Author Archive | Jane Notten

“Poetry, coding and philosophy.” These are the subjects that Professor Roger Martin, global influencer in management strategy, design, innovation and business education, believes are most important for all who aspire to future-ready leadership in the 21st century.

Director of the Martin Prosperity Institute at Toronto University’s Rotman School of Management and former dean of the same institution, Martin was speaking on strategy and innovation for transforming organisations at a breakfast hosted by the UCT Graduate School of Business, the Bertha Centre and Deloitte. He challenged leaders in business and business education to consider whether they were sufficiently geared for the innovation challenges of the dynamic, complex environments that characterise modern economies.

Martin suggests that most US business education is failing business. It needs, he says, to wake up to the thinking that is more suited to the world, as “there is way more innovation going on in business schools” in other countries.

According to Martin, education that does not embrace the perspectives of others, can’t teach how to use and capitalise on the diversity of thought available. Yet, the value of inter-disciplinary teamwork, which is crucial for problem solving in the contemporary era, is best realised by people, he reflects, who have learnt how to collaborate with those who see the world differently from themselves. And in doing so, they are able to create solutions that are greater than the sum of their own knowledge or experience.

Martin says that data-driven, analytical thinking remains the default thinking mode in business – upheld in Aristotle’s much-referenced Analytica Posteriora. However, this limits business strategy to what is known and has already happened. It results in business models that are built for reliability and optimisation; based on exploitation of what already exists.

This is fine, up to a point, but what is needed for strategising and designing effectively for the future, he argues, is an alternative way of thinking that integrates intuitive thinking with analytical thinking. Here he counterposed Aristotle’s other great, but significantly less read, work Rhetorica, a treatise on the art of persuasion, which encourages thinking that is based on judgment and instinct.

It is a way of thinking that encourages creativity, and extends the business model to include an exploration that goes beyond what already exists.

In Martin’s view, business thinking needs to land at the nexus of these two edges.

This new approach requires, he suggests, that the central question dominating business thinking should change from, “What is true?” to “What would have to be true for this idea to be a good one?”

And, the thinking capacity of the most effective person in any organisation will draw on both analytical and intuitive thinking, he insists.

Martin advances Design Thinking – the design-led innovation methodology – as the thinking needed for synthesising analytical and intuitive thinking, and integrating modes of exploration and exploitation. In Martin’s view, design thinking enables the best forward-looking solutions; giving organisations a critical competitive advantage in the contemporary era. It is the key, he says, to future-forward business leadership that can innovate in complex, fast-changing modern economies.

In advocating the kind of thinking necessary for the integrated world, Martin believes contemporary business leaders need to integrate the unknown in their strategy and plans, and have the ability to construct compelling arguments to advocate for their solutions. This is what makes disciplines like philosophy, which teaches rhetoric, so important. Martin is a leading expert on integrative thinking, business design strategy and country competitiveness, and the go-to strategist and adviser to some of the world’s leading companies, like Lego and Procter and Gamble. He heads the Skoll Foundation and holds the Premier’s Chair in Productivity and Competitiveness in Toronto, Canada, and his accolades include being named one of the most influential designers in the world, one of the 10 most influential business professors in the world, and the third most influential business thinker in the world. He has authored and co-authored 11 books.

He is described by Professor Kosheek Sewchurran, director of the GSB’s Master’s in Executive Management as “the most effective concept maker in business education in the 21st century,” based on the numerous successful interventions that Martin has introduced to business education. Sewchurran says the significance of Martin’s contribution lies in his ability to match the systemic changes he considers necessary with innovations in education and ideas.

Martin’s recognition of the attributes that contemporary leaders require is particularly pertinent to the global economy of the 21st century. This is reflected in the central focus of this year’s World Economic Forum that sought to understand the implication of the rapid digitisation for decision-makers in industry and government, who are responsible for developing solutions in an increasingly complex, connected and fast-paced world. In South Africa the challenges – and opportunities – are significant too. The Global Entrepreneurship Monitor (GEM) 2015/16 country report for South Africa paints the picture of a stagnating economy that needs opportunity-driven entrepreneurship for employment creation and economic growth. Yet, the country struggles to convert its comparatively high record for innovation into viable enterprises.

In this context, design thinking’s human-centred innovation process can act as a change-maker for leaders. As Richard Perez, director of the Hasso Plattner Institute of Design Thinking at UCT (d-school) and a panelist on the discussion that followed Martin’s presentation, explains – design thinking adds the desires and needs of humans to the financial viability and technological feasibility on which business usually focuses. The innovation that happens at the nexus of these three (viability, feasibility and desirability) is more likely to succeed because it reflects what people – the end-users and – actually want, and are suitable to the contexts they experience.

Most South Africans have heard about Uber, not only because of the company’s thorough marketing tactics, but also because Uber has been in the news for all the wrong reasons.

Spawning strikes and protests from the traditional taxi industry, as well as outbreaks of violence and intimidation, the service – which has been hailed as a business model innovation by many a scholar – is doing what technology innovation does best – disrupt.

Uber’s is described as a collaborative consumption (CC) business model, which is a derivative of the sharing economy – an explosive new phenomenon that is taking the world by storm. According to global law firm Norton Rose Fulbright, such business models are not a fad, but an unstoppable force that has taken root in the wake of the financial crisis. Now generating around $15 billion US in global annual revenue, according to a recent PwC report, the socalled sharing economy has already revolutionised a number of industries and is showing no signs of slowing down.

Driven by a fundamental shift from private ownership to shared usage and access, the sharing economy promises to provide potential benefits to both the economy and society through the shared consumption of goods and services. The rapidly developing segments in the sharing economy have profitably leveraged unprecedented advances in technology to match cultural trends and the evolving needs and demands of their customers.

In fact, CC business models like Uber are described as “sharing redefined by technology”. They tend to utilise two-way online platforms and smart algorithms to conduct business, and break away from the traditional notions of doing business by seamlessly linking stakeholders and decreasing transaction costs. One of their chief claims, in terms of social benefit, is that they empower individuals to become microentrepreneurs who make their assets, skills or time available publicly by means of a digital matchmaking platform. Digitally driven business models like this are allowing new entrants – sometimes from lowincome groups – to access markets and disrupt wellestablished players in numerous industries and gain a competitive advantage in the process.

This alone must make them worthy of consideration in any discussion about boosting economic growth in highly unequal emerging markets. Such business models have the potential to be rolled out into other areas of the economy. Imagine for example, if governments could leverage mining-related infrastructure for regional economic development. Facilitating the shared use of mining infrastructure between mining companies and third parties could contribute to the distribution of the benefits of mining investments more widely.

So far, so good. But not everyone is convinced. Despite the seductive promise of CC business models, there is ambivalence, and uncertainty surrounding the stakeholder impacts of such models especially those operating in emerging economies like South Africa, where almost no research has been done.

“There is no reason to assume that CC business models are sustainable business models per se. The question whether CC leads to more sustainable business is especially unclear within an emerging market context, where it might be of special importance due to the particular vulnerability of the potentially affected social groups,” comments Betine Dreyer, a researcher from the UCT Graduate School of Business (GSB), who recently co-authored a paper that set out to plug this research gap and investigate the impact of CC models on stakeholders in South Africa.

Dreyer and co-authors Professor Ralph Hamann and Kristy Faccer from the GSB and Florian Lüdeke-Freund, from the University of Hamburg, explain that critics have suggested that CC models could be exploiting people rather than empowering them because they do not sufficiently protect workers’ rights. The protection of consumers, too, often appears to be of secondary concern in the face of aggressive expansion. Uber, for example, has been slow to comply with regulations protecting passengers or to conform to established practice in its hunger for market share.

So, while the models do hold significant potential for economic empowerment, especially of marginalised groups, more attention needs to be paid to local context and understanding the impact of business model changes on local stakeholders. Simply put, the impact of a shift in Uber policy at global level could have very different impacts on drivers in the US than on drivers in South Africa.

A case in point was the introduction of cash payments in line with its global strategy earlier in 2016. While on the surface this move was good for consumers and business, in South Africa, it undermined two important stakeholder benefits: the perceived security for drivers and customers associated with cashless transactions in a high-crime environment; and the market differentiation between Uber South Africa and the traditional taxi industry.

CC business models, are, by their very nature, agile. Changes can be implemented relatively easily and swiftly, given the technological platform at the core of the business model. But this brings threats as well as opportunity.

The GSB research concludes that CC business managers should pay greater attention to local context when making business model changes, than they seem to be doing currently.

