Panellists agree that the only way startups can make it big is by leveraging relationships with big corporates.
Most CIOs today are relying heavily on IT systems and solutions that come from industry giants in Europe, US and Asia. However, during a panel discussion at the CIO year-end event that took place on 30 November at the Westcliff Hotel, panellists challenged the senior IT professionals in attendance to think outside of that box and look inside of South Africa and Africa.
“We’re not in Silicon Valley, but this country has plenty of startups and IT services companies that are innovating for the unique culture of South Africa,” CIO South Africa MD Joël Roerig said. “Today, we’d like to interrogate what it takes to foster a genuine homegrown IT environment, and what CIOs can do to help this movement.”
Joël was joined by Siddika Osman, founder and CEO of Ngwete IT Solutions, Lethabo Mokone, founder and CEO of Makwa IT, Gys Kappers, chairman and founder of Wyzetalk, and Jonathan Lamb, executive head of platform business at Standard Bank CIB Digital.
The whole panel agreed that IT makes things possible, but that it is people who really make things happen.
“I have been in IT for 25 years, and 15 years ago I felt like the time was right for me to become an entrepreneur,” Siddika said. “I saw it as an opportunity to create jobs, because I’m passionate about the youth of South Africa.”
She added that, since founding Ngwete IT Solutions, her proudest achievement has been going from employing 40 people to 130 people in 10 years.
“Ngwete’s vision as an IT organisation is to unlock South Africa’s pulse through technology,” Siddika explained. “Pulse means the people of this country, and it’s the people who will actually enable South Africa to reach new heights by using technology.”
The rest of the panel agreed, and Gys said: “Blue collar workers are the people that get stuff done. If you want to grow your economy, you have to employ people, and if you want to build an economy properly, you have to do it through entrepreneurs.”
Lethabo echoed Gys, saying that “if you want to get ahead, you can’t do it alone. You have to do it with people and through people”.
He explained that if corporates don’t give opportunities to startups and scale-ups, all the money they spend on the international giants go to shareholders and are feeding the economies of other countries. However, if the money goes to the entrepreneurs of South Africa, they can use that money to create jobs and to strengthen the country’s economy.
While the state and government always talk about the importance of entrepreneurship, they don’t practise what they preach. Gys explained that Wyzetalk is seen as a corporate entity because of its revenue. As a result, his finance team has to spend two months a year doing BEE certification, which is a heavy tax on a business like theirs.
“In the Netherlands, where we are headquartered, they have given us a five percent corporate tax rate for the next 10 years, and a 30 percent discount on salaries for the next five years for every employee we have. In South Africa, you get nothing. You have to compete on the same level as the giants,” he said.
He added that, put together, everyone on the panel has created more than 300 jobs through their start-ups. Each of these jobs are tax-paying people that are adding credibility to society and have potential income for their families to further develop themselves. Yet the government does not help these entrepreneurs.
Because of this, the panellists agreed that it’s important for corporates to help startups and give them the opportunities that would otherwise be impossible to find.
“For a lot of corporates it’s quite tricky to take on a startup or scale-up that they don’t know,” Gys said. “You have to find the right people to engage with to build up references.”
He explained that, for the first 12 months he self-funded Wyzetalk, a scale-up that focuses on enabling frontline blue collar employee communication. “A lot of potential customers would say, we like what you do, but we’re not going to be first.”
When Remgro got on board, Gys and his team went to other potential investors and customers, and they all bought into the company too. Over time, the company built credibility and went from three employees to more than 100.
“Established businesses need to think beyond just using homegrown South African solutions as vendors,” Jonathan said. “What every big corporate can consider is to connect entrepreneurs to the customer base and networks that you’ve already built. There’s revenue in it for all the parties, and it makes sense commercially. If you can be bold enough to bring the entrepreneurs with you to further add service through you, that can help grow the homegrown entrepreneurs.”
This is exactly what Standard Bank CIB Digital has been focusing on in the last 18 months as they’ve taken on a platform strategy. “We recognised that we have great access to a community and relationships with top executives, and we wanted to be more than just a financial services provider to these organisations.”
Jonathan’s team started by deepening the relationships with their customers, going to the CIO and HR communities as well, instead of just the CFOs. “Through that we’ve built up an insight into what the C-suite is worrying about.”
They then looked at opportunities where they could help these executives by partnering with startups and scale-ups that could provide more than just financial services. “We realised that there were synergies between what Wyzetalk were doing and this gap they filled between blue collar workers, engagement and digital inclusion.”
Since then, the initiative has snowballed to include more SMEs. “Our goal is to find the right client problems that we think we can match through the right partners. That’s how we can support and bring scale to players who can’t get to those big opportunities as fast as we can.”
Siddika concluded that, if small businesses, scale-ups and start-ups can leverage the economies big corporates have already built, they’ll have easier access to the right markets that will help them grow and create more jobs. “In the end, it all boils down to relationships.”