Fani Titi & Phuthi Mahanyele-Dabengwa | Focus Talks | Investec

Welcome to the latest episode of Investec Focus Talks, conversations with leaders, innovators, and change makers. I'm your host for today, Kathy Mulhachan, and I have the honor of being in conversation with the Investec CEO, Mr. Fani Titi, and the Naspers CEO, Miss Phuti Mahanyele-Dabengwa. Hello to both of you, and thank you so much for making time for this conversation. We are looking at a country that is trying to rebuild what has been broken, what has been destroyed in the middle of July. We are hearing the stories of business people that are incredibly discouraged, of just the sheer anguish and despair that they've had to go through due to their businesses being disrupted. And I'll kick it off by saying that perhaps both of you, your own reflections on where we are as a country right now and how you define this moment. I'm going to take moderator liberties and, Phuti, I'm going to say perhaps you can kick us off today.

Thank you so much, Kathy. It's really good to be able to speak to you, and it's awful to be in the environment that we currently are in. However, I believe that the country needs to use this kind of crisis that we're in, and I believe that it's far from over, as a seminal moment to reassess the state of our country and to really make hard decisions and to take decisive action to get us back on track. According to stats, they say youth unemployment in South Africa is now at 46.3 percent, and that was as of the first quarter, and youth account for 59.5 percent of the total number of unemployed persons. We can't continue on this trajectory of an unequal society, a public that feels let down, an ailing infrastructure, or an economy that is struggling. It's a complex and difficult situation, and the question on everyone's minds is certainly what needs to be done to improve things. I believe that we have a nation that is resilient, creative, and hardworking, and with great minds and experienced individuals from various sectors of society, we need to use this moment and these great minds around us and come up with pragmatic steps to be able to deal with the issues that will generate jobs, improve training and development of people, restore confidence back into the country, and we need to do so urgently.

Thank you so much for that, Phuti. You've certainly given us a good foundation to build on in terms of where else this conversation is going to go. Mr. Titi...

You're talking about how your own story of hope, your story of having grown up in a shack to being the Investec CEO, is a story that should show South Africans what is still possible. It's near unimaginable to think of you right now in your current position as somebody who had once lived in a shack. Speak to us a little bit about that journey of entrepreneurship.

Phuti, you've dabbled somewhat as an entrepreneur as well, and perhaps just your own reflections on what really makes it difficult for entrepreneurs to thrive in this country. And your story is also one that many South Africans can relate to, you know, kind of trying to trade between the corporate world and then also having your own dreams and businesses to look after.

No, thank you, Kathy. I think when I look at that question, I'd like to just take a step back and really look at just where I come from, because I think certainly, were it not for my parents, the opportunities that I've had in life, I probably would not... because I don't think I had the tenacity of somebody like Fani. But you know, I'm really grateful to them. My father came from Middlelands and my mother from Zola. My mother died when we were still very young, and so my father took on the role of mom and dad, and he came from very little from a financial perspective. I mean, you know, we've always had great family, but from a financial perspective, he came from very little. But he built himself firstly through access to education, as Fani spoke of. Education was the first lever that he used, and completed his undergrad in economics, and then MBA, and then finally the doctorate. And so it was whilst continuing with his education that he then got access to corporate opportunities. So it is with this background that I came into corporate South Africa. I had a parent who was able to put my sister and I through private education, and then when I completed high school here in South Africa, which was one of the first multi-racial schools in South Africa in the 1980s, I was able to go to the States and did my undergrad degree. And so when I completed my undergrad and continued with my master's, I took on a few corporate roles in infrastructure financing in South Africa. And I think my entrepreneurial journey really started when I joined Shanduka. I remember asking the question, okay, how much capital do we have available for acquisitions that we need to make for this energy division? And they looked at me and they said, none. So it wasn't just about creating a business, but it was also about having a story to raise capital so that you could make acquisitions. Anyway, I then met a man, his name was Johan de Vos, he had just left Sasol, and he had been working on the gas pipeline between South Africa and Mozambique, and so he now had a plan to come up with this gas business in Mozambique, and he was looking for a partner. And so we invested into his business, and soon thereafter we came across this company, it was a FTSE listed company, and the company was called Aggreko, and they do all the energy support for sports tournaments around the world. And so they were looking for a partner, this was now leading up to the 2010 World Cup, so they were looking for a partner, and it was brilliant, we worked well together, and thereafter we started working on a number of other projects. And in fact, when you are in Durban and you're on the highway, you'll see that Aggreko facilities on the highway because the business continued here in South Africa. But what I learned in my journey of entrepreneurship was just the importance of partnership. Over everything that you do in the business, primarily your partnership with your business partners is key to being able to really succeed, because you can really build on that. And I think when you look at South African entrepreneurs, you see the difficulties that South African entrepreneurs face. And when you see the fierce shocks that COVID-19, the pandemic, has had on entrepreneurs, the impact is even more magnified. And so we need to find ways to support these businesses, these small businesses, so that they can... because they make up a significant portion of the economy of South Africa. So we need to be able to support these SME businesses if we are to grow. My own journey was different because when I left Shanduka and started my own business, it was very different because I was able to speak to one of the banks and they were ready to make a fund available for us, for us to be able to invest into different businesses. But when you look at the small and medium-sized enterprises, those are the businesses that we need to support because those are the highest employers of people in our nation, and that is where many young people get opportunities to actually be employed earlier on than in corporates.