Regulators and activists should go beyond generic arguments around stakeholder impacts of CC business models, and rather recognise specific and disaggregated stakeholder impacts and how they may be influenced by changes in CC business models.

Not to do so runs the risk that the baby gets thrown out with the bathwater, and the country loses out on the potential benefits of disruptive power of CC business models. As Botsman and Rogers, authors of the influential book What’s mine is yours: How collaborative consumption is changing the way we live, point out – CC business models could be “as important as the industrial revolution in terms of how we think about ownership”.

Uber has been the ‘bull in a china shop’ in many ways, but their success demands that the model is given serious consideration as an enabler for economic development.

SA’s National Development Plan’s pledge, declares that, as a nation, South Africa must keep on trying to succeed. This demands, that as a country we learn from the shortcomings of business model innovations like Uber and build on their success. We need to take the best that CC models have to offer and make them work in the SA context.

The authors are MBA students at the GSB. This article is based on research they conducted as part of their course requirements with fellow students Trisha Naicker, Adam Parsons and Wouter Vink. It draws inspiration from a report on Business Models for Shared Value from the Network for Business Sustainability-South Africa.

“I don’t like the term born free, because there is no African child Born Free in this country … I see it as a negative, false thesis that shows better change in this country, whereas all of us knows that life hasn’t changed for the better.”

The young man speaking here is named Thando. He’s talking to Vanessa Malila, a postdoctoral student at Rhodes University, for her paper Born free but still in chains. He’s one of several to speak in a similar vein.

Thando is voicing a common theme in the current South African discourse: the end of apartheid in 1994 promised a new beginning, with political freedom and rising prospects for all, but 22 years on, many of the so-called born frees are not yet enjoying the fruits of this new found freedom.

According to the World Economic Forum Global Risk Report (2014), South Africa has the third highest rate of youth unemployment in the world. From 2010 to 2016 it has risen from 50% to 52%, with the expanded definition – which includes those so discouraged they are no longer seeking work – as high as 63% in 2015.

A puzzling parallel problem is this: why, when so many of our youth are unemployed, do we still face a critical skills gap in the job market? Why, when nearly two-thirds of young people do not have jobs, are 96% of CEOs in the country concerned about a critical skills gap according to a PWC report? This despite the fact that government spends a relatively high percentage of GDP on the education system.

Various reasons have been put forward for this phenomenon; one of which is that there is a mismatch between what business needs and what the education and training system is producing. According to labour market analyst Loanne Sharp writing in a City Press feature titled, Degrees without Guarantees, 600 000 graduates were without jobs in 2012. But Haroon Borhat and fellow economists Alan Hirsch, Ravi Kanbur and Mthuli Ncube counter in their paper Economic policy in South Africa past, present, and future that there is a strong correlation between level of education and whether you have a job or not.

We can draw two main conclusions from this: one, South Africans need more access to tertiary education; and two, we need to direct students towards those areas where there is a skills shortage.

Borhat et al write that considering South Africa is a young nation built on a complex and very challenging political economy, expectations that the new government would get everything right quickly were naive. What other entities, then, can play a role in achieving these two objectives? The obvious answer is business.

Business has a huge incentive to solve this problem because millennials, also called Generation Y (those born between 1980 and 2000, which includes the ‘born free’ generation), while thought of as ‘high maintenance’ employees, are also highly prized as a dynamic force for innovation.

As scholars have pointed out, this generation thrives on challenges, enjoys freedom and the flexibility to be creative, and dislikes being micro-managed – the perfect recipe for innovation, which is widely touted to be the lifeblood of business success in a world of increasing complexity and competition.

And indeed, around the world, corporations are recognising the important functions they can play in marrying education and employment. In 2014, The Guardian reported that “economic powerhouses can attribute much of their success to their heavy investment in human capital”. Citing the examples of Samsung’s Tech Institutes and Honeywell’s Initiative for Science and Engineering (HISE), the publication suggests companies can use their assets to close the skills gap.

This has the dual function of building employee loyalty and driving staff retention in a competitive market. Billy Elliot, South Africa manager at the Top Employers Institute, points out that the new generation of employees no longer considers a salary alone highly motivating. Long-term investment in talent is essential, and leadership development programmes start from the bottom. It therefore makes sense to spot talent as early as possible and invest in education, says Elliot. Further, the kind of education they are investing in needs to be carefully considered, with a determined focus on ‘job readiness’, says David Taylor, Head of the African Institute of Financial Markets and Risk Management (AIFMRM) at UCT. AIFMRM has just launched a new Master of Commerce degree that was developed following several years of collaboration with industry. Taylor says that specialised master’s programmes of this kind that are structured as apprenticeships and are coordinated by both industry and universities should become “a matter of course” if the country wants to get to make headway in bridging critical skills shortages.

And what about those who don’t wish to study further after school? It’s just as important to invest in functional internships for artisans, particularly in the building trade. South Africa has a shortage of tradespeople and artisans, and currently the average artisan is bordering on retirement age. Who, when the current generation retires, will build the infrastructure for the next generation’s dreams and developments? Functional internships and career guidance from the appropriate businesses are essential here.

Schools can play an important guiding role here too, in helping young people decide which avenue they want to pursue after matric. The focus at schools should also be on job readiness, argues Nicky Sheridan, CEO of Christel House. Christel House uses a holistic approach to service learners from severely financially disadvantaged backgrounds. Its focus on creating jobready graduates includes driving the development of ‘soft skills’ to increase employability and running an entrepreneurship programme in the school.

The school does this with the assistance of corporate donors, such as Dell and MTN and Sheridan, who is the former head of Oracle South Africa, is a big advocate of the role that business can play in supporting interventions that work at school level.

Beyond the school walls, there is also much that business – in partnership with local government – can do to create enabling environments that will prepare learners to become economically active citizens. The Western Cape Government Smart Schools project – a R1.2 billion initiative that will link schools in the Western Cape through a high-speed, real-time wide area network (WAN) and include the provision of local area networks (LAN) as well as the building and refreshing of computer laboratories is a case in point. With any luck, this will provide school leavers with facilities that will not only drive greater computer literacy, but also enable easier job applications and communications.

If we are to really create a country that our youth can be excited to be part of, a realistic outlook is essential. We will need more education options – certainly – more access to the right kind of education or training and more funding opportunities as well as more support for young people to develop the right skills to become economically active.

The challenge is immense and the reality is that at this stage, however little we may like it, the taxpayer cannot continue to foot the bill on his/ her own. Business has a hugely impor tant role to play as a par tner in this process – and many are already heeding the call. They should be applauded for it, as our collective future really does depend on turning the numbers around: lower youth unemployment plus a lower skills gap will equal the healthier economy that we all so desperately want.

The GSB, with its reputation for academic excellence, relevance, and purpose firmly established, is widely regarded as the leading business school in Africa. Yet, as an emerging market business school, its location at the V&A Waterfront is far from representative of the reality of the vast majority of South Africans.

Over the past five years, the school has built numerous partnerships and piloted several initiatives to cultivate an environment that tries to bridge this gap; spaces and programmes where individuals with innovative ideas can understand, build and develop solutions that are relevant for Africa. Now it is moving these one step closer to the realities of an emerging market with the establishment of a permanent base in Philippi Village – a mixed use, 6 000m2 entrepreneurial development zone at the epicentre of Nyanga, Gugulethu, Mitchell’s Plain and Khayelitsha.

Spearheaded by the GSB MTN Solution Space and the Bertha Centre for Social Innovation and Entrepreneurship, the Philippi Campus is the first community campus to be established by UCT in its 178-year existence. While the university has been active in township communities, with field sites, mobile health services and education programmes for decades, it has not, until now, established a presence with the long-term purpose of getting all students and stakeholders to engage and interact beyond the traditional spaces of the university.

It is, in many ways, a bold step into the unknown that has to be taken with a considerable amount of humility. As a university, traditionally the ‘expert’ voice, we know in this instance, we do not have all the answers. And quite honestly, no-one knows how this will turn out.

The reality is that we live in a thoroughly divided country and city from a geographic perspective, and that creates a divide in understanding, in connections, and in networks. For many Capetonians, it can take more than 90 minutes to make their way to the school’s Waterfront campus by means of unreliable public transport to attend class or listen to a talk. The aspiration for our Philippi campus is to bridge this physical divide, certainly, and by so doing, to create a space where conversations can take place that are natural and authentic, and based on real relationships and a real understanding.

