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Sometimes big business thinks too big; take Bounty Brands, for example – Daily Maverick

Defend Truth

Opinionista

Sometimes big business thinks too big; take Bounty Brands, for example

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Toby Shapshak is publisher of Stuff (Stuff.co.za) and Scrolla.Africa.

I read with glee my colleague Tim Cohen’s column last week about taking a small Karoo town off the electricity grid. It’s a clear and detailed investigation of the ongoing lack of electricity and how to fix it.

Prince Albert pays Eskom R16-million a year for wholesale electricity and would need 60,000 solar panels for its 15,000 residents to replace that. Tim estimates installation expenditure would be about R80-million and Prince Albert would take about eight years to pay for it.

But there is a problem with this logic.

The way Bounty Brands imploded demonstrates it: to build a business, the company founders took on too much debt. The ultimate losers were us, to the tune of R1.8-billion in highly questionable investment of Unemployment Insurance Fund money.

Big business’s problem is it thinks too big. Government’s problem is it thinks like big business.

As admirable as taking Prince Albert off the grid is, it’s a R80-million recipe for disaster, with looting, angry residents and eventual collapse. Local municipalities do not have the skill sets, nor the integrity and morality, to manage their own finances. Just ask villagers of Giyani, without water eight years after R3.3-billion was blown.

The bigger the project, the less likely it is to be completed.

What struck me about the Bounty Brands implosion was why nobody saw it coming. Taking on lots of debt is how big business solves a problem. And that is the core fallacy: everyone in South Africa thinks of fixing our country like a big business. We have to stop and think like a small business.

In lockdown I realised I was no longer a journalist. My primary responsibility was paying salaries in a pandemic. Luckily, my long-suffering business partner Sally Hudson is good at managing the money nuts and bolts. Stuff is a small media publishing house that employs 10 people. We have no legacy businesses to prop up, low overheads and are very frugal.

The reason we are lean and agile is because, well, we’re a small business. We can’t afford to be showy or throw millions at projects that are not well thought out. We closed our offices and found a way to pay that money to staff.

Good small businesses tend to be robust because they don’t overreach financially. Knowing your limits is as important a business skill as knowing your strengths.

Please also don’t think my next sentence is self-congratulatory. Some old Mail & Guardian colleagues (Mungo Soggot and Phillip van Niekerk) and I launched a startup in October 2019 called Scrolla.Africa to report in the old-fashioned way. Our first series was about the horrific family murders by killer cop Rosemary Ndlovu.

Stuff has made a profit for two years, and Scrolla.Africa is flourishing, with more than 700,000 monthly visitors to our tabloid-style journalism in English and isiZulu. It’s all done with Samsung mobile phones.

When an investor remarked, “Wow, you did this during lockdown!”, we breathed out a bit and realised we’d inadvertently chosen the worst time to launch a new business.

Without big bucks in the bank, we soldiered on, self-funding Scrolla.Africa until we recently got some grants and won a prestigious Google News Initiative award.

When the pandemic tsunami hit it wasn’t a pleasant ride, but we weren’t weighed down by legacy products or thinking. In 2020, three major magazine houses went under, taking down 15 titles and shedding 800 jobs that will never come back.

South Africa needs more small business logic, more small business salaries for civil servants and more small business problem solving. DM168

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R25.

An image of the the front page of the latest edition of Daily Maverick's DM186

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