Black Like You

by Mashaba, Herman;

  Now that I had branched into a new direction with Leswikeng, I needed to make a serious decision regarding my continued involvement in Black Like Me. If I spread myself too thinly, both Leswikeng and Black Like Me would suffer. I was working at the Black Like Me offices, and began to notice things that convinced me management weren’t managing the company properly. From the few meetings I attended, and from disgruntled staff members’ whispered comments, I realised that there were serious leadership problems. There was not a single leadership figure who inspired the staff, and none of the managers were dynamic enough to steer the company in the direction I wanted. So, rather than allow the company to collapse, I knew I needed to bring in people who were competent – otherwise I’d have to sell Black Like Me again. I mulled over the different configurations and decided I didn’t want to sell the company, so I brought in a consultancy firm to analyse Black Like Me and to formulate a strategy to move it forward.

  Connie had left the business in 1997 to pursue her education and to take care of our children. When she was awarded her BCom honours degree by Unisa, I felt very proud of her; I was also pleased that she could spend time at home with our two young children while she was studying. But Black Like Me also needed her nurturing, so I asked her to rejoin the company while the consultancy firm was doing its analysis of the business. During this time I had an opportunity to tender for two brands that Unilever were selling – Mentadent P and Close-Up toothpaste. I had a good working relationship with one of my competitors, Amka Products, and I knew that although they had their own toothpaste brand, they had not been successful in breaking into the toothpaste market.

  I called a meeting with Amka, where I outlined the details of the Unilever opportunity. “I suggest we put in a joint bid to buy the brands,” I said.

  For the next couple of months we worked hard with Amka to put our bid together, and eventually we presented the joint tender. But in the run-up to this, Amka had opened up their factory to me. I was impressed by their extra capacity and systems. Their systems were geared to running various businesses under the same roof, their huge buying power reduced costs, and their streamlined operation was cost-effective. For one thing, I noticed that a pump that cost us over R1 per unit – and we used about 200 000 units a month – Amka imported directly from China at a quarter of the price.

  As it turned out, our bid for the toothpaste brands was beaten by Aspen Pharma, who offered substantially more. But all was not lost. The collaboration with Amka had put me in contact with Nizam and Haroon Kalla – excellent potential buyers for Black Like Me. It was early 2005, and by this time Connie had taken over the reins of the company; understandably, she was rather nervous when I approached her and her team with the idea.

  “You’re asking me to work with another company – but remember what happened with Colgate,” Connie said. “I really don’t want a repeat performance of that.”

  “Trust me, Connie,” I said to her. “I’ve seen the operation at Amka, and they know how to run a lean company.”

  Connie looked at me in silence for a few moments. She was clearly not convinced. “Herman, you of all people will appreciate that I don’t want to be dominated by strangers. And I’m only just beginning to enjoy my independence at Black Like Me,” she said.

  “This is a completely different situation,” I said, trying to reassure her. “The big mistake we made with Colgate was allowing the business to stagnate after the take-over. We kept adding staff until our salary bill doubled – and then our production slowed. It won’t be like that with Amka, in fact it will be exactly the opposite,” I said. “We’ll close our manufacturing facility and cut down on staff.”

  Connie looked at me sceptically. “Are you really saying we must retrench people who have worked for us for a long time? This means they’ll lose their jobs, doesn’t it?” Connie said, and I had to look away.

  Retrenching is never an easy exercise. Some people at Black Like Me had been working there for fifteen years or more. If we sold to Amka, we would have to let go of some of these loyal employees. It was a tough business decision – I knew I had to take advantage of the synergies between Amka and Black Like Me. Our financial director, Nisar Dawood, was also a director and shareholder in Black Like Me, so I called him in and showed him the new business plan; I explained that the new business model no longer required a factory manager, human resource person – or a finance person. It was obvious that a reduction in senior management would translate into massive savings to the company. But, still, it was not easy to say to Nisar, “It’s a hard decision, but this is the route I am forced to take.” At the end of the 49% sell-out to Amka, only ten out of the ninety personnel from Black Like Me kept their jobs.

  I decided that the best way to retrench staff was through consultation. This would enable us to talk people through the process and to deal with the situation honestly. I was completely upfront with the staff, and I explained the issues that Black Like Me needed to deal with, as well as the advantages to the company of retrenchment. I stood in front of loyal members of staff and told them, “I’ve always managed to keep Black Like Me afloat – and there have been some very rough patches. But we’ve lost market share, and I don’t have the money to rescue the company. There’s another problem too: I have moved into other business commitments. This time, if Black Like Me collapses, all of you are going to lose out. The best thing to do is to sell out a share to Amka so as to get the business up to par again.” This was not an easy moment, so the best thing was to put the facts on the table clearly and dispassionately.

  Soon afterwards, Amka held interviews for staff who wished to be employed at the Amka facility. Those who weren’t absorbed into the new company were paid retrenchment packages.

