This is my first blog for 2010 and there are many exciting things to report on. The South African economy expanded by 0.9% in the last quarter of 2009 and many saw this as the first signs of taking a journey on the road to recovery. In October last year the IMF forecasted 4.1% growth for Sub Saharan Africa and 5% overall for emerging markets. The title of their report was “Sustaining the Recovery” calling for the need to keep the momentum generated by a variety of stimulus instruments to restore and rebalance global demand. Locally the recovery story was somehow muted yesterday with a 2.3 points drop in the business confidence index, but I’m confident that the overall growth and recovery story will become a more permanent feature of our local dialogue.
Last night we had our first chat with Tony Blewitt from the Entrepreneurs’ Network on ClassicFM where we looked at making the transition into a recovery. Coming out of a period of economic decline without many battle scars is a cause for celebration. Entrepreneurs should take stock of the what and the how giving careful consideration to what facilitated such good fortune and how the business kept abreast. This reflection should provide a rich resource of internal lessons that can be employed to achieve long term efficiency gains.
In particular, businesses that manage to achieve some efficiencies should look at maintaining those gains and expanding it into organisational culture. Irrespective of how BIG or small these efficiencies are, if it has no negative impact on the customer or product or service quality there should be a concerted effort to keep these practices in place. In the case of productivity gains it is important to use such momentum and keep the workforce committed to perform at this level. In addition to this is gives a great opportunity to get your human capital invested through open consultation that provide clear guidelines on the company’s sustainability and performance and how their efforts influence this. People will appreciate the fact that they could keep their employment during tough times and ongoing engagement around these dynamics can facilitate a higher level of commitment from all employees. Structural changes such as downsizing can perhaps be more challenging, but it is important to immediately settle into a business frame of reference that is appropriate for your new size.
What does economic decline means for the VC industry? In 2008 we still saw R12bn of new investments in the South African VC & PE landscape and although this was slightly lower than the 2007 number it still represented 25% of the deals and 6% of value for the activity for that period. One would expect that the 2009 number will be perhaps even lower, but at least deal flow did not dry up. It only means that entrepreneurs must be able to produce BIG solutions, exciting products and services with globally significant market potential. This can be a tall order in any economic climate and it calls for carefully crafted plans, accurate projections and a lot of stamina to sell the story. The South African Private Equity Congress kicks off Thursday 11 February. I’m sure we will be able to get a comprehensive overview of what happened in our space in 2009 from the SAVCA PE & VC Annual Survey. The congress is hosted under the title “Seeking out success in South Africa’s time of opportunity” which hopefully reflects the sentiment of the industry. If this is indeed the case we should have a very interesting year ahead of us for entrepreneurs and fund managers alike.
Fredell
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