Allon Raiz helping small business succeed in South Africa; Brad Sugars he is not

Allon Raiz CEO of Raizcorp joined Alec on CNBC Africa to discuss the impact of the 5 month long platinum strike on businesses across the country. You would be forgiven for thinking that the contents of the discussion between Alec and Allon was full of gloomy tales of small businesses haemorrhaging their lifelines and subsequently disappearing into the abyss. And although the affects of the strike were dire and will continue to be seen for the foreseeable future, Allon has a story of contrarian success to tell. It is exciting. It is refreshing, and it proves that no matter how bad the storm, if well captained the ship can withstand the beating. This is definitely one to help you get excited about small business and the efforts of dedicated patriots, unlike the work of the likes of Brad Sugars peddling smiles, charm and spiffy marketing. – LF

ALEC HOGG: Welcome back to Power Lunch. Joining us now to discuss the impact of the five-month long platinum strike on small businesses around the country and its broader impact, is Allon Raiz, CEO of Raizcorp. Allon, you’re making a big reputation for yourself but I think there are a few people who still don’t understand what Raizcorp does

ALLON RAIZ: Thanks, Alec. We call ourselves a business prosperator and not an incubator, because most of the companies within Raizcorp are prosperous. Effectively, what we do is support small businesses through their growth. They come in. We look for the entrepreneur (not the business) and then we support that entrepreneur with physical infrastructure, guides, a strategy guide, a finance guide, marketing, sales, and personal development. We train them. We’re accredited through the CHE. We provide them with books. We do their books and linkages into corporate supply chains.

ALEC HOGG: Such a contrast to a guy we had here on Monday who claims to be the world’s best business coach. My goodness, underwhelming in the extreme, so it’s nice to have you in the studio – kind of a homegrown product. Clearly, with this relationship that you have with small businesses, you’ve also been keeping a close eye on the impact firstly, on what’s going on in the northwest province with the platinum strike. Maybe we can also look at the engineering sector, and how it’s happening there. Give us some insights.

ALLON RAIZ: We have an operation in Rustenburg, which is mainly there to support the mining industry and the related industry around their enterprise and supply development programs. Obviously, the strike had a huge effect on the whole city of Rustenburg and in particular, the small businesses. What I’m really proud of is that when the thing started, we didn’t know how long it would take before it ended. It could have been a week. It could have been two weeks, but as we started to see that this thing was going to linger, we sat down and put together a ten-point plan in order to try to prepare ourselves for a long bunker down.

ALEC HOGG: What was in that plan?

ALLON RAIZ: Firstly, we diversified the products that the companies were selling. Secondly, we diversified the clients. We made sure, very soon into that strike that they were looking for alternative clients outside of the mining industry. Thirdly, we looked at different geographies in terms of outside of Rustenburg per se, in Gauteng and KZN etcetera, looking for other clients. We looked at cost cutting opportunities.

ALEC HOGG: Were there many retrenchments?

ALLON RAIZ: No, none. No. In fact, the portfolio – and this is what I’m proud of – grew. It was so counterintuitive, but the portfolio grew and I think that was based on what we did, these companies are now going to thrive.

ALEC HOGG: So you didn’t waste a good crisis.

ALLON RAIZ: No, and what’s very important is that we’ve taken all that learning and we’ve applied it across the country to all our other prosperators. There’s almost the sense that our manager there, Peter,  has become a hero within Raizcorp because he sat down, made a plan, implemented, and that thinking has now rippled throughout Raizcorp.

ALEC HOGG: It’s so interesting. As I say, you didn’t waste a good crisis. Sometimes, a crisis can give you the greatest opportunity. What about the NUMSA strike? Are you able to help engineering businesses then to find a way – it’s hard to turn it into an advantage – but at least, not go out of business?

ALLON RAIZ: Well, it’s exactly the same thinking. It’s about diversification geographically – product/client. It’s about cutting costs. It’s about working harder. It’s about using the Raizcorp network as well – that was a big thing. Everyone then got together. People were sitting and giving each other leadership, where normally you’re quite silo’d as an entrepreneur; people were sitting down around tables and saying ‘okay, I know these guys. I know those guys. Who needs this?’

ALEC HOGG: How many people do you have in your network?

ALLON RAIZ: In the businesses we support around the country, and then Angola as well, we employ directly over 140 people. (as Raizcorp).

ALEC HOGG: Allon, you’ve grown.