Allow me to just bring in then the role of business, because oftentimes, and both of you would be aware of the general public sentiment about business in this country. Business is seen as the biggest beneficiary of the status quo. And so when you speak about business needing to rethink how it operates in South Africa and how it can better be part of the solution and respond to the very real problems that South Africans are facing, what does that look like?

Well, I think both the corporate sector and government have a responsibility to ensure that we have an enabling environment for small and medium-sized enterprises, to support and to protect the sector. And this is due to the fact that we know that they play a vital role in creating jobs and creating growth. After all, SMEs of today are not SMEs in the future. I mean, Fani spoke of Discovery. Discovery was formed in 1992 as an idea that Adrian and his partners had at the time, and today this is a big business with a market cap of, I think yesterday when I checked, was around 79 billion rand. So, you know, the fact that you start in a small or medium-sized enterprise today does not mean it will remain that. You can grow this business into a great organization. And so the issue is for us to be able to support these businesses. And that's why we as Naspers have got the Foundry. The Foundry is the entity that we use to put capital into these small... and they're not even medium-sized, these are small enterprises, and we invest anywhere between 30 to just over 100 million rand of equity into these businesses, and we grow them. And our focus is on scaling them globally. And one of the businesses that we've invested in is an agritech business called Aerobotics, and the majority of their revenues actually come from the US. And these are young South Africans who studied at MIT and they've decided to come and start this business here in South Africa. If we are about growth for South Africa, we need to look at these small and medium-sized enterprises.

Yeah, and in fact, finally, but just back to what you were saying on PPPs, you're absolutely right. I remember that when I was still at Shanduka, what we did was we partnered with the Garcia Trust, and each of us took a hundred million rand. We said we'll invest 100 million rand each into a province, and we need that province to match our 200 million rand, and that 400 million rand must go into education into that province. And it's exactly what we... I remember we went into one province and they told us all sorts of issues around rules and whatever, they couldn't take our money. But anyway, the Free State, when we went to them, they said please come, they matched our 200 million, we had 400 million, and we went into the schools, we built classrooms and all of that. The Free State, you'll recall, is now number one in terms of education, the matric results. And we've gone into areas like Matlafateng, Debe, these are areas where the pass rates were so low, and we've now got them up to 89% and higher. So, you know, with just a little bit of capital, as you say, when you have partnership with government, sectors that are willing to work with you, you can produce unbelievable results. So I absolutely believe in public-private partnerships.

Absolutely. You've both spoken about the issue of inclusion and how whatever trajectory this country needs to go on in terms of it being sustainable, in as far as its success is concerned, it needs to be inclusive. When we look at pretty much all the research that has been done, even under COVID-19, about who is the most vulnerable in this country, the face is that of a woman, and specifically more of a black woman. And so the conversation, the problem we have, is quite gendered in terms of even the unemployment rates that we are seeing. I wonder how this translates itself into the entrepreneurs that you are helping support. What are you seeing as far as gender is concerned, and how are you responding to what we know is often quite a gender-biased sector overall? Business itself is quite gender biased. Just look at the JSE, look at the CEOs of the JSE, and that in itself tells you a story. Phuti?

