From Silicon Valley to Swaziland, Rick & Wendy Walleigh [i love reading books .txt] 📗

backing existed in Swaziland. TechnoServe had limited funds to initiate a center, so it clearly needed multiple partners to establish and sustain it. Additionally, determining exactly where to locate a center and exactly the right services were major issues as well. The next steps were much less clear for this project.

However, at this time, UNISWA (University of Swaziland) was also thinking of establishing a regional business resource center, but they had not gotten beyond the conceptual stage. They were struggling with what this new institute would do, the kind of programs to run within it, and how to fund it. After research, discussions and evaluating the alternatives for a business resource center, Leslie, Atiba, and Wendy agreed that the best way forward would be to partner with UNISWA and either locate a center on their campus or adjacent to the campus in Manzini.

Seeking a potential site for the business place, Wendy and Atiba drove the one-hour drive to Manzini, the largest Swazi city (over one hundred thousand people). Although it was larger than Mbabane, it was not the government capital and was not as well-kept. Its downtown was pretty old, dilapidated, and polluted from all the buses, cars, and kombis (small vans used as local buses); but it was the easiest city to reach from all parts of Swaziland.

Consistent with partnering with UNISWA, Wendy and Atiba first explored the campus as they looked for potential colocation sites. Then they visited Mavuso Trading Center outside Manzini, a large convention-type complex built by the government/king that was meant to promote Swaziland by hosting business fairs. In its first three years of existence, it had been fully booked for only two weeks per year. The remainder of the time, it went mostly vacant with occasional social, sports, and business events; another grandiose idea on which a lot of money had been wasted. Not seeing any opportunities in university or government space, they also visited a number of commercial buildings. No one offered anything but retail rental pricing, some even above market rates. Wendy and Atiba were very dejected that no one wanted to help them and give back to the community. Since USAID, the primary donor for TechnoServe’s work in Swaziland was only willing to pay for a percentage of this business gateway, Wendy knew that she really had her work cut out for her.

As Mpendulo and I continued to collect data on the market for bottled water, one useful visit was to the country general manager for an Italian multinational food company that focused on dairy products. When asked about bottled water, he indicated that they had tried bottling and marketing their own line of water several years prior. They had abandoned it. He was sympathetic to our cause but said he wanted no part in the marketing or sales of bottled water. He was willing to discuss simple distribution of any products we had to offer because he had a fleet of trucks for distribution and carrying more products could reduce his costs per unit. However, he didn’t think that we could even sell bottled water to the major grocery retailers since they already had too many brands on their shelves. He knew the business, and his thoughts confirmed what we already knew.

Another interesting visit was to a real estate broker who was selling a water bottling plant complete with its own source of water. Mpendulo, my junior colleague, had called this broker to find out some business information on the property that was for sale. The young woman with whom he talked said that we would have to meet with the owner of the brokerage business. I’m sure they thought we might be potential buyers.

The owner of the brokerage business was a well-known mini-tycoon in Swaziland. He owned a number of businesses and had a reputation for being successful with everything he touched. His background was Asian, but he had lived in Swaziland since he was quite young. He was impressive to meet. He was a well-groomed, fast-talking, articulate, energetic businessman; and what a salesman! He told us how wonderful the water business was, how he had gotten numerous contracts to export water, how they had established a brand, how important water is for health, and how they had just been too distracted by his other businesses to aggressively pursue their bottled water business. That’s why they were selling this modern, high-capacity, stainless steel water bottling plant with its own source of pure clean water. We declined the offer to visit the plant, thanked him very much, and left with a different message than the one he wanted to sell. We knew that if the business had been a good one, he would have continued it himself or at least sold it as a going concern to get a higher price.

We also talked, by phone, to the bottled water company in Lesotho, another small country in southern Africa about twice the size of Swaziland. This company had been started a number of years ago with a lot of hope, fanfare, and the expectation that they would bottle water for export to Mozambique, Botswana, etc. They were operating at 12 percent of capacity and selling only in Lesotho.

Based on our research, and an informal conversation Mpendulo had with our client, we knew it was time to give him the bad news. We would not be helping him if we delayed giving the message. The sooner he dropped this idea, the sooner that he could possibly move on to something else. And maybe in our discussion with him we could give him some insight that would help him to better evaluate his next venture. I put together a short PowerPoint presentation that described the issues with his idea and the research we had done to back up our position. However, I thought it would be best for Mpendulo to give the actual presentation. In addition to making it easier for our client to accept our advice, coming from another Swazi, I thought this would be a good development opportunity for Mpendulo. Even though I wouldn’t be giving the presentation, I anticipated the experience with dread. The man was so nice and so optimistic. I hoped he wouldn’t take it too hard.