This may be difficult and uncomfortable at times – in fact, this will definitely be difficult and uncomfortable at times. But in business schools today we teach our students about the importance of learning to get comfortable with uncertainty and paradox in a complex and fast changing world – and to trust that solutions will emerge. Here at Philippi we will get to practice what we preach. Staying with and working with discomfort, we believe, will be a crucial part of forging a new reality for business and society from the ground up. As Richard Heeks proposes in his ladder model of inclusive innovation, we are seeking to move beyond inclusion of intention and consumption, where inclusive innovation seeks to address the needs and wants of an excluded group, towards inclusion of impact, process and structure, where the excluded group(s) are more actively involved in the development of the innovation and whose livelihoods are therefore more directly impacted. Philippi Village, as a development, was initiated more than five years ago with the vision of creating economic opportunity through the active inclusion of those who are excluded from the mainstream of development, and the GSB has been involved in these conversations from the outset. The founding sponsor of the Bertha Centre at the GSB, the Bertha Foundation, is one of two founding partners in the initiative; the other being a Cape Town-based NGO The Business Place. And already our students are actively engaged in working with businesses in the community. In 2016, almost all students at the school across most academic programmes will have done at least one course on the Philippi campus.

Now as we prepare to formally take our place in the community, the question that is driving our activities is how do we, as a business school, contribute to that larger vision of integrated socio-economic development? As a business school, we have a clear sense of where our strengths lie and what we have to offer in terms of understanding business and the mechanisms of business through teaching, research and engagement. But can we bring our knowledge and networks to bear where they are needed most? Can we genuinely co-create new business models that are inclusive, that empower people and communities and that have the power to shift the system?

We don’t know, but we do know that we want to try.

Right now, South Africa is at a difficult crossroads. Paradoxes abound and challenges are mounting around us. In that context we want to be a business school that is relevant and engaged, and that makes a difference in society. We can do that through developing learning programmes that produce socially conscious graduates with a new approach to doing business. We can do it through ensuring our research, undertaken by students and faculty, is both relevant and has a positive impact on society, and we can do it by creating greater access to critical business skills and support to build entrepreneurs from the ground up. But more than that, we also need to be prepared to step beyond our traditional roles of thinking and reflecting, to take our place as actors in society where we can play a role in catalysing an enabling ecosystem for inclusive development across sectors.

And while universities are not necessarily the most entrepreneurial and innovative of organisations in and of themselves, we need to be willing to take some risks, to, in effect, ‘innovate’ ourselves. We teach our students to challenge the rules and the status quo of power and exclusion by building new products, processes and models that deliver greater social value and also shift belief systems, cultures, behaviours, flows of resources and positions of authority. If we are teaching these approaches to our students, why should they not also be applied to higher education institutions themselves?

We cannot afford to be paralysed by paradox. We believe it is more important to try new approaches – even if they fail. And it is in this spirit that we take our place in the community of Philippi Village. We want to be the change the system so desperately needs.

The establishment of the Philippi campus would not have been possible without support and involvement of key sponsors including MTN (in its role as the sponsor of the MTN Solution Space); the UCT Vice-Chancellor’s Strategic Fund; and the Flanders Government funding for building a social economy, and the Bertha Foundation.

According to the Africa Progress Panel – 2015, on current trends, it will take until 2080 for every African to have access to electricity.

In spite of this rather gloomy prediction, lights are switching on across the continent, thanks to the ingenuity of energy entrepreneurs and their funders. While more than 600 million people in Africa lack access to clean, safe and affordable energy, innovations in solar technology, mobile payments and distribution models are increasingly enabling greater levels of affordable access. In support of these innovations, the industry has seen committed capital of at least US$30 billion over the next five years from public and private funders – all focused on Africa for access to energy. However, access to finance remains the number one restriction to scale, according to energy access enterprises.

To grapple with this challenge, a new report by the Bertha Centre for Social Innovation and Entrepreneurship at the GSB and the Worldwide Fund for Nature South Africa, with support from the Wallace Global Fund, set out to explore innovative finance solutions for the industry. The research was based on workshops and consultations with more than 100 industry representatives across the continent.

MARKET OPPORTUNITY IN OFF-GRID ENERGY

Although the majority of mainstream efforts focus on large-scale infrastructure development, much of Africa’s potential lies in the off-grid space, which is currently being tapped by so-called energy access entrepreneurs. These entrepreneurs leverage the current momentum behind local, decentralised, renewable energy solutions, particularly solar technologies, such as microgrids, solar home systems (SHS), and intra-household or ‘picosolar’ systems. For solar home systems and picosolar products, Kenya, Tanzania and Ethiopia made up 66% of the sales in Africa in 2015, with Rwanda and Uganda generally regarded as the next emerging frontiers. Bloomberg estimates suggest that the market could be worth US$3.1 billion by 2020 – reaching almost 100 million households.

POWER-FULL BUSINESS MODEL INNOVATIONS

The market opportunity has spurred innovative business models, such as M-Kopa and Off-Grid Electric, that allow people to pay-as-you-go (PAYG) for their solar products. Over the last five years, the PAYG model has become the popular enduser financing model. PAYG customers pay a small deposit for a solar system to be installed in their homes. They then make smaller regular payments over time, usually through a mobile payment system, to pay for either the energy used or ownership of the system.

Beyond PAYG models, other companies are thinking equally creatively about the consumer financing component by tapping into either government resources or collaborating with corporates. The iShack project in South Africa builds their model to be in sync with existing national energy access strategies and integrates the mandated Free Basic Electricity subsidy into their end users’ payment model.

Solarus, an international renewable energy technology company, is currently testing another interesting business model in South Africa. To extend their off-grid energy solution to lower income customers who may not be able to afford the installation cost, Solarus is collaborating with a hotel in South Africa to roll out the Hotel Staff MPower Project. The hotel will finance the up-front installation costs of the systems to up to 600 employees’ homes. The employees repay the cost of the installation at an affordable monthly rate to the hotel.

COMMITTED CAPITAL – AND ITS LIMITS TO SCALE

The UN’s Sustainable Energy for All (SE4All) initiative, estimates that annual investments of US$48 billion are required to reach universal access. USAID’s Power Africa is one initiative driving these commitments, which has identified more than 43 private sector investors and practitioners who have committed US$1 billion to emerging energy access enterprises over the next five years through the Beyond the Grid initiative. But while momentum is building and large amounts of capital have been committed, energy access enterprises find that the types of capital and investment terms often do not match the enterprises’ needs and capabilities and that access to finance remains the n umber one restriction to scale.

Traditional financing through commercial banks or commercial lending institutions has not been a viable option for many of the energy access enterprises. The inability to predict future cash flow from sales, the actual return on investment per product sold, the lack of customers’ credit history and, often, the informal economy within which these businesses operate mean they struggle to access finance. Enterprises and entrepreneurs highlighted that: 1) there is an increasing need for local capital for (local) entrepreneurs; 2) that seed funding remains a challenge; 3) that working capital is one of the most significant financing gaps, particularly for enterprises offering PAYG solutions to their customers; and 4) that funding for logistics and distribution often goes ignored.

INNOVATIVE FINANCE SOLUTIONS

From Nairobi to Cape Town, interview respondents and roundtable participants urged the industry to come together to increase coordination and develop innovative finance solutions. Recommendations for different capital providers include:

Grant providers: In order to scale, the industry will need continued grant funding and concessionary capital along with better integration into the investment cycle. This concessionary capital will likely be necessary for proof of concept for early-stage ventures. Apart from directly seeding early-stage ventures, grant capital can be catalytic in opening up new, untested markets for the larger energy access companies, thereby enabling them to expand faster than otherwise possible. An impactful example is the use of result-based finance (RBF) in Tanzania, where companies are incentivised to go into harder to reach, high impact areas. “This incentive is exactly the kind of support we need to rapidly expand energy access to the customers who need it most,” says Xavier Helgesen, CEO of Off-grid Electric. “We believe it is an ideal model because it accelerates the market without distorting it …”

Local banks and other financial services providers: For companies that rely on cash sales and provision of devices to end-customers on a PAYG basis, working capital is a critical component to operating and scaling a business. Local banks potentially have a catalytic role to play in deploying much-needed debt financing to energy access enterprises. However, they remain relatively hesitant to lending based on cash flows, especially to early-stage companies in a sector most banks are not familiar with. One emerging alternative comes from digital finance, such as online lending marketplaces, which can be suppor ted by international impact investors, local institutional investors as well as retail investors. Through an online marketplace, the transaction cost of SME investing is reduced and automated. One such platform, which is blending institutional and retail investments, is Rainfin, launched in 2012 as South Africa’s first online lending marketplace. Models such as this have potential to fur ther leverage capital from institutional and retail investors.

