How would you spend a billion?

by Andrew Smith on 08/03/07 at 12:19 pm
9 comments

Oink! Oink! So you’re a big company in South Africa, but you’re not black enough. You need to give away some equity in order to meet government requirements, but you reckon Tokyo Sexwale has enough cash for now, and you want to use this opportunity to stand out from the crowd and earn a few press releases.

Allan Gray’s Solution? Throw in these phrases, “financing for entrepreneurs” and “the need to create jobs”, plus some 10 digit figures (that’s “billions” if you were wondering). The headline “Empowerment Allan Gray style” certainly grabbed my attention and led to daydreams of unlimited startup capital, resources and materials for small business owners like ourselves. I headed over to Fin24’s article to find out more. The summary seems to be that a new trust is borrowing money to buy around 19% of Allan Gray. The loan is repaid by the dividends earned (aah, if only real-life investing was that simple), plus Gray himself is putting in R1.1bn of personal cash, plus a donation of 7% per year of Allan Gray’s (the company) profit. And then, “the future cashflow will provide financing for business and ’social’ entrepreneurs”.

Sounds great so far, but when I reached this point I came crashing back down to earth:

“These entrepreneurs will come from the Allan Gray Fellowship Programme.

Each fellowship is a fully funded scholarship at university covering tuition, board, lodging and subsistence particularly in the areas of commerce, engineering and science. Once they graduate, the foundation expects that the fellows will work for several years to gain experience.

It is also within the mandate of the foundation to fund the postgraduate studies of those fellows that excel.

Thereafter, if, as expected, they develop a viable idea for a business, the E^2 Trust will provide the start-up capital for this.”

At this point I realised that when Allan Gray’s highly educated, high-flying boardroom suits say the word “entrepreneur” and when I say the word “entrepreneur”, we’re not actually talking about the same thing. I have no problem with university graduates (and post graduates) and several year’s experience, but within the circle of people that I know who have launched a small business from the ground and kept it going for a few years, not one of them is a post-grad with several year’s experience at a big company. Most of them were selling pirated music cassettes and hand-drawn comic books when they were 10. They certainly weren’t going to wait until their late 30’s to launch a company. Their “several year’s experience” came from the 3 businesses that flopped while they were in their twenties, and their “tuition fees” were the late-night waitering jobs that provided the monthly cash-flow while they toiled with their fledgling company during the day.

It all comes down to how you think South Africa’s unemployment situation is going to be solved. Will it be through government public works programs, big corporates, mid-sized corporates or small/micro businesses? My understanding of “entrepreneurship” is the guy who starts manufacturing leather couches from his garage, hires a handful of employees, gets his stock into a couple of furniture stores, and maybe even cracks the export market. Multiply that by 50,000 other micro companies and we’ve got something very exciting. Allan Gray seems to think the solution is to pay for an engineer to spend just under a decade at varsity, then join a big company to gain some experience, then take a few million in venture capital to launch a new mid-sized engineering business that helps build the stadiums for the Olympics here in 2030.

That’s certainly not a bad idea; it’s just not how I would go about helping this country if I had a billion rand to throw at the problem.

Andrew Smith is the pedantic systems guy behind Live Alchemy, a SA e-commerce company. Andrew writes for Ideate in an attempt to make the world a more efficient place. View more articles by Andrew Smith.

9 Responses to “How would you spend a billion?”

Karin

Mar 8th, 2007

Hi Andrew

Good story. But not just a South-Africa ‘problem’ I’m afraid. How many CEO everywhere only recruite managers/dicrectors with a MBA on their CV (knowing lots of stuff about running a business, but no real experience in actually ‘running’ a business).

It’s one of the items described in The Knowing-Doing Gap book (Pfeffer and Sitton) I’m reading at the moment.
Andrew

Mar 8th, 2007

Absolutely Karin. Lots of people want to change the world, but they only have their own experiences to use for reference. So the Allan Gray bosses will use their understanding of education and training to solve employment situation.
Karin

Mar 8th, 2007

Shall we suggest to them then to read Hard Facts, Dangerous Half-truths and Total Nonsense?
Might change their views for the better
Fred

Mar 8th, 2007

I like this post. After thinking about it, I reckon that there’s a balance needed.

I think Allan Gray’s contribution is necessary. There is a chronic shortage of ‘big skill entrepreneurs’ (like engineers) in SA, so what Allan Gray is doing is pretty vital. Look at the World Cup 2010 stadiums – there are not enough skilled companies to tender for it, so there are only 5 or so companies that are going to get a piece of the pie. This country is crying out for graduates who have the necessary skills that Allan Gray wants to teach people; which will then lead to more smaller niche technical companies led by able-bodies entrepreneurs.

I agree, though, that what we understand as entrepreneurs is more of a ground-level, grass-roots guy who will second mortgage his house because he believes his product will bloody well sell…!

Maybe, both are equally important – what do you reckon?
Andrew

Mar 8th, 2007

I definitely acknowledge that both are important. I was disappointed because I was hoping this effort would beneift the grass-roots category, because that’s the one I’m passionated about. We need investment and skills in every aspect of our economy – from the spaza shops to the government departments.
Paliso

Mar 22nd, 2007

Dear Andrew,

WOW! These were the words going through my mind when I read you passage! Guess what, I fit the description:
“but within the circle of people that I know who have launched a small business from the ground and kept it going for a few years, not one of them is a post-grad with several year’s experience at a big company.”

I’m crazy about Stephen Covey’s 7 Habits, want to start my own business, am married to a business-minded-work-aholic, is a chemistry post graduate, worked for 2 BIG south african companies (Angloplatimun & now SASOL), and lastly don’t have the capital to start up.
Andrew

Mar 25th, 2007

Hi Paliso

Perhaps one of the reasons a lot of entrepreneurs are not tertiary educated is because they were able to fail a few times before the age of 25. Very few people of any age have the capital to launch a new company, but at least when you are young you have nothing to lose and no family to support.

I wish more parents would support their kids financially for the first 4 years out of school, but instead of paying University fees, provide the capital, accommodation and advice to launch a business (or 3). It is highly possible that the ventures would fail, but the educational value would be huge. My son has 17 years until he reaches that age, but I have a few ideas in mind!
Simon

Jun 24th, 2008

Post or Undergraduate,business is business…if you do not run a business in a ‘certain way’ it will fail regardless of whether one has Matric,Degree or Masters
Pablo

Jun 5th, 2010

Thanks for the Share it,Ibe

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