Yeah, well, I think you are absolutely correct. And in the tech sector specifically, women are highly under-represented. In fact, PwC found that women currently hold just one-fifth of tech-related jobs of the top 10 global tech companies in the world, relative to men who have around 80 percent of the jobs. So, whilst we've seen some positive changes over recent years, the balance is unlikely to shift significantly unless companies, schools, universities, and governments work together to remedy the underlying causes. It means that more can be done to encourage and support young girls to pursue science, technology, engineering, and mathematics, STEM subjects at school. And we need to go further and beyond investing in young girls, teaching them the skills to get through the door to the interview, and the skills that are hard to automate or to codify, such as creativity, teamwork, and problem solving. The World Economic Forum found that in South Africa, only two women graduate with an ICT or technology degree to every five males. Women are also underrepresented in maths and statistics, four women to five men. So this means a limited pool of female STEM talent, restricting the potential of South Africa's tech sector. On the positive side, I think more companies recognize the benefits of gender inclusivity and more diverse leadership. Naspers, for instance, is seeing a pleasing upward trend in the hiring of women, with the last three additions to the board of Naspers all being women. There's also an increase in the number of women being recruited into management roles across the group of Naspers. And I do believe that digital transformation can help women overcome many barriers and promote gender parity. For example, online or e-learning platforms enable remote learning and provide access to information denied previously. Fintech platforms are helping women to manage their finances, to run businesses, and to pay for their children's schooling. So in a nutshell, I believe that achieving gender parity means more than simply opening doors for junior women in your organization. It also means looking beyond the confines of your own company: what impact are you having on the broader society? This is the starting point.

I must say, some of the insights that both of you have been sharing have really, really been great to hear. And it also had me thinking about just when we talk about rethinking the way that business is done, business is about the bottom line, it's about how much did we make at the end of the day. So when you then hear business leaders talking about business in a way that seems to also take into account the social factors, it brings us to a conversation about social entrepreneurship. And I think maybe just your views on how we cultivate a culture, and do you think that's what we need to be doing in this moment, cultivating a culture of social entrepreneurship, Fani?

I think certainly a social entrepreneurship approach is a win-win approach to business. It fosters a more equitable society by addressing needs and seeks to achieve ongoing sustainable impact, and it's good for business, not only for now but for the future. The business that Naspers Foundry invests in are businesses that are closely aligned with this business philosophy, where they seek to address solutions for local problems through their platforms, and so dealing with big societal needs. In fact, if you look at any of our businesses, whether it's our payments or food or any of our businesses, it's dealing with addressing big societal needs. Another example here in South Africa is Naspers Labs, our youth social impact program, which empowers young people with digital skills and then places them in work, as I mentioned earlier. So I think it's important to have a business that is very much in tune with what society's needs are, so that we can address the needs of society. So overall, personally, for me, what I would like is to have a legacy that is not measured in rands but is measured by the impact that it has on our people. And so it's important the impact that we are able to make through the businesses that we are involved in. And so that is why in every aspect of our work, we see how we are making an impact in the societies that we're involved in.

We are edging towards the end of our conversation today. Before we do that, however, I would like to hear from you. We've touched on so many different issues, but perhaps just to re-center the conversations, what are the... let's narrow it down perhaps to three priorities, top of your mind, that we need to be doing as a country right now to enable an environment that supports entrepreneurship, to enable an environment that unlocks the entrepreneurship opportunity that we have in this country.

Well, I think if you were to speak to an entrepreneur, the first thing they would probably say is capital. But the reality is that, firstly, I think you need to ensure that there is the right access to education about how to run a business and run a sustainable business. And so we need to ensure that there are those resources for entrepreneurs. And secondly, we need to ensure that we have a really direct focus on what we spoke about earlier around PPPs, around education and some of these pivotal areas. And then I think, having done those things, we can then start to look at solutions around financing and all of that, because I think South Africa has always had access to financing, but it's just ensuring that we have financing for these small businesses. We have financing for businesses that have a value of 100 million or 50 million, but when you talk about a business that has a valuation of less than 10 million, the funding sources are that they almost don't exist. When I drive around, when I go and see my relatives, whether it's in Soweto or wherever it is, and you see that the businesses that were there back then, they haven't grown to another scale. It's not typical that you will see a Maponya type mall which started as a small store in a community and has grown into a mall. Why don't we have more of that? We need to have these business people being supported so that they can grow, because by them growing, more people are employed and more opportunities are created for employment. So those would be some of my parting shots.

Let me thank you again both so much for being part of this conversation. It's been incredibly insightful. And of course, to all of those that are tuned in, you should look out for the next Investec Focus Talk.