One of the mysteries of the South African economies is that it really struggles to generate entrepreneurs, people who take the plunge and start small businesses that, over time, grow to be large ones. This is a pity, because around the world, small businesses are crucial to economic growth and, most importantly, to employment. Small businesses create jobs, while large businesses are always looking to cut jobs, so small businesses play an important role in boosting employment in most of the world’s economies. However, for a host of reasons, South Africa has always struggled to foster entrepreneurs. In this interview, entrepreneurial success story Ivan Epstein talks about what needs to happen to change that. – FDÂ
ALEC HOGG: Joining us now to have a look at how big businesses and government should work together to grow the small business sector, is Ivan Epstein, Chief Executive of Sage AAMEA. It has nothing to do with drinking or cars. Australia or Africa?
IVAN EPSTEIN: I wish it had something to do with cars. It’s Australia, Africa, (which is a big market for us), Middle East, and Asia.
ALEC HOGG: Ivan, many people watching this are saying ‘what the heck is Ivan Epstein talking about small business for. He runs such a big business. He used to run Softline. He’s an entrepreneur – South African Entrepreneur of the Year’. What year was it?
IVAN EPSTEIN: 2000.
ALEC HOGG: 2000. Goodness me.
IVAN EPSTEIN: Time flies.
ALEC HOGG: Yes, it does but now you’re keen to try, and kick into gear this economy in the right way, through small business. You’ve been there, but I suppose your company (Sage) – many people would know it because of Pastel – does have its fingers very deeply embedded into the small business sector. Are they battling?
IVAN EPSTEIN: What you’re finding in South Africa at the moment – and it’s also applicable to other parts of the world – is that you’re not getting enough small businesses starting up, and South Africa saw a slight regression in that regard. I think it’s important to an economy. I’m going to talk purely about South Africa now, because Sage is a group. Just in perspective, we service about six million SME’s around the world. In South Africa, it’s round about three hundred thousand, but we play an important role by providing the backbone, which is the software – the accounting software – into these businesses. What’s important in an economy like ours is to see growth of small business, because (1) we’re an emerging economy, (2) we’re an economy that, not 20 years ago, came out of a difficult past.
ALEC HOGG: But we know that. We know that the world grows with small businesses. Small businesses employ people. What worried me when I was looking through the research you guys have been doing, is that only 14 percent of South Africans bother about starting a small business in the next three years.
IVAN EPSTEIN: Well, that’s what the statistics say, but a lot more should be and we want to encourage that, encourage it in the correct direction, and the way to encourage that is to play a role. We now have the formation of the Small Business Sector in government and the Minister Lindiwe Zulu, so there’s a creation in this new department.
ALEC HOGG: But does she know much about it?
IVAN EPSTEIN: Well, I haven’t met her and I’m looking forward to meeting her – hopefully, quite soon.
TSHEPISO RADEBE:Â Has she had small businesses? Do you know much about her?
IVAN EPSTEIN: She’s had reasonably good experience and I think if she works together with not just people in government, but with people in business, I think she could do an outstanding job. I think it’s important because it’s the right initiative for the government to have actually set that department up. That department…if people with companies like ours are able to work together with them, I think we can assist tremendously in that regard.
ALEC HOGG: In Davos this year, there was a lot of talk about gazelles – about being nimble. The whole world is really scared at what’s happening to employment and they realise there’s only one way out of the employment funk and that is in generating more entrepreneurs and generating small businesses, because that’s where the employment comes from. You don’t set up a government department and suddenly ‘magic’ the problems away.
IVAN EPSTEIN: No. I think you’re right, Alec. It won’t be and that’s why we’re very keen to sit down and have a discussion with the department and with the minister, to see what their intention is and to offer our assistance in that regard. Bear in mind, we understand small business. We’ve been at this for 25 years. In other parts of the world…
ALEC HOGG: How can you help?
IVAN EPSTEIN: Well, in a number of different ways. Firstly, we can help by stimulating entrepreneurship. We have programs. We’re busy doing that at the moment. As a company, we have programs where we stimulate entrepreneurship. We help with education, at not only a tertiary level, but also right up to post-graduate level as well at the university. We’re able to assist with programs, and that’s with regard to our product base as well, just to be bear that in mind.
ALEC HOGG: Look, I just have a start-up. We’ve been at it for the last ten months. I love your initiative for small business, that you can do all your accounting online for about R150.00. Is that one of the things that you’re talking about that you can assist with?
