generations, send young people through universities, create innovation structures and platforms and processes that we allow ourselves to build a different continent. But whatever you do, delay your own gratification. And finally, this is the trick, right? How do you know somebody is a good entrepreneur?

The Entrepreneur’s Paradox

It’s simple. They’re very bad at writing business plans. It’s true. We see a lot of it in our environment. If somebody has an MBA, odds are they’re going to suck at entrepreneurship. If they can write a really well-written business plan, odds are they’re going to be really poor at this entrepreneurship thing.

And in the context of this conversation about the lie of small business is a part of the conversation we need to have, which is, how do we take people who are naturally not inclined to writing 60-page business plans and attach an addendum of a 20-page Excel spreadsheets of projections? And by the way, eight years in finance as a venture capitalist, I have never seen an Excel spreadsheet that says the business won’t make money.

Embracing the Start-Up Culture

The business always makes money. The revenue line is always up, costs are always down, and profits are a perpetual quest of cream and water. People who are good at writing the document are usually very bad in the real world at making the adaptations they need to make. So, we need to create a culture that says start.

Start badly. Start scrappy. Make mistakes. Fail. Start again. But whatever you do, just start. Before I close, let me tell you a personal story. So, the year is 2004.

Overcoming Financial Exclusion

I’ve just been kicked out of Wits University for something called financial exclusion. It’s like a party, but for money. It basically means you don’t have enough money to pay your fees. So, I go, what am I going to do?

And I go, well, I’ve got this thing called public speaking. It’s a gift. I’ve won the world championship. Maybe I could do that, right? So, I start a public speaking business. I get a small little office. It’s a nice little office. I’ve got a secretary.

Facing Business Challenges

And here’s the thing. My business plan said I was going to make money from month one. The financial model says, by month three, I was cash flow positive. Six months in, I haven’t received a single booking.

Not a cent in my bank account. I’ve used up all the little savings I had up to that point. My secretary then says, “Listen, I’m willing to come to work for another month. But after that, if you can’t pay me, I really can’t come here anymore.”

The bank’s chasing me because I haven’t paid off my car. And if you don’t pay off your car, the bank does this thing. I love the term. It’s called a repossession.

Experiencing Repossession and Evading the Bank

Which means, when you sign the contract, you thought you owned it. You didn’t really. We always owned it. We just didn’t tell you.

So now, we are re-taking it back. And so, the bank rang me up and said, “Listen, if you don’t pay, if you don’t pay for your car, we need to take it back.” So, I absconded. I left my home and went to live in my office.

Because the other thing about signing the bank contract is, if you ever sign a bank contract, it’s got that thing called domicilium citandi et executandi, which is Latin for “where do we find you when we need you?” So, they had my home address, right? And I absconded and went to live in my office. In seven months, I lived in the basement of my office.

Perseverance Through Tough Times

The only meal I used to have often was driving to my then-girlfriend, now wife’s house. Her father hated me. So, I always went there during lunch when he was at work. And I would come back and continue to run my business.

Was it tough? Yes. Have I been bankrupt? Absolutely. But ladies and gentlemen, I am privileged enough to stand here and say to you, I have made more money than I never thought imaginable. And I have not done it because I’m particularly more able than other people. I’ve done it purely because I’ve been afforded the opportunity to start.

Yours and my task as the next generation of this continent is to have a bit of faith. And here’s what faith is in my eyes: Faith is the ability to see the invisible, to believe in the impossible, and to trust in the unknown. You and I today need to have a bit of faith in our own continent. Thank you.

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