Impact investors: Not surprisingly, investors generally did not second the notion that access to finance is the key challenge. For impact investors targeting market-rate return, the key challenge reported is a lack of investable deals. To mitigate this, impact investors are increasingly working with energy access enterprises to test new models such as securitising PAYG portfolios through bond structures. This is being explored by BBOXX, a London-based solar innovator, which aims to raise US$2 billion over the next five years to turn solar into an asset class and create contracts for thousands of solar rooftop arrays to sell as bonds to investors – ultimately demonstrating that it is possible to lend on the basis of future receivables from the solar home system contracts and the securitisation of the unbanked.

Thanks to the ingenuity of energy access entrepreneurs, such as M-Kopa, BBoXX, Solarus, and iShack, as well as the funders they partner with, the future is increasingly looking bright across the continent as millions of people are accessing off-grid energy.

National interest still trumps friendship in international relations. The notions of solidarity that were popular among developing countries in the 1950s and the 1960s have no resonance in 21st century diplomacy, which is largely driven by commercial considerations. Many developing countries still view the advent of rising powers – some of whom were part of the Third World movement known as BRIC (Brazil, Russia, India and China)* that positioned itself to counter imperialism – as offering promise for development progress. However, BRIC countries are not primarily driven by Africa’s development concerns, but are seeking to fulfil their own commercial interests, as well as to use Africa as an avenue for shoring up their international legitimacy and credibility.

Undoubtedly, economic incentives form a core element of each of the BRIC countries’ interests in Africa. These countries share a common desire to gain access for their goods and services to the burgeoning consumer markets in Africa. With a combined population of over 900 million, and evidence of gradually increasing levels of household spending, Africa is viewed as a potentially profitable and largely untapped frontier for investments and exports of manufactured commodities. To be sure, Africa is viewed as an underdeveloped market for low-technology, but also cost-effective manufactured goods and services. Furthermore, Africa also presents an opportunity for the BRIC countries – China and India in particular – to access markets like Europe and the United States, due to the preferential access into those markets granted to less developed countries, especially in the case of textiles and apparels.

In particular, the growth of the ‘middle class’ has become the key narrative of Africa’s resurgence. With African countries experiencing rapid economic growth, combined with rapid urbanisation, the middle classes are projected to expand, with an accompanying youth bulge in urban centres. This potentially acts as a magnet for external actors, such as China and India, to tap into this growth dynamic. Fast-moving consumer goods are especially targeted, since this rising middle class will presumably consume ever-larger quantities of goods and services. Urban centres also require services infrastructure, such as banking, telecommunications, energy and transportation, in ways that build linkages with physical infrastructure development – another important area of opportunity for the BRIC countries. Already, mining, agriculture and infrastructure projects are at various stages of development and completion across the continent, and companies will need to provide a range of goods and services to fill the growing demand, especially for capital inputs. Add all this up, and Africa’s developmental needs are likely to drive a virtuous cycle of expanding demand, employment creation, trade and fiscal revenue generation for decades to come as the demographic dividend plays out. Recognising this, each of the BRIC economies has devoted significant attention towards penetrating the African export markets in a way that best fits its national economic interests. In the case of China, Africa represents a ready market for Chinese manufacturers. While its imports are dominated by raw materials, China exports primarily finished products to Africa, including a range of machinery, textiles and electronic items. In this respect, China has been quick to recognise the market potential in Africa, which it sees as a prime market for low-cost electronic and consumer goods as well as exports of light manufacturing, agro-processing, apparel products and communications and other services. Even though there has been a gradual shift in China’s commercial foray into Africa, especially outside of the resource-rich economies, broadening out to services and manufacturing, the security of supply of natural resources remains the thrust of China’s commercial diplomacy on the African continent.

Consider, for example, China’s trade relations with sub-Saharan African countries. While China overtook the US as Africa’s single largest trading partner in 2009, with the value of trade topping US$126,5 billion in 2010, much of the two-way trade has been skewed in China’s favour. The only exceptions to this general rule are resource-rich countries, such as Angola, the Republic of Congo, the Democratic Republic of Congo, Zambia, and Equatorial Guinea, which have sustained trade surpluses.

Indeed, as much as 87% of China’s exports to Africa consist of equipment and machinery, textiles and clothing and other manufactured products. China is also interested in Africa’s labour market. Africa boasts a large reservoir of untapped labour resources, making it an ideal location for China’s labour-intensive industries. To reform its current development model, China needs to outsource and relocate its labour-intensive industries, as well as low-skilled jobs to Africa, while developing more capital-intensive, high-tech industries within China. The rising labour costs in China have made the need for reform increasingly urgent, and forced many Chinese manufacturing enterprises to relocate production to cheaper destinations.

Africa also represents an important market for China’s arms sales. Following the end of the Cold War, Chinese weaponry began to penetrate the African markets, replacing the Soviet Union, by offering lower priced weapons and ammunition. Between 2003 and 2006, Chinese arms exports to Africa were the third largest of all countries.

Similarly, Brazil’s growing presence in Africa has been motivated by strong commercial diplomacy considerations. It is no coincidence that Brazil, for example, has been actively engaged in several countries in which both China and India have been scouring for commercial opportunities. Brazil has not been merely focusing on Lusophone countries, even though the bulk of its relations have been with these countries, in particular Angola and Mozambique. Brazil sees Africa as a key consumer market for its manufactured goods, and sees the expansion of exports of manufactured products to Africa as a means to stave off de-industrialisation. Brazilian exports to Africa, which include many agricultural products, together with manufactured and semi-manufactured goods, are far more diversified than its imports from the continent. As of 2012, manufactured products accounted for 42% of Brazil’s total exports to Africa. Brazil has a growing commercial footprint on the African continent. Even so, despite Brazil’s desire and efforts to grow its commercial and financial relations with Africa, trade remains relatively low and is confined to the Lusophone countries, notably Angola and Mozambique. Beyond the Lusophone countries, the country has an economic presence in countries such as Ghana, Gabon, Nigeria, Senegal, Kenya, Ethiopia, Namibia and South Africa. Companies such as Vale (mining), Odebrecht (infrastructure), Petrobas (oil) and Embrapa (agriculture) are iconic Brazilian companies that are making a mark on the continent.

For its part, India’s economic interest in African countries has also been propelled by a desire to access the continent’s sizeable and largely untapped export markets. At present, India’s manufactured products represent about 51% of its total exports to Africa. Indian firms have been particularly keen to improve the penetration of electrical and electronic products and automobiles in African markets. The Indian government has invested heavily in key industries in Africa, such as telecoms, consumer manufacturing, automotive and resources.

Trade and investment have also been important drivers of Russia’s foray into Africa. In 2012, total trade between Russia and sub-Saharan Africa amounted to US$3 billion. Russia’s focus has mostly been confined to tapping into markets within Africa’s minerals and energy sectors. Russian companies have also broken into such markets as science, engineering and arms. The arms trade, in particular, has been a crucial aspect of economic relations between Russia and Africa. Arms exports from Russia to the world reached US$13 billion in 2011, with 10% of those destined for North Africa (especially Algeria) and 7% to sub- Saharan Africa.

South Africa is one Russia’s key African trade partners. In 2002, bilateral trade totalled US$138,1 million, and grew to almost US$1 billion in 2012. Major Russian companies operating in South Africa include the Renova Group (exploration and production of manganese ore), Norilsk Nickel (production and mining of nickel) and the Evraz Group (production of vanadium and steel). Through the state-run nuclear company, Rosatom, Russia has been focusing on ramping up its supply of nuclear reactors to African countries. This includes South Africa, which is believed to be a frontrunner for the procurement of 9 600 MW of nuclear energy, and Egypt for the construction of four nuclear reactors at 1 200 MW each. In March 2015, Rosatom and the Nigerian government signed a cooperation agreement for the design and construction of four nuclear reactors at a total cost of US$20 billion. Furthermore, Ghana has concluded a cooperation agreement with Rosatom on the peaceful development of nuclear energy. Aside from exporting their goods and services to Africa, a yearning to gain access to Africa’s natural resources is another key driver of the BRIC countries’ involvement on the continent. The abundance of natural resources in Africa has piqued the attention of the BRIC countries, both for their own economic interests, but also for reasons of energy security. As the BRIC countries industrialise with unprecedented speed, their fast-growing economies demand increasing supplies of oil, gas, timber and other natural resources to fuel development. Africa, with rich reserves of minerals and raw materials, is a key source of these supplies. In the case of both India and China, in particular, Africa is critical as a source of natural resources and raw materials, especially oil. Due to its limited exposure to the world’s main conflict zones, its general openness to foreign participation, and high quality, African oil supplies are of considerable strategic importance to these countries. China became a net-crude oil importer in 1993. Today, it is the second-largest consumer of oil in the world and around 25% of its oil imports come from Africa.