When our client came in, there was a conflict for the only conference room, so the three of us had to meet around Mpendulo’s desk. Mpendulo walked our client through the presentation. He explained the logic of business competition and what it takes to be successful. He explained our research and why a new bottled water company without some unique approach could not be successful. Our client listened carefully and silently. Mpendulo was very empathic and soft in his delivery. At the end, our client reiterated his original idea and why he had thought it would be a good one. He thanked us for our help and told us he would have to think about all we had told him. Then he left, obviously very disappointed. We felt bad too, but there was no value in wasting resources—his or ours—time, or money on a business that would ultimately fail. We needed to help people discover and develop businesses that would be successful.

Concurrently, we worked on MPE Timbers, making some progress, but not nearly as much as hoped. We brought the principals from the company, Brian and Robert, into our office for a multihour meeting, hoping to get some good financial start-up numbers from them so we could start doing our analysis. Unfortunately, the numbers they had were too general. They might have been right, but they had no support. Also, expenses for the first year had been estimated and then spread evenly across the months. We really needed to know what would be spent at the beginning, then as they ramped up, and finally what would be the steady state. When starting a business (and later as well) cash flow is critical! There was some grumbling about doing more detailed work, but we emphasized that if they were lending money, they would want to know where it was going. So Brian agreed to get us numbers by the following week.

Later the same week, we had an exciting development. We met with an investor, Dave, who was potentially interested in putting money into MPE Timbers. He had already been a successful lawyer and investor in Swaziland. He had been talking to TechnoServe about another opportunity and then got referred to us. Dave had been involved with the timber industry before and was interested in doing more value-added activities to timber in Swaziland. At the time, Swaziland was exporting a lot of raw timber and importing wood products. It seemed to all of us that this situation created multiple business opportunities. Brian was coming back to our offices the next week, so we planned to introduce him to Dave.

The following week was an interesting one for clients. On Monday, Brian drove over from Johannesburg to meet in our office, so we included Dave. The meeting was friendly and both parties were interested in talking about Dave’s possible investment. I was in another meeting when Brian and Dave were introduced and started talking, so at first, Brian thought this was a chance meeting. Later I assured him that it wasn’t chance. Although there was some luck involved with our initial identification of Dave as a possible investor, I told Brian that I had already spent considerable time with Dave to introduce him to the project.

We all knew that we were just starting a long process of courtship and negotiation before a deal could be worked out, or not. However, we did get into serious discussions on some issues such as ownership. At the end of the discussion, we agreed that the next step would be getting numbers from Brian so that we could do our analysis and see what worked financially. Then we would familiarize Dave with the whole business, have him visit the actual plant, and ultimately get Dave to figure out his conditions for a deal.

Throughout the week, I worked with Dave to familiarize him with the economics and the possibilities of the business while giving him a chance to bounce his ideas off me. His wife, Fiona, also got involved, especially looking at the numbers that had been developed so far. By the end of the week, Dave had come up with the conditions for his interest. After looking at everything, Dave saw the proposition as high risk. I would have called it medium risk, but since the business had run out of cash twice and it was Dave’s money, we called it high risk. In return for the risk, Dave wanted the possibility of high return while minimizing his risks in other areas, including potential problems with disgruntled shareholders. Since a lot of Dave’s law career had been in pursuing shareholder suits, he knew the pitfalls. Consequently, he wanted 100 percent share ownership. We knew that this would be a tough hurdle to overcome, but Dave was interested in structuring attractive ongoing incentive arrangements for the existing shareholders to persuade them to give up their shares. He had a number of other conditions, but this was the most challenging. I planned to present it to Brian and Robert and to see what their level of interest would be.

Brian was supposed to have new start-up numbers to me by Wednesday at the latest, but I didn’t have them Friday morning, so I called him. As mentioned, Brian lived in Johannesburg, which was known for its high crime rate. His wife had been a victim. Although she had survived, she was very shaken up. The mugging happened when she went to her sister’s house to check the progress on her sister’s new kitchen. Her sister and husband had gone out of town, but