What a difference one ‘A’ makes
Today’s newsletter was meant to impress you with a smart comparison of the net worth of US basketball legend, Michael JordAn, with that of South Africa’s own Michael JordAAn, a former FNB CEO and, since 2014, the founder and CEO of Montegray Capital. Google reckons the basketball star has amassed around USD1.7 billion over his lifetime to date; but we found no entry for the banking and investment guru’s wealth, not even among the handful of South Africans that appear on the latest Forbes Rich List.
The mystery around entrepreneur’s wealth
Thus, the writer’s tongue-in-cheek “what a difference one ‘A’ makes” headline fizzled before it could catch flame. If you are prepared to speculate though, you might conclude that AA ‘approaches’ A based on the 25 innovative and disruptive start-ups and new technologies that Montegray has invested in since 2014. And perhaps the reason that Jordaan does not appear on the rich list is that the size of his holdings in businesses like Bank Zero, Clickatell, Purple Group, Rain and VALR are not generally public. And even if they were, it is incredibly difficult to place a value on private equity businesses. To illustrate, as part of the recent unsuccessful merger talks between Rain and Telkom, a major shareholder in the former valued the business at almost ZAR18 billion.
Let us abandon this conjecture, dear reader, and cast our collective attention to the latest in the long-running PSG Konsult Think Big Series webinars, featuring none other than Jordaan. The interviewer offered some context in the opening exchanges, saying that South Africans were in serious need of “a dose of the venture capitalist spirit”. Furthermore, she hoped that the discussion would help attendees to identify opportunities that showed growth potential regardless of the challenges, risks and uncertainties that local entrepreneurs face. This discussion seems far removed from the day-to-day operational grind that financial and risk advisers face, until you realise that these disciplines are, for the most part, entrepreneurial in nature. You have to navigate your advice practice through the prevailing economic, political and social conditions while simultaneously advising your clients on needs appropriate investment and / or risk products.
Forget the Boksburg tiger, Eskom is on our collective minds
Fortunately, the interviewer was not knocked off track by the ‘tiger in Boksburg’ story, choosing instead to charge headlong into the real issue of the day, Eskom SOC Limited. Her first question ran along the lines of how can businesses power ahead (please excuse the pun) under Stage IV, V or VI loadshedding? “Entrepreneurs and venture capitalists are driven, in the first instance, by solving problems … and the good thing about South Africa is we have lots of problems, many of which can be solved sustainably by business,” said Jordaan, before quipping that stable, usable electricity was a component of the second industrial revolution, let alone the fourth. He noted that independent power producers (IPPs) had installed enough capacity during 2022 to ward off one level of loadshedding before predicting better outcomes in the coming years.
There is a long list of South African businesspersons and entrepreneurs that steer away from criticising government for its shortcomings. Jordaan is no different. When asked whether there was an adequate sense of urgency from government in addressing the energy crisis he responded, “definitely not”, before confessing that he preferred to stay out of politics and did not go around “pointing fingers at government, as valid as the [criticism] may be”. Perhaps it is better to follow this entrepreneurs ‘hands on’ example rather than hurling criticising from the proverbial bleachers. PS, the Oxford Dictionary describes bleachers as “a cheap bench seat at a sports ground, typically in an outdoor uncovered stand”; and you can take ‘cheap seat’ to mean somewhere far from the action. As for solving the electricity crisis, there is growing impetus among big power users “to take their electricity demand off grid” and thereby improve the grid experience for households that cannot afford alternatives like grid-tied inverters or solar.
Solve problems first, the money will follow
The discussion unearthed a thesis that disruptors and / or entrepreneurs who come up with sustainable solutions to problems will end up with viable businesses. So, for example, in the business banking space, those who solve for accessibility, convenience, cost and efficiency should emerge as real winners. This writer’s gut tells him that the recipe would be similar in the financial and risk advice segment; after all there are thousands of un- or under-serviced individuals and households that could be reached if your advice practice could address the challenges associated with fees, reach and scale. There are other considerations, which Jordaan quickly raised: “If you do business without marketing it properly, it is very much like winking at a girl in the dark,” he said. “Because you know exactly what you are doing, but she has no idea”.
The bottom line is that your customers will not flock to your door if they do not hear about your product or service. “You can do wonderful things [like] offer free banking and give abundant data and so on [but your offer] must be accompanied by the right sales and distribution strategy,” said Jordaan. “There are many businesses today that have superior offerings to what is available in the market that are not growing as fast as they should”. Although consumer complacency is part of the problem, it remains up to the entrepreneur or small business owner to identify these consumers, interact with them via the appropriate channel, and convince them to switch product or service provider. Failing that, you end up with thousands of customers that simply pay over the odds to stay with a market leader despite their being dozens of capable, cheaper competitors out there.
Dispelling the ‘cash is king’ myth
The interviewer tripped up over the myth that ‘cash is king’ in the South African context. “Cash is not king,” retorted Jordaan. “If you look at the volumes that are paid in the South African banking system, [you will see that] significantly more than 90% is currently done electronically; cash is not nearly as prevalent as some people believe it to be [though] it is still needed for some solutions”. Financial and risk advisers have little time for cash nowadays due to the myriad regulations put in place to eliminate money laundering and other cash-related ills. Keeping regulation in mind, we close with comment on the implications of the Financial Sector Conduct Authority (FSCA) decision to regulate crypto assets.
Commenting on Bitcoin, Jordaan noted: “I do not know where the price is going to go; but I think the technology [behind the cryptocurrency] is very interesting as it allows completely new business models”. For example, it allows for offshore payments and receipts to be processed more efficiently, and at lower cost, than through traditional banking channels. “You only have to make one Bitcoin payment … and realise you have [an instrument] that does not recognise international borders to understand the power of what cryptocurrencies can do,” Jordaan concluded.
Writer’s thoughts:
Michael Jordaan offered a wealth of advice that will benefit entrepreneurs regardless of the market segment they operate in. We enjoyed his observation re poor distribution and sales strategies being akin to ‘winking at a lady in the dark’ and would love to hear from you which part of the discussion you found most relevant… Failing that, what question would you like to put to Jordaan? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts editor@fanews.co.za.