Africa is regarded as a key source of natural resources to serve as inputs into production and to fuel China’s energy needs, while also serving as a market for Chinese exports, all of which are key to China’s continued economic growth and development. Indeed, large-scale economic development in China is increasingly throttled by the depletion of domestic energy reserves and natural resources, meaning that access to much-needed natural resources is a key element of China’s relationship with African countries. At the same time, China is also attempting to reduce its dependency on the Middle East to fuel its energy needs. China’s internationalisation strategy has balanced investments in the financial sector and technology acquisitions in the West with expansion into, what was in the past regarded as peripheral economies, in Africa. It is heavily engaged in the African economies across energy, agriculture, finance, and telecommunication sectors.

For its part, India needs to import 90% of the crude oil and natural gas required to feed its industrial appetite. The International Energy Agency predicts that India’s oil dependence will increase from 2,1 million barrels a day in 2007 to 6,6 million barrels a day in 2030. As the world’s fifth-largest consumer of energy, India is keen to match its needs with Africa’s growing production output. Deepening relations with Africa – especially oil-producing countries, such as Nigeria and Sudan – has been crucial to India’s energy security considerations.

In contrast to India and China, Brazil’s involvement in Africa is less motivated by natural resources needs. Brazil is not reliant on imports of natural resources from Africa, as it is a natural resource-abundant country itself, with ores, oil and fuel products contributing a significant share of the country’s total exports. Instead, the resource-based specialisation of Brazil’s large-scale enterprises is central to the country’s activity in the resource sectors of African countries. Since Brazil does not need to secure energy and resources overseas, the presence of companies, such as Petrobras, in foreign markets derives from a desire to internationalise and diversify its markets. In this sense, the Brazilian state-owned oil company Petrobras and the mining company Vale are, “deeply involved in the extraction of Africa’s resources”, and oil and other natural resources account for almost 90% of Brazil’s imports from Africa. Having operated in the oil-rich African states of Angola, Benin, Gabon, Nigeria and Senegal, Petrobras is regarded as a key actor in fulfilling the Brazilian state’s ambition to secure oil supplies.

Akin to Brazil, accessing natural resources is not central to Russia’s interests in Africa. Internationally, Russia is an important producer of minerals, oil and gas. In 2012 alone, natural gas and oil contributed close to 30% of Russia’s gross domestic product and accounted for nearly two-thirds of total exports. Simply put, Russia does not have the same need as China, or even India, to purchase natural resources. That said, Russian companies are striving for increased access to the mineral wealth of countries across the continent. The financial crisis of 2008 exposed the extent to which Russia relies on oil and gas to support growth, and encouraged the Russian political and business elites to look towards the abundant energy reserves available in Africa.

Russian imports from Africa include, among others, manganese, chrome, nickel, zinc, lead and bauxite. More than 30 large Russian companies are involved in the development of Africa’s natural resources projects. In South Africa, Russia aims to control nearly half (45%) of South Africa’s uranium enrichment market. Russia also hopes to use South Africa as a springboard from which to establish a competitive position in Africa’s natural resources sector, focusing particularly on the extraction of nickel, chromium, diamonds, zinc and cobalt.

The above analysis illustrates that the contemporary era of global diplomacy has witnessed growing and intense political and economic competition, not only between developed and developing countries, but also among developing countries. It reveals that the booming presence of the BRIC countries in Africa is driven by these countries’ national interest, and the notion of a collective interest of the Global South is largely a misnomer in contemporary international political economy.

There is no doubt that the BRIC countries, especially China, are redefining and will continue to influence the African continent’s global geo-political positioning, while also redrawing its economic landscape. It is hard to predict how relations between these countries and Africa will develop in the future. Yet it is clear that they will be largely shaped, not only by the evolving political and economic forces in Africa, but also by the changing international and domestic policy priorities of the BRIC countries.

* South Africa is excluded from this analysis as the focus of the article is on how the non-African members of the BRICS formation pursue their commercial strategies on the continent.

Africa has big development aspirations that call for substantial financial resources, but a key question remains: where is it going to get the money from?

In recent times, there has been a sharp slowdown in the global economy, which has made it even more difficult for Africa to access international financial markets. At the same time, private investors have also been discouraged from investing in the continent in part, because most low-income countries do not have sovereign credit ratings that are up to investment grade, awarded by international rating agencies.

With access to capital becoming tricky, a recent United Nations report on economic development on the continent advised African governments to find new ways to finance development. Between US$600 billion and US$1.2 trillion will be needed each year to achieve the sustainable development goals in Africa, according to the UN Report, subtitled Debt dynamics and development finance in Africa. This equates to about one third of some countries’ gross national income, meaning that public budgetary resources, official development aid and external debt are unlikely to cover those needs. The conclusion? Development partners will need to share the burden.

With serious constraints on public finance both in Africa and in donor countries, development finance institutions (DFIs) therefore are poised to assume a prominent role in terms of financing development and supporting Africa’s infrastructure needs.

According to Professor Nicholas Biekpe, who heads up the newly established Development Finance Centre (DEFIC) at the GSB, national and international DFIs are specialised development banks or subsidiaries set up to support government and some private sector development programmes in developing countries. In essence, DFIs invest in areas where commercial investors or banks would be reluctant to venture.

Local DFIs can play a key role in mobilising resources for underserved segments of the economy, including entrepreneurs and smallholder farmers. From this perspective, they can complement international financial institutions and commercial banks, says Biekpe.

“DFIs … aim to have a developmental impact in the markets in which they invest, alongside the requirement for sustainable returns. They are typically majority-owned by national governments and source their capital from national or international development funds or benefit from government guarantees,” says Biekpe. This, by and large, guarantees their creditworthiness, which makes it possible for them to raise significant amounts of money on international capital markets at low rates and provide financing on very competitive terms. The finance provided by the DFI is also intended to act as a catalyst to attract and mobilise the involvement of other private investors.

Some of the major international DFIs investing in Africa include the World Bank’s International Finance Corporation (IFC) and the European Investment Bank (EIB). There are also several African DFIs, the largest of which is the African Development Bank. The New Development Bank (NDB), also referred to as the BRICS Development Bank, is another prominent and more recent player. Created in 2014 by the BRICS member states (Brazil, Russia, China, India and South Africa), the main objective of the bank is to establish an alternative to the current set of multilateral institutions as a source of development finance for emerging and developing countries.

But while the institutions are well developed and active, Biekpe says that the record of DFIs in stimulating economic growth has not always yielded the desired results in Africa and other developing regions.

In a 2013 working paper for the African Development Bank group, Pietro Calice says that African DFIs have historically played an important developmental role, taking higher-than-average risks to perform their mandates and reducing credit pro-cyclicality. But, notes Calice, the track record of African DFIs is mixed, and their developmental contribution has frequently come with a cost in terms of relatively low efficiency and effectiveness. According to Biekpe, clear and focused mandates, robust corporate governance standards, ‘acceptable’ level of government control, appropriate lending and risk management technologies, and the ability to recruit and retain qualified staff, are some of the key ingredients for an effective DFI that will ultimately contribute to economic and social development.

In the face of the huge developmental needs of the continent, there are strong reasons for African policymakers to continue strengthening and modernising local DFIs, giving them the tools to better fulfil their policy mandates, notes Biekpe.

“Additionally, there is no question that African governments should not continue to depend on the Bretton Woods Institutions – the World Bank and the International Monetary Fund (IMF) – which have their own agenda based on Western interests,” says Biekpe.