ALEC HOGG: My goodness. When did you start?

ALLON RAIZ: There are two dates. There’s the unofficial 2000 and the official 2002, when we registered so it’s been 14 years of doing this.

ALEC HOGG: One-hundred-and-forty staff members doing what, primarily.

ALLON RAIZ: Supporting small businesses and making sure that they thrive. That’s why we used the word prosperator and not incubation, because incubation denotes illness and weakness, and our companies are not. Many of our businesses are doing over R200m in our portfolio.

ALEC HOGG: Do you have any in business rescue?


ALEC HOGG: So you won’t go and help the guys who are really in trouble.

ALLON RAIZ: Well, we are those guys in a sense. We are those guys. We’re not registered practitioners per se, but we do the job of rescuing businesses. There’s a market failure in terms of small businesses tend to fail early on, and we intervene – not based on the business, but based on the entrepreneurial flair of the entrepreneurs leading the business.

ALEC HOGG: Did you meet James Caan when he was here?

ALLON RAIZ: I was unfortunately in the U.K. at the time he was here, but one of team met with him.

ALEC HOGG: What was their feedback? Can he help us?

ALLON RAIZ: I think his plan is to get our government to put up and match some money he wants to put in.

ALEC HOGG: I guess it’s similar to what he’s done in the U.K. Is it applicable to this country?

ALLON RAIZ: Look, I’m of the view that there’s a lot of money floating around. It’s a very controversial view and my view is that there is more good money chasing business than there are good businesses chasing money. The moment we sober up to the fact that we have a need, as entrepreneurs to have a compelling economic right to exist, when we take on that responsibility, money will flow to us. I do think there’s an opportunity. I think there’s lots of cash around.

ALEC HOGG: When you say ‘an economic right’ – lovely. I’m sure you thought that one through very carefully. It’s a good way of describing it. What do you mean by that?

ALLON RAIZ: Alec, very often people come up with a business idea, which is a ‘me too’ idea. Do I set up another spaza shop next to the other seven and then complain that (a) no-one wants to finance me and no-one wants to buy from me etcetera? For me, the responsibilities around making sure that your business model (a) works, but if you put R100.00 in the top, R120.00 falls out the bottom and not R80.00, so does the actual model work? (2) Have I differentiated myself enough from my competitors in order to make my clients come to me versus them? Once you get those two basics right, money generally flows to you.

ALEC HOGG: So you’re a bit of a sceptic then on what James Caan might be able to do for us.

ALLON RAIZ: No, I think ‘sceptic’ is the wrong word. What I’m saying is the problem isn’t ‘there’s no money. I’m providing money’. I’m saying that there is a market for that, but it needs to be focused on companies’ economic right to exist. In our discussions with him, we spoke about companies that already had a track record of producing that for them to be funded, so he’s thinking very similarly to us. It’s not just ‘come with your idea and we’ll fund it.

ALEC HOGG: I guess the concern is that if government gets involved, often government likes to make sure that the funding goes to the people that they like – cadre deployment etcetera – and that doesn’t usually work that well in business. What do you think about our new Ministry of Small Business?

ALLON RAIZ: I think it’s a positive thing that somebody’s there. I think she has a big task ahead in terms of differentiating herself from the DTI and economic development, in terms of where the lines are. I’ve seen a lot of progress in the last couple of weeks. I want her to win. I really do.

ALEC HOGG: Is she listening to you? Has she phoned you?

ALLON RAIZ: No, we’re still in the process of trying to meet one another.

ALEC HOGG: She’s only been in power for – what – three months.


ALEC HOGG: I guess you have a tough diary, right.

ALLON RAIZ: Yes, sure.

ALEC HOGG: Do you want to help? Are you saying ‘here I am. I know a little bit about small business. We have a track record. Bring me in and I’ll do some national service’.

ALLON RAIZ: I’m dying to help because I think that if we’re going to entrench the future of this country for our young kids…if I want to have a future in this country, I have to be a part of that solution. I have a certain expertise. I have something to give, so why not give it. I already do my national service sitting on other boards. I have a ten-point plan, which I’m dying to share with her. She probably knows most of it. It might just be nuances on the thinking, but anyone who can help, should help and I can so I should.

ALEC HOGG: Good for you. Next time, wear your South African tie as well. I’m sure you have one in your cupboard somewhere. Allon Raiz is the Chief Executive of Raizcorp. It’s always a pleasure to have him in the studio.

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