How this company plans to become the biggest tech firm in Africa

Business Connexion has reported steady growth over the years, but it’s ambitions are much larger than it’s current trajectory. In fact, the company has plans to be the biggest tech firm in Africa, and is pursuing an aggressive acquisition-led growth strategy in the continent. It is particularly active in Nigeria, and has plans to expand further. But how realistic is this goal? In this interview with CEO Benjamin Mophatlane, he offers some insights into the direction the company is taking, and the challenges it anticipates along the way. – FD

To watch this CNBC Power Lunch video click hereBenjamin Mophatiane - Business Connection_face0

ALEC HOGG:  Technology services company Business Connexion has reported an improvement in normalised headline earnings for the year to end August 2013.  Normalised headline earnings per share rose four percent from just over 50.5 cents to 52.2 cents.  Joining us in the studio is Business Connexion’s Chief Executive Officer, Benjamin Mophatlane.  Ben, I’m sure there’s a message in that Stacy Keach discussion – the whole JP Morgan thing for corporates.  Be very careful if you want to open yourself up to Twitter.

BENJAMIN MOPHATLANE:  Absolutely, I think there are lessons learnt.  As much as there is social media, I think it’s also important to realise that it can have unintended consequences.

ALEC HOGG:  Let’s look at your business: you have a credo that you are going to become Africa’s leading tech company.  You’re a long way behind the eight-ball – if you’re a snooker player – at this point in time.  These numbers: revenue only up six percent, so if you’re going to become Africa’s leading tech company, it has to be more like 60 percent growth per year.

BENJAMIN MOPHATLANE:  Absolutely, and I think the important part for us…the key is going to be the acquisitions.  Nigeria was a stellar performer in this financial year, so we’re currently looking at two acquisitions in Nigeria.

ALEC HOGG:   Take us a little bit deeper.  In what areas?

BENJAMIN MOPHATLANE:  Well, very much into the area of verticals as basically in the financial services.  Nigeria has a big banking segment.  I think most South African banks have been looking at either acquiring or doing something there, so we’re looking at a business that has an IP in the financial services side.  I’d also want to extend or manage printing offering across the continent.  Although we’re very dominant in South Africa, we believe there’s opportunity to grow outside South Africa.

ALEC HOGG:  Managed printing…

BENJAMIN MOPHATLANE:  Managed printing.

ALEC HOGG:  What does it mean?

BENJAMIN MOPHATLANE:   In the past, the printer used to be a big part of the procurement process.  It has now become part of the total cost of ownership from a CIO, so this device has become very intelligent.  You can actually hook them up to a network and see how much printing has been an employee level as well, so we’ve seen quite a lot of growth in that area.  Last year that business did 800 million rand worth of revenue.  This year it’s just over one billion rand.

GUGULETHU MFUPHI:   Benjamin, you also mentioned in your numbers that you are very bullish on the increase in your revenues from your African explorations.  You also mentioned that the public sector also presents an opportunity for you.  How is it working with them?  We know that the public sector, especially in Africa, is not really painted out to be an easy counterpart.

BENJAMIN MOPHATLANE:   Look, for us at the moment the exposure is still South Africa from a public sector point of view.  One looks at the market and Business Connexion’s share of the market is only 2.5 percent and on the revenue of six billion only seven percent came out of the public sector, so for us there is scope, but it obviously has challenges around corruption, delayed projects, and delayed tenders.  We believe that a big win we got out of the Department of Water Affairs this year, which we’ve been able to transition in the last six months – it’s a right step in the right direction.

ALEC HOGG:   Ben, corruption…South Africa…

BENJAMIN MOPHATLANE:   Corruption is everywhere.

ALEC HOGG:   Seriously: are you seeing that as an issue in the South African public sector?

BENJAMIN MOPHATLANE:   The big issue for us is not necessarily just within the government.  I think when you have many small SMME’s that have come who have come across and don’t necessarily have the skills, but somehow they’re always in front of some of the queues of very big projects that require balance sheets, investments, and everything else.  I’m quite confident that the new leadership at SETA is definitely going to take SETA in the right direction, and we believe that with the Minister of Public Service Administration – with what they’re doing – I think Ms Sisulu is going to go a long way towards addressing some of the challenges.

ALEC HOGG:  So the opportunities now exist.  It’s very interesting.  There has been a new Head of Procurement appointed by Pravin Gordhan, to oversee procurement throughout the public sector.  This must be a step in the right direction if you’ve been bumping your head in certain areas.

BENJAMIN MOPHATLANE:   Absolutely, we believe that there’s so much wastage.  The Auditor-General report came out: 30 billion rand’s worth of money should actually be going to the right areas in terms of improving service delivery, and making sure that the right investment comes through.

GUGULETHU MFUPHI:   Benjamin, how do you manage to step up against your competition like your big brother, EOH?  Their share price has been a solid performer.  Their operations are reporting positive numbers as well.

BENJAMIN MOPHATLANE:   What do they say in the States?  Don’t hate the player.  Congratulate him.  I think the important part is that they have a formula that is working.  For us, we’re more of a deeper IT company.  If you look at the investment, we made in the data centres, as well as our positioning…  They have areas where they’ve done very well and.  What is happening in our space?  People are investing in non-IT, traditional IT services, so in our financial year we’re starting to get into a place of HR business process outsourcing.  Not a lot of that growth has necessarily been in pure IT.  I think IT services become quite pervasive.  One has to get smarter ways and bring new technologies to…

ALEC HOGG:   But then you’re a two billion rand company.  They’re a nine billion rand company, and DiData is even bigger than they are, so you have some giants to bring down if you’re going to be the top IT business in Africa.

BENJAMIN MOPHATLANE:   Well, we still have a long way to go, but I think the most pleasing aspect in these financial results is that we’re starting to win in the marketplace.  In the last quarter, we’ve won over four of the big Blue Chip clients, which wouldn’t’ have happened in the past.  That should come through in 2014 and beyond and I think it just shows that when people are going through the challenges of cost cutting, they look at businesses like Business Connexions to grow them, and also to take them out of South Africa.

ALEC HOGG:   Benjamin Mophatlane it’s always good to have you in the studio.  Thank you for joining us today.  That was Benjamin Mophatlane, Chief Executive Officer of BCX, or Business Connexion.  It’s quite an interesting career – BCX, but Ben’s only half-right.  This is a business to watch.   At least he wears the right coloured tie.  We get people from Nedbank coming in here with blue ties.  Ben has…BCS is a red company, isn’t it?

BENJAMIN MOPHATLANE:   Are you back in Johannesburg now?

ALEC HOGG:   I am indeed.

BENJAMIN MOPHATLANE:   I thought you were still on the farm.  I like your website.  I think it’s good.

ALEC HOGG:   That’s wonderful.  You see, he’s my friend.

GUGULETHU MFUPHI:   I see, Alec – connections in the right places.  That’s your business connection right there.

ALEC HOGG:   Of course.

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