He says that the recently launched Development Finance Centre at the Graduate School of Business seeks to address some of these issues within the development finance sector. “Establishing such a centre in Africa is vital for improving the functioning of these institutions which, if managed properly, can be central in the development of the continent. Among other goals, the centre seeks to improve the efficiency of the DFIs, and bolster the production and publication of research related to development finance. Despite a growing literature looking at the impact of individual investments and projects on development, gaps still remain in the research of both the micro and the macro impact of DFIs and indeed their inner workings. What is also lacking is the relevant professional capacity in development finance.” The centre will seek to bring together development finance practitioners from all over the world to encourage knowledge sharing, and promote the public understanding of development finance.

“Very often, development finance institutions have been criticised for being inaccessible to poor communities on the ground, the people most in need of their help. Improving the visibility of DFIs is, therefore, crucial if we are to make sure that they remain useful tools to promote investment and growth in poor countries and communities,” says Biekpe.

The Master of Commerce Degree in Development Finance, hosted by the centre, also plays a key role in terms of honing skills that can help DFIs perform optimally. Furthermore, because many African countries will increasingly become dependent on the DFIs to meet their developmental needs, it is important that they are staffed by people with an in-depth understanding of how these institutions function.

“It will be crucial for the continent’s future to build efficient, sustainable and well-functioning local DFIs that understand the needs of Africa and its people, and that will be able and willing to bridge the financing gap faced by the credit-rationed sectors,” concludes Biekpe.

Around the world, youth populations are growing, while resources and economic opportunities shrink and inequality worsens. We’ve known for a while that the old ways are failing us, and nowhere is that more true than in the world of education.

Training institutions are having to dig deep to come up with strategies to overcome their limitations and find new ways to provide hope and advancement to their students – enabling them to go on to access real opportunities and engage meaningfully in economies – to get, in short – their slice of the pie.

Not to do so invites disaster. In South Africa, we see this playing out in the #FeesMustFall and other youth protest movements including the #ThisFlag protests north of our borders. These movements herald a growing tide of dissent and dissatisfaction among the youth with the status quo. You cannot exclude the majority of young people from the mainstream economy forever and expect them not to react.

The uncomfortable fact is that young Africans are three times more likely than adults to be unemployed and many more are trapped in menial jobs by poor or non-existent education. A UNESCO study found that the number of African children and adolescents who are out of school is on the rise, and grew to 124 million in 2013.

Entrepreneurship has long been trumpeted as a solution to economic marginalisation. The (slightly patronising) narrative goes something along the lines of “teach a man to fish and you feed him for a lifetime”. But the reality is that teaching someone the techniques of running a business is only a fraction of the matter. Knowing how to balance the books is not enough to create an entrepreneur – especially when you are engaging with a marginalised young person who may not have been equipped with even basic skills such as time management.

The challenge therefore is to find a way to ‘teach’ entrepreneurship that also transforms the individuals involved.

At the Raymond Ackerman Academy, a specialised unit at the UCT Graduate School of Business, we have been grappling with this for more than a decade and the centre has emerged as a leader in this field. In 2013, it was recognised as one of a handful of institutions around the world engaging in pioneering work to put young people on a path to sustainability and was awarded a prestigious Youth Economic Participation Initiative (YEPI) demonstration grant from the Tufts University Talloires Network to expand and deepen its impact and, importantly, to research the critical factors of the model with a view to scaling these up globally.

Ross VeLure Roholt, an associate professor at the University of Minnesota specialising in youth development and one of the YEPI programme learning partners, says that the RAA is “doing something better than many” in reaching beyond the disciplinary community of the university and bringing the knowledge that it is creating to bear on the lives of young, aspiring entrepreneurs. The RAA was established 11 years ago with funding from Raymond Ackerman – one of SA’s most respected entrepreneurs. Its vision is simple enough: to offer unemployed and under-resourced youth an opportunity to develop an entrepreneurial mindset and explore and realise their entrepreneurial vision through an intensive, holistic, six-month training experience that is heavily subsidised. In recent years, the academy has expanded its offering and now includes a thriving Graduate Entrepreneur Support Service (GESS) that works with graduates of the six-month programme who are now running their own businesses.

An adjective that comes up often in relation to what the academy does is ‘disruptive’. According to VeLure Roholt, we do several things very differently to the norm. To start with, understanding that we are doing more than teaching people to fish, we take a very personcentred – and personal – approach. We invite our students and graduates to look at themselves before they look at the business they want to start or work in. They are invited to answer the somewhat awkward question of “Who are you?” as a person; as an entrepreneur; as a citizen. We also develop a lot of soft skills, because we’ve seen that when you build character and confidence – and get people to articulate a sense of purpose – they are that much better equipped, and more enthusiastic about travelling the entrepreneurial journey.

Our second disruptive intervention is to build an entrepreneurial support system around students that is notable for its breadth and depth and provides a powerful source of support and connection. This system consists of access to professional services, grant funding and personal and business mentoring. RAA graduates on the GESS initiative receive individual mentorship and also benefit from group mentoring from their peers.

The RAA’s close connection to the GSB and the Raymond Ackerman Foundation are, of course, wonderful resources and allow students and graduates to leverage off these facilities and connections.

This is something that is very close to our benefactor’s heart. One of Raymond Ackerman’s daughters recently described her father as a builder of bridges. “He is a leader who has striven to develop connections and links between people of different backgrounds; to create bonds that look past colour, language, ethnicity or religion …”

And our support system extends well beyond what is considered usual to include the provision of a small monthly stipend to help with buying the essentials like data, electricity and food. This has proven vital in taking some of the pressure off young business people in the early stages of their ventures. As anyone who has travelled the entrepreneurial path can attest, things in the early days can be tough and money is almost always scarce.

Our students are taught to think differently too. The RAA’s pedagogical model is based on the principles of public engagement; experiential learning; and critical thinking and it makes our students step into new roles. The focus is on building in each of them an entrepreneurial mindset. They are taught the skills of ideation and critical thinking and are empowered to recognise characteristics such as resilience. The expectation is that they will fail and that this should not deter them. Students quickly come to learn that we are less interested in where they came from and what they lack in life and more in where they are going, and what they can achieve. We empower them not to see limitations and challenges – but opportunities.

As Wadji Abrahams, the facilitator of the GESS programme says: “If you change the way you look at things, the things you look at change.”

But in the end it is not one approach or another that makes the difference, it is the combination of them all. We also believe that to build entrepreneurs we, the team behind the programme, need to act like entrepreneurs ourselves.

It takes passion, energy, compassion, commitment, risk taking, determination, flexibility and optimism to create and deliver programmes that foster those same characteristics in the aspiring participant entrepreneurs. What we have learned along the way is that transformation is not a one-way street or a once-off intervention – it is a relationship, a journey and it takes time.

To create impact; people and relationship hold the key. Through this approach, we have witnessed many lives changing before our eyes as young entrepreneurs turn ideas into reality and start to provide for their families. And this transformation is perhaps best summed in the words of one entrepreneur who told me simply: “The Raymond Ackerman Academy helped me discover the person that I am; it has taken me from italic to bold.”

At a recent panel discussion at the GSB, I argued both for and against divestment: the broad principle is sound, but its application needs more sophistication.

The divestment campaign is part of an activists’ strategy to bring about reductions in greenhouse gas emissions. It counteracts an entrenched economic and institutional system with vested interests. Fierce resistance is to be expected.

Historical analogy can be helpful in this regard. Consider the abolition movement opposing slavery. The moral case for countering climate change is arguably similarly strong. Resistance to this movement also highlighted the expected economic costs. As it happened, abolition gave rise to innovation and economic advancement. (Though it’s also worth remembering that slavery is still with us, albeit less overtly.)

This analogy helps counter claims that investment decisions are not political, as argued by the president of Harvard. It is disingenuous to say that investments are made purely for economic reasons, as long as they are legal. Laws change, and norms play a role too. Just because slavery was legal does not mean that it was morally or economically right.

A second argument against divestment is that it will lead to reduced returns and higher risks for the investors and lower economic growth. The abolition experience is telling in this respect too; reliance on fossil fuels breeds the kind of intellectual laziness that slavery once did. Freeing ourselves from this laziness can unleash much more creative and potentially exponential gains from renewable energy and other technologies and innovations.

Some point to the specific South African circumstances, but even in a small market like South Africa, alternative companies can be added to the basket to maintain risk-adjusted return prospects. The economic foundation for divestment is further strengthened by a glut of fossil fuels, as evidenced in low prices, which will only grow when the Paris agreement is translated into targets in 2020.

