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No matter your politics, everyone in SA can agree that we need more jobs and that we need to create more jobs now. To do this, we need better policy and we need a different focus. The fourth industrial revolution we hear about so often means nothing to someone who is unemployed. With 75% youth unemployment and a “demographic bulge” coming, we need to build out opportunities in traditional job-creating sectors such as manufacturing, agribusiness and consumer goods. Instead of the fourth industrial revolution, we need a “tech-enablement bridge”.
Issue: the advantages of the tech revolution have not been evenly distributed
There are many great businesses and management teams in Southern Africa that lack the time and resources to effectively leverage what is coming out of Silicon Valley and Silicon Cape. These companies do not need to take technical risk or have a huge IT budget, they need to cut through the noise to use tech products and services that can meaningfully bring their business forward.
This divide between tech and more traditional industries will grow wider still unless we build the tech-enablement bridge so that these companies too can evolve. If we help grow traditional, “boring” businesses into local champions by providing growth capital, operational support and tech-enablement, we will turn this demographic bulge into a demographic dividend. This will create new, sustainable, quality, attainable jobs and it will keep spending and profits local.
This is economic growth that will reach all Southern Africans. In other words, we need to grow our own Domino’s rather than create the next Google.
Solution: focus on job-creating sectors that do not need to create tech, but can leverage tech ...
We need pizza companies, not search engines: in the US, Domino’s employs twice as many people as Google. And these Domino’s jobs are spread across the country, across educational backgrounds and across LSMs. After all, Domino’s can’t outsource or offshore pizza-making the way tech companies can search the globe to hire the cheapest programmer.
Plus, growth from companies in traditional sectors have a multiplier effect; they circulate more money locally, which grows the local economy. Tech companies create diseconomies of scale; they shrink market sizes and grow themselves with a fraction of the number of employees.
Much like Domino’s did with its digitally enhanced fulfilment and delivery system, there are durable, resilient, “boring” industries and companies in Southern Africa that will not be disrupted by tech, but that can be modernised. These are usually companies that work with the physical world; they work with “atoms” (physical goods and services) and they leverage “bits” (tech, other software).
We’ve seen that implementing simple tech-enabled bridges for traditional business capability needs can have a significant result. Traditional sectors will always need to manage, automate, sell, and market and there are many great tools available for small, growing businesses (SGBs), but it’s hard for them to know which capabilities to tech-enable and which tools provide the best results.
At the end of 2020, what was the best-performing 2004 initial public offering — Domino’s Pizza or Google? The answer is Domino’s by almost two times. And since 2010? Domino’s outperforms every “high-flying” Faang (Facebook, Amazon, Apple, Netflix, Google) stock.
And the best part is that the Domino’s-like industries are not winner-take-all like their tech counterparts. There are thousands of job-creating profitable pizza companies in the US, but only one profitable search engine.
This is why we don’t invest in tech, we use it to create results. We believe there are durable, resilient, “boring” industries that will not be disrupted by tech, but that can be modernised.
We bring the resources, insights, and the operator-investors to make tech solutions work for small, growing businesses. These solutions help them outperform their market and since top money, talent and tech usually ignore these companies, there is a huge market inefficiency and opportunity.
For example, one of our portfolio companies is Wukina, “Africa’s Avon for Wigs”. Wukina sells wigs and hair care — classic, quality products in a large, fragmented market. However, Wukina outperforms on execution because it uses Netready, Flutterwave and Payfast to sell; Xero Accounting, Dear Inventory Management and Zapier to manage financials, inventory and data; and Klaviyo, Facebook Business Manager and Google Ads to automate its marketing.
Consequently, these solutions help small, growing businesses such as Wukina grow, upskill their teams and create long-term, sustainable jobs in the process.
We have invested in and brought new tools to companies in these “old” industries: in addition to hair care, we’ve invested in biltong, shoes, energy bars, lettuce and batteries. We gave these businesses growth capital, provided operational support and brought technology solutions where they were most needed. This approach has helped to create 400 full-time jobs across our portfolio and grown each company by between three and 100 times.
And this is with just 10 companies: there are thousands of companies out there already that both need this support and could create this type of impact and financial return. Thus, the opportunity for jobs and financial returns and our focus, should be on growing and modernising these small, growing businesses, not with fourth industrial revolution but with a tech-enablement bridge.
• Anesu is an operator-investor and Shaikh a principal, at Secha Capital.
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.