  Connie’s anxiety about the union was short-lived, and she continues to thrive in her role as Managing Director of Black Like Me. The Amka/Black Like Me operation is well co-ordinated, and Connie has successfully divided her time between work and home, giving both the time they need and deserve.

  Chapter 17

  Black Like Me was behind me, and I now looked ahead to building up a BEE investment portfolio. But, looking back a few years, after Leswikeng’s successful buy-in into Mogale in 2002, I realise that I’d got a taste of something new and exciting – the negotiations and the new environment stimulated and interested me. With Noel Machingawuta as Leswikeng’s technical director, and Charmaine Rayson as my secretary, I moved into a small office where Leswikeng could be run independently.

  Getting into the BEE investment arena in 2002 was helped along by a network of corporate people I had known for ten years. Many of these connections were established in 1992, when I’d been invited to join the Johannesburg Chapter of the Young Presidents Organisation (YPO), which comprised about 200 young business presidents. The YPO is an international organisation dedicated to providing a nurturing environment for young CEOs. At the time I was invited to join, there were no other black members. I was one of ten people who comprised a forum, which met once a month. Rod Fehrsen from the PG group, Myra Salkinder from Kirsh Industries, Sam Hackner from Investec, and Idris Hathurani, the founder of Jumbo Cash & Carry, were among the members in my group. During our four-hour forum meetings we got to know each other well, sharing family issues and business frustrations without fear of judgement, and all in the strictest confidence. We also supported and advised one another regarding our various business difficulties – and the advice often differed from that given by fellow board members of our respective companies. In the forum there was no competition, no self-interest – the good, solid advice came from people who had a different perspective and whose distance from a problem lent objectivity. I found this sounding board very refreshing and helpful; as a result of our intimate interaction, we all became close friends.

  A business network is crucial to any entrepreneur’s success, as I had understood from my earliest days of selling linen and crockery from the boot of my car
. My experience at the YPO confirmed this, as it provided wider opportunities when I started Leswikeng. I told everyone I knew what I was doing, and in this way I hoped that the right opportunity would arrive. My instinct proved to be correct. Soon afterwards, my friend Kholekile Biyana – who had built my house in Soshanguve, my factory in Mabopane, and made extensions to my Midrand factory – arranged a meeting with the CEO of Stocks Building Africa. The CEO, Tom Henry, had read stories about my emergence into the BEE arena, and he had asked my friend to introduce us.

  At first, I was doubtful about the advantage of such a meeting. “But Stocks are in construction,” I said. “As you know, I’ve just sold out a percentage of my haircare business, and I’ve invested in the ferrochrome industry – and, in any case, what do I know about the building industry?” But my curiosity had been aroused, and I agreed to meet the Stocks CEO.

  Tom Henry was an Irishman who had lived in South Africa for over thirty years. He still had a broad Irish accent, and I struggled at times to understand what he was saying. But I found his warmth appealing – and we both loved British soccer. So, although I had reservations about what I could offer a construction company, I liked Tom, and I was interested to see where our discussions would take us.

  “Forget about your lack of knowledge of the industry,” Tom said. “The important thing is that you know how to make money. You’re a dealmaker – never forget that.”

  It felt good to meet a man who was so encouraging and who saw my strengths – and pointed out how these strengths might add value to his business. I always say that I haven’t really had a mentor in my life, but insofar as a mentor guides and teaches, I would have to say that Tom Henry came the closest to playing this role. He was a natural mentor, it was part of his personality, and I suspect that he has been a positive influence in the lives of many other people who met him.

  It didn’t take long for Tom to persuade me to become a shareholder in Stocks Building Africa and soon afterwards Shane Ferguson structured an attractive deal. Tom then introduced me to RMB Ventures, who were the major shareholders. RMB owned 72% of Stocks, and because I wanted to buy 30% of the company, I needed to buy some shares from RMB Ventures. Shane Ferguson joined me at the preliminary meeting with RMB Ventures – which didn’t last even ten minutes. Whenever Shane and I talk about that first meeting, he always says, “The meeting was finished before we’d finished our coffee!” Of course, the meeting was so brief because our opening bid was so far below RMB’s expectations. Later that day, Tom called me at my office and invited me over, and for the next few months he and I worked hard to close the gap between what Leswikeng was prepared to offer and RMB’s price tag on the 30% I was after. A few months later we struck a deal, and I was invited to attend the next Stocks board meeting.

  I was excited about it all, but at the same time I felt out of my depth. I admitted as much to Connie one evening, “How will I manage with all those highly educated board members? Most of them don’t have just one degree, they have two or three.”

  Connie smiled and said, “You are streetwise and wise, Herman. That’s got you where you are today. People like you don’t need certificates to prove their competence.”

  As part of the deal I was elected chairman of the board. Though Connie had reassured me that my kind of experience couldn’t be bought at any university, I still had the feeling of being in unfamiliar territory. I asked Tom to chair the first meeting so that I could familiarise myself with the company’s protocol; he graciously agreed, and so began a friendship that lasted until Tom died of cancer some years later.