A third counter claim is that divestment won’t make a difference; there will always be others who will take your place to invest in fossil fuel companies. But of course this depends on the proportion of participants, which is rising rapidly. More importantly, it is not primarily the economic impact on the fossil fuel industry that matters – it is the symbolic impacts, the stigmatisation. Some belittle symbolic impacts, but they can be very important. For instance, ask Shell about employing skilled engineers after the Brent Spar and Saro-Wiwa debacles in the 1990s.

So there is a compelling moral economic, and environmental case for divestment. However, the current approach of the divestment campaign is misguided. To paraphrase Einstein, it is trying to make things as simple as possible to enhance its impact, but in so doing it is making things too simple. Climate change is a complex problem and focusing on just one lever of change while disregarding the broader picture can be detrimental.

For a start, an important part of the divestment movement’s simplification process is to target a specific group of ‘fossil fuel companies.’ But where would you legitimately draw the line? It will necessarily involve some arbitrary choices. Moreover, divesting from oil companies will probably mean investing instead in, say, banks, which then pass the money onto those same oil companies. A more inclusive, holistic approach to strategic change in a broader range of businesses (especially finance) is required.

Second, there are likely to be unintended consequences, including possible job losses, especially if divestment decisions are implemented abruptly. Companies and sectors need to be given signals that changes are going to be made over a specified period, so that adaptations can be made as much as possible. Such adaptation will include, for instance, reskilling of workers.

Third, despite clear signs of unscrupulous behaviour among some of the targeted energy companies, it is unhelpful to paint companies with a single brush. Specifically, investors lose influence when they divest from one day to the next. As part of a gradual divestment strategy, an active shareholder engagement approach should be applied to cajole companies – those identified as ‘fossil fuel companies’ and others, especially banks – into making a broader array of shifts.

Finally, any organisation opting to include divestment into its strategy must get its own house in order. It would be hypocritical of UCT to divest from oil companies without making much more committed changes to energy consumption and generation on campus and members’ travel arrangements.

In sum, UCT and others should develop a hybrid approach that connects an active shareholder engagement strategy with clear expectations on a range of key social, environmental and governance issues. The parameters for such engagement exist in the form of the UN Principles for Responsible Investment, to which we should subscribe. But this engagement needs to be beefed up with much clearer expectations, especially on greenhouse gas emissions, and if such targets are not met, we shall withdraw funds. Moreover, we should do all this not just in a transparent manner, but vocally, so that our message is loud and clear: our research shows that current responses to climate change are too meek and we’re putting our money where our mouth is.

ONE of US President Barack Obama’s lasting legacies will undoubtedly be his “My Brother’s Keeper” initiative, which he launched in 2014.

Obama, whose term of office will end in January 2017, has framed the project as a call to action for every American to take responsibility for the youth and to recognise that “my neighbour’s child is my child”.

Many have responded to his call, announcing a range of new initiatives to address the challenges facing youths, especially black youth. And although it is too early to gauge how successful the movement has been, early indications are that it has been well received. At the very least, it has brought the issue of youth mentorship to the fore.

Such initiatives are woefully lacking in SA, and elsewhere in Africa amid clear signs that the youth are growing more disillusioned with their leaders; a situation that is perhaps most vividly now playing out in the #FeesMustFall protests, which analysts have said represent much more than a struggle over university fees. They are a proxy struggle for the frustrations faced by many youths who are unhappy with the direction the country is taking, their living conditions and the unemployment crisis.

Undoubtedly, the recent local government elections also demonstrated young people’s anger with the poor leadership in the country, with many choosing not to vote. Apathy has long been long thought to be the cause of low voter turnout among young South Africans, but research by the Institute for Security Studies (ISS) published in July revealed that this apathy is actually disillusionment with the current political landscape.

“Young people are growing increasingly frustrated,” said ISS researcher and author Lauren Tracey. She observed that corruption is a major disincentive to voting.

A report by trade union Solidarity also highlights the leadership deficit in the country and details cases of corruption that have grabbed headlines in SA in recent times. It points out cases of bad leadership in terms of integrity, accountability, and transparency and details cases such as the false qualifications scandals and corruption scandals that have cost the taxpayer much more than the R246 million spent on the President Jacob Zuma’s home in Nkandla. According to the Institute of Internal Auditors of South Africa, R700 million was lost due to corruption during the two decades following the dawn of democracy. What kind of example are the leaders involved in these scandals setting for the youth? Should a country that has leaders setting bad examples in almost every sector expect the next generation to do good and build a better society? How can, for example, Zuma talk about integrity and fighting corruption when he has been at the heart of it?

Many African cultures place great importance on respect for elders. Young people are expected to know their place and to respect the wisdom of those rich in life experience. Yet, if they see the elders always doing wrong and being irresponsible in society, it seems absurd to assume that they will show respect and act in a responsible manner themselves.

It can be argued that behaviours are contagious and when young people see leaders and potential mentors doing wrong, it bodes ill for the future of the society. Robert Zipplies, co-founder of Common Cause South Africa, notes that human values and behaviours are mostly unconscious and acquired through the sum-total of a person’s historic and ongoing lived experiences – upbringing, peer groups, jobs, education, culture, government policies and media, among others will shape what we do.

Therefore, if we are to build a successful society it is imperative and urgent that leaders begin to change and set good examples for youth to follow, he argues.

More than that, leaders must be playing an active role in mentoring the next generation. A popular African proverb says: “It takes a whole village to raise a child”. This means that everyone in society, including leaders in business and politics, is responsible for creating moral character is society. Mentors play a crucial role in helping young people access opportunities and skills. However, often public investment in mentoring is negligible.

David Shapiro, president and CEO, MENTOR: The National Mentoring Partnership in the US, and Nancy Altobello, global vice chair, talent, EY, observed in 2015 that the business case for more corporate engagement in youth mentoring is clear. It builds business acumen for employees, including experience in managing and developing talent.

“The investments in quality youth mentoring made by companies are direct contributions to the future strength of … communities … They connect young people to the powerful asset that is mentoring, to opportunity and to success,” Shapiro and Altobello wrote.

Because of Africa’s late demographic transition – the population is young and will remain so for a long time. Youth are therefore, in a very real sense, the key to the future of the continent. As Microsoft founder and philanthropist, Bill Gates noted recently: “In the next 35 years, two billion babies will be born in Africa. By 2050, 40% of the world’s children will live on this continent. Economists talk about the demographic dividend. When you have more people of working age, and fewer dependents for them to take care of, you can generate phenomenal economic growth,” said Gates.

However, the poor leadership and mentorship gap that currently exists poses a serious threat to the future of the youth on the continent. To head off the disaster that is looming the leaders of today urgently need to change track. They need to stop talking and lead by example and they need to reach out a helping hand to the next generation the way. We need to build a country and continent where the most important question you can ask of a leader is not what they have achieved but “who have you helped to get ahead recently?”

Imagine being a student without access to the internet? Impossible, right? Yet for Luvuyo Rani, this was a daily reality. Living in Khayelitsha and studying in Cape Town in the 1990s, he would have to travel for an hour at least to get to a computer just so that he could check his email.

Now this was more than two decades ago. And while it would be nice to believe that things have improved for township communities in the past 20 years, the reality is that too many South Africans still struggle to get online. According to internet live statistics, just over half of South Africans (52%) enjoy the luxury of internet access at home. And the further you are from the centre, the less likely you are to be connected. A 2014 Statistics South Africa report found that just 2% of homes in South Africa’s rural townships had internet access. If you count mobile phones and internet cafés, the numbers trudge upwards to around 20%. This statistic translates into significant problems down the line, since education, the likelihood of employment, and the option of further studies are increasingly becoming tied to an individual’s computer literacy and internet access.

It was these numbers and his personal frustrations that drove Rani, now an award-winning entrepreneur, to take his first step into the world of business. “Before I started the business, I was a teacher. It was back when Outcomes Based Education had just started being introduced. Teachers and students alike started needing access to computers and no one was really providing for that demand,” Rani says.

“We started off by selling second-hand computers to teachers in the townships and eventually opened an internet café in Khayelitsha when we realised that so many people actually didn’t know how to use the technology. Most people we encountered, of course, didn’t have much faith in what we were doing, but we could see that there was a real need and a real opportunity for growth.”

Rani says that they started the internet shops as a way of giving people in underserved areas access to computers. “School learners in particular would make use of the computers and through that we helped the students become computer literate,” he remembers.

Ten years down the line, Rani can claim to have helped more than 25 000 such youngsters. His company, Silulo Ulutho Technology, which he co-founded with brother Lonwabo, has expanded dramatically from a single internet cafés to a R30 million company that offers computer training courses, internet cafés, business centre services and IT retail and repair. And the awards and recognition for these achievements are stacking up on Rani’s shelves. Most recently, he was named the 2016 Schwab Foundation Social Entrepreneur of the Year.