IVAN EPSTEIN: That product will be provided to the start-up business. In addition, bear in mind that with the legislation, with SARS and payroll etcetera… Those are the components we provide, and we can work together with the department to assist. The most important thing is to educate and stimulate and I think that through education, comes employment (as you just said). How are you going to create that employment? Educate people. Assist them in forming a small business. Don’t work on those odds of ‘under ten percent of businesses in their first year don’t make it’.
ALEC HOGG: A lot of people don’t understand the language of business and the language of business is accounting, which is what you guys are doing.
IVAN EPSTEIN: Yes, there’s accounting and obviously, there are all the entrepreneurial things. The kind of benefit we have – and certainly, I talk for myself, and some of our management team as well – we all started as a small business. You remember our start-up back in 1989.
ALEC HOGG: Amazing. What enabled you – from a start-up – to become this big corporation, that what you created, is today?
IVAN EPSTEIN: The timing was good. Let’s say we were lucky. We went into the software industry in 1898. We got into a market where the upward curve was tremendous. You remember the conversion from manual accounts to what was then called computerised accounts. I remember when I was an auditor at Pricewaterhouse, filling out books – the accounts – the old-fashioned method. I think we got our timing right. In addition, we were very driven and focused individuals, Alec. We pushed hard at this. We decided back then that we weren’t going to be a statistic. We were going to make it through. Later, with our JSE listing in 1997…
ALEC HOGG: You’ve also been curious. I had a good friend who worked with you when you were an articled clerk. They said, the one guy who was not going to make a good accountant, was Ivan Epstein, but you’ve made a damned good entrepreneur. Do you think the two are mutually exclusive?
IVAN EPSTEIN: I always knew I wasn’t going to be an accountant. That’s why I went into businesses. The thing is, as we know Alec, discipline in business is very important. When a business gets to scale, you need to have great controls, solid discipline, and a fundamental financial understanding. I think that’s important.
ALEC HOGG: And curiosity, which you had.
IVAN EPSTEIN: Yes, curiosity, drive, and ambition as well. Having the aspirational drive in going to the next level in any business is important. These are some of the attributes we want to discuss with the government. For example, ‘how can we educate people? Starting at a school level, moving through university, and even for those who don’t go through to university…helping to stimulate growth in the small business sector’.
ALEC HOGG: Ivan, what I like about where it’s coming from – this advice – is that you’re still very entrepreneurial yourself. Apart from being involved in Sage, you’re doing property developments. When do you do that? What time? You have a big company…a big business to run. Where do you find the time to unleash your entrepreneurial ambitions?
IVAN EPSTEIN: Alec, when you’re awake the adrenalin pumps. When the adrenalin pumps you make it happen. It’s what I enjoy. It’s what I enjoy doing.
ALEC HOGG: How is that developing?
IVAN EPSTEIN: It’s going very well. It’s a long road. Again, you need to be disciplined in that. As you know, we look at the property sector now. From a listed perspective, it’s steamy. We’re not a listed company. We’re a private fund. Again, it’s putting on your entrepreneurial attributes into growing a business, learning from the mistakes of the past, (which were many), as you know. I think what’s important is that you never stop learning in business. Every day you make a mistake, you do something good, or you learn something new. That knowledge…that database of knowledge forms over many years of being in business. That’s why we’re so keen to get involved, not only because we provide the backbone to so many thousands of small businesses throughout this country, but we also truly understand what it takes to start a business. We’re not a team coming from a perspective of ‘we provide the software and we just want to get our software into you’. We understand the concept of starting up a small business. We understand the trials and tribulations of having grown a business. I think it’s an important contributor to the economy of South Africa.
ALEC HOGG: Well, we look forward to hearing from you when you have that first meeting, follow-up meetings, and thereafter. Buffet and Charlie Munger from Berkshire Hathaway say that they believe business schools should be focusing only on one thing, and not on these long complicated Greek symbols that are put into calculations, but on the successes and failures of business. if you’re talking about entrepreneurship, surely we should be doing the same thing: looking at the successful entrepreneurs, studying their life stories, and maybe applying those in our own minds if we want to grow more entrepreneurs. South African Entrepreneur of the Year in the year 2000, and he’s kicked on in a big way – Ivan Epstein. He’s the Chief Executive of Sage Africa, Asia, Middle East, and Australia. Well remember, you can email us on [email protected]
After the break, we’ll discuss the hospitality outlook for 2014 to 2018. Some good news in there for those who invested in hotel sector shares.