  Tom had told me that I knew how to make money; I often thought about this, and it guided me in making decisions about Leswikeng’s acquisitions. Though I am aware of my responsibility to my fellow partners, I instinctively seek out new investments that adhere to the basic business tenet of making a profit. I am not prepared to collaborate with cowboys who come to me and say, “Mr Mashaba, if you fund my business I will create many new jobs.” It makes me angry when people looking for finance say what they think I want to hear instead of providing a viable business plan.

  I have so often been in situations where I have had to say, “Who do you think you are fooling? You’ve given me every reason why I should finance you – so that your new business can create jobs, or that I really need to fund your product or service because there is a market for them – but you haven’t given me the only reason I want to hear.” I have always ended these discussions with the words, “The bottom line is, if you are not in business to make money, then I do not want to be your partner.”

  Wealth creation has to be the single motivating factor for any executive. It is only when your business is profitable that you can employ people.

  I have never employed people simply because I want to give them a job. If this were the case, I would have employed my brother Pobane – or any number of extended family members who battle even today to secure employment. I do not look after my senior staff members simply because I like them – I look after them because I believe that they are expertly equipped to develop and protect my assets.

  Many critics have accused me of being inconsistent in my choice of investments. According to these critics, the portfolios are too diverse; also, my investments are unmanageable, and I focus on private companies rather than corporates. Yet, my choices have been deliberate and strategic. When I started Black Like Me, I chose partners who put a good package on the table and were people I clicked with; if there is no chemistry between people, the business relationship is doomed. Usually, I meet with the CEO – as I did with Tom Henry – and if there’s a rapport between us, and I have a good feeling about the company’s performance, we proceed to negotiations. From there, the dialogue progresses fairly smoothly and without too much delay because we don’t have the red tape of the corporate machine that goes with the listed companies. I also don’t want to be stifled by having the same set of partners, which is why I set up the Phatsima Group and Lephatsi Investments; by expanding my partnership groupings I am able to diversify the different company investments.

  Another important element is the liquidity of a company. Where at all possible, my partners and I try to incur the lowest debt when investing in a new company. I look at companies that have a strong turnover; this ensures that the investment debt can be serviced and quickly liquidated so that investors can start earning dividends early on. These are all important aspects of my business investment model.

  Leswikeng, Phatsima and Lephatsi – my three Broad-Based Black Economic Empowerment (BBBEE) initiatives – have shareholdings in a diverse portfolio of companies spanning mining, construction, aeronautics, finance and information technology. The vision of each is to become a leading non-racial entrepreneurial and socially responsible company, and to be at the forefront of the economic empowerment of previously disadvantaged groups in South Africa. To this end, their mission is to make a positive contribution to all the businesses we invest in.

  BEE and BBBEE are different yet essential tools for transforming the South African economy. BEE measures equity ownership and management representation, but BBBEE seeks to distribute wealth across a broad spectrum of South African society. I am convinced that both will improve the lives of ordinary South Africans. But BBBEE can succeed only if there are properly trained employees.

  The South African manufacturing sector has severely declined over recent decades, and South Africa needs a second industrial revolution to boost development and make it sustainable. To achieve this, South Africans need to integrate new technologies and machinery into educational institutions so that we can prepare our learners for life in the real world. If we fail to produce much-needed technical experts, we will have a nation of polarised youngsters: on the one hand, a group of achievers who seek only to enter the corporate or professional world, and, on the other hand, a group of under-achievers who cannot provide for themselves because they don’t have the skills. Unskill
ed workers – and my brother Pobane was one of them – are not equipped for life in the commercial sector. These workers are generally under-achievers because neither educational institutions nor corporate and private companies are equipping them with the kinds of skills they need to take their rightful place in the economy.

  There are various ways in which the broad vision of black empowerment – the creation of black business and management opportunities – may be realised. These include legislation, but also help from government and business. But it will also require boldness on the part of black professionals to seize these opportunities and make the most of them. Certainly, there is a need in our economy for more risks to be taken, and for the self-complacency that comes with secure positions to be replaced with creative initiatives that could change the contours of the business landscape in South Africa.

  The government has made significant strides in encouraging and increasing black operational participation and control in the economy, specifically in the realm of government tenders. But unfortunately there are always lazy and dishonest people who seek ways of making money with no effort. Some have taken advantage of the tender system by acting as black fronts for white companies, thereby doing black business a great disservice, as this effectively keeps operational control in white hands. This merely frustrates the participation of black people in the economy and slows the expansion of production.

  BBBEE is a government initiative which recognises that our democracy cannot survive as long as the majority of black people remain on the periphery of wealth-sharing. The challenge for business is to act swiftly by embracing BBBEE; any delay will encourage political instability, which will inevitably reverse the gains of the liberation struggle. Liberation is what our grandfathers and grandmothers, our fathers and mothers, our aunts and uncles, sisters and brothers fought for, and it is a fight we must continue. We have won democratic freedom, now we must win economic freedom.