Rani credits much of his success to his involvement over the years with the UCT Graduate School of Business. “In 2006 I was a student at the GSB (the Association Management programme). That course was definitely my break into serious business. I used to tell everyone I met there that I ran a spaza shop, but I was planning to run an empire someday. I also continually based all my business cases that I was doing for the course on my own company.”

The course, according to Rani, shaped his thinking. “I also managed to get a loan of R26 000 through the Centre for Innovation and Entrepreneurship while I was there, allowing me to buy the computers that I was renting at that stage, and take my business to the next level,” Rani continues. The next level involved expanding the internet café into more of a business centre. “We based the whole business at that stage on internet access, education, business services and mobile,” he says. They then bought a bakkie and started to form new connections and partnerships and developed a franchise model to help grow the business and expand beyond the limits of Khayelitsha. It has since spread to 40 centres in the Western and Eastern Cape that together employ more than 180 people. “We are rolling out to Gauteng now as well,” Rani adds. “And we plan to grow the business outside of South Africa’s borders too.”

What makes Silulo’s success even more significant, is the fact that many similar initiatives to bring connectivity to South African townships have been slow to take off. This is true, not just for initiatives like the free WiFi projects in Kayelitsha and Soweto, but also for other products like short-term insurance and other financial services (a study by KPMG reveals that only 15% of South Africa’s total population has short-term insurance).

Rani notes that a sound business plan is only one small part of what it takes to launch any such project in South Africa’s underserved communities. “We are certainly not the first business operation to try and cater for the underserved and rural markets, and I believe that other companies have suffered setbacks because they are not in tune with what these communities need from a business. We have made a success of it so far because we understand the community in which we work,” he explains. “Small communities such as these do not support businesses if they do not have a good understanding of what they do and their motivations. You earn the trust of customers in rural areas if you can easily communicate why you are there, and you can show that your motivations are pure,” Rani says.

Rani uses an interesting case to make his point. “A while ago our business in Khayelitsha was robbed. What struck me about that was the fact that only our office was robbed, and the computers and equipment that are used to serve the customers were left untouched. We have also received a lot of support from the community that we operate in, which I believe is due to the fact that people are actually realising that they can and should depend on the types of service that we provide,” he says.

Rani adds that being able to show results has also been important. “Many of the students that have been trained and helped by Silulo Ulutho Technologies have found employment as a direct result of becoming computer literate. From call centre operators to IT professionals, we can actually show the community how we have helped people that they know. That takes away a lot of the suspicion with which a new business is sometimes viewed,” Rani adds.

As a final point, Rani also notes that this lesson is relevant to companies that are looking for new business in the rest of Africa. “We also envision Silulo Ulutho Technologies venturing into other African countries in the future and I believe that the lessons we take from operating in South Africa’s underserved communities would be valuable to any business that looks to create and tap into new markets on this continent,” concludes Rani.

Late in September, Finance Minister Pravin Gordhan called on the country’s leaders to rededicate themselves to building democracy in South Africa in order to regain the trust of the global community.

This timely reminder applies to business, NGO and political leaders alike, who are called upon to rally to better the lives of South Africans. Against this backdrop, the GSB celebrated its 50th birthday in 2016. Widely regarded as the top business school on the continent, one of its core functions has always been to produce strong leaders. And in the current climate – economic, political and social – the need for ethical and informed leaders from all walks of life to take their place in society has become an urgent matter.

Enter the GSB Foundation, an independent, registered trust, NPO and PBO that was established in April after receiving the blessing of UCT Council late last year. Based at the GSB campus in Cape Town and operating internationally, the GSB Foundation fundraises for and governs an investment fund, which is managed by Investec. The trustees consist of representatives of UCT, the GSB and GSB alumni.
The brainchild of alumni and long-time business stalwarts Tiger Wessels, Stewart Cohen, Ian Kantor and Peter Thorrington-Smith, the foundation seeks to raise the calibre of leadership on the continent, by giving talented students greater access to a world-class education at the GSB, regardless of their financial circumstances.
Specifically, it is raising funds to support four key areas at the school: scholarships; faculty; research; and facilities. At the same time, candidates benefiting from foundation funding will also have access to mentorship support from the school’s powerful alumni network.

The four founders, who were all part of the MBA Class of 1969, came up with the concept after discussing the extent to which their studies at the GSB were formational. “I would have made a very poor engineer,” jokes former UTi Worldwide president Thorrington-Smith, who had indeed studied engineering at undergraduate level. “But once you have that opportunity in business, the GSB has not only given you the knowledge, but the confidence to do that job well. There were lots of opportunities – so many people from the school did well in business. As we were gathering at the 45th reunion in 2014, we all recognised how fortunate we were.”
At the time of his studies, recalls Thorrington-Smith, he received a loan of US$750, which he paid back over two years.

For Wessels, co-founder of UTi Worldwide, there was a strong need to pay forward some of the advantages he had enjoyed at the start of his career. “The [endowment] fund was an idea that was conceived by a couple of guys that the time had come to put something back into the business school,” he says. “The school had given us so much, for which we are extremely grateful. As a token of thanks, as we get into the later stage of life, it was important to put some of that back for those who are still to come.”

It was time, the founders felt, to “get the ball rolling” – and, says Wessels, there were a “great number” of graduates who felt exactly the same way.
To some degree, they say, their own classmates have stepped up to support the endowment; now they have thrown open the challenge to other MBA classes to either club together to match, or better, the Class of 1969’s donation – or to make an individual contribution.

Retailer Stewart Cohen, who co-founded the Mr Price Group Limited, says that giving back is an essential part of redress on the socio-economic landscape. “South Africa has its past, its apartheid past,” he says. “We need to pay back for the advantage that some people have received. And the area to give back is [in] education.”
Particularly business education will make a difference, Cohen believes. “We need more diverse MBA classes and they will become the business leaders and entrepreneurs of tomorrow. We need MBAs in our parastatals and even in government. That will make a huge impact over time,” he stresses.

Part of the challenge that lies ahead, says Cohen, is to wake up graduates in South Africa to a culture of giving back that is seen in other parts of the world; where business school graduates “give back in spades” where they can. “In South Africa you don’t see this same commitment to supporting those who come after and this needs to change,” he says.

And, says, Investec co-founder Ian Kantor, it is not just a moral obligation that should motivate graduates to step up to contribute. He points out that business leadership is simply no longer expected to operate in the same way and that the need to train business graduates with a wider understanding of their role in developing society is becoming critical. The GSB has already established itself as a leader in this field and with the right support, it can continue to train and equip talented young men and women to go out and make a difference in the world.

“The current interest in social entrepreneurship implies that 35% of GSB students will make a social as well as an economic impact – that is truly inspiring,” he says. Social entrepreneurship has already made a substantial impact abroad and locally; in the UK, the most comprehensive report into the state of the sector reveals that social enterprises are thriving, outperforming their mainstream SME counterparts in nearly every area of business: turnover growth, workforce growth, job creation, innovation, business optimism and start-up rates. University World News has argued that increased social entrepreneurship will be a key factor in beating corruption across Africa, while the Global Entrepreneurship Monitor (GEM) report has argued the same. The foundation’s multi-pronged approach addresses a number of related problems: in the short term, it increases access to education, while easing financial stress for its beneficiaries, while the broader crisis of tertiary education is tackled at higher levels. And in the long term, it potentially contributes to job creation as well as decreasing long-ingrained patterns of inequality.

Research has shown, over and over, that diversity positively impacts organisations of all flavours; it is therefore essential that leadership in South Africa must reflect greater diversity. This will only improve the role that management plays in business, NGOs, parastatals and government. In short, the foundation is a platform that allows alumni – not just the founders – to leave a lasting legacy for future generations, tax efficiently.

“How does one say thank you for an incredible gift you have been given? I think the right way to say thank you is to invest,” concludes Thorrington-Smith. “Given what the GSB has done for me, it’s great that there is now a fund to which I can contribute in order to express my thanks – a fund that will allow bright and inspired entrepreneurs without the necessary financial resources to enjoy the GSB experience and make a difference in the world. There is no doubt that this can be a life-changer for talented young men and women.”

To learn more about the GSB Foundation or to find out how you can make a tax-efficient contribution, please visit www.gsbfoundation.org.za.