To Create Jobs, Instead of the 4IR, South Africa Needs a Tech-Enablement Bridge — aka We Need Domino’s, not Google

Written by Anesu Shoko and Yusuf Shaikh of Secha Capital

No matter your politics, everyone in South Africa can agree that we need more jobs and that we need to create more jobs now.

To do this, we need better policy and we need a different focus. The “Fourth Industrial Revolution” we hear about so often means nothing to someone unemployed today. With 75% youth unemployment and a “demographic bulge” coming, we need opportunities today in traditional job-creating sectors such as manufacturing, agribusiness and consumer goods.

Instead of the 4IR, we need a Tech-Enablement Bridge.

If we help grow traditional, “boring” businesses into local champions by providing growth capital, operational support and tech-enablement, we will turn this demographic “bulge” into a demographic “dividend.” This will create new, sustainable, quality, attainable jobs and it will keep spending and profits local. This is economic growth that will reach all South Africans.

In other words, we need to grow our own Domino’s rather than create the next Google.

Focus on Job-Creating Sectors…

We need pizza companies, not search engines: In the US, Domino’s employs two times more people than Google. And these Domino’s jobs are spread across the country, across educational backgrounds and across LSMs. After all, Domino’s can’t outsource or offshore pizza-making the way tech companies can search the globe to hire the cheapest programmer.

Plus, growth from companies in traditional sectors have a multiplier effect; they circulate more money locally which grows the ecosystem. Tech companies create diseconomies of scale; they shrink market sizes and grow themselves with a fraction of the number of employees.

…That Do not Need to Create Tech, but Can Leverage Tech…

Much like Domino’s did with its digitally enhance fulfilment and delivery system, there are durable, resilient, “boring” industries and companies in South Africa that will not be disrupted by tech, but that can be modernized. These are usually companies that work with the physical world; they work with “atoms” and they leverage “bits”!

Currently, the advantages of the tech revolution have not been evenly distributed: There are great businesses and management teams in South Africa who lack the time and resources to effectively leverage what is coming out of Silicon Valley. These companies do not need to take technical risk or have a huge IT budget, they need help to cut through the noise and use tech products and services that can meaningfully bring a business forward.

…And That Create Profits and Wealth

At the end of 2020, what was the best-performing 2004 IPO — Domino’s Pizza or Google? The answer is Domino’s by almost 2x. And since 2010? Domino’s outperforms every “high-flying” FAANG stock.

And the best part is that the Domino’s-like industries are not winner-take-all like their tech counterparts. There are thousands of job-creating profitable pizza companies in the US, but only one profitable search engine.

At Secha Capital, we’ve invested in and brought new tools to companies in these “old” industries. We’ve invested in hair care, wigs, biltong, shoes, energy bars, lettuce and batteries. We gave these businesses growth capital, provided operational support and we brought technology solutions where they were most needed. This approach has helped create 400 full-time jobs across our portfolio and grown each company from 3 to 100x. This is with just ten companies: there are thousands of companies out there already that both need this support and create this type of impact and financial return.

Written by Anesu Shoko and Yusuf Shaikh.

Anesu is an Operator-Investor and Yusuf is a Principal at Secha Capital.

Secha Capital is an early-stage impact private equity manager. Secha’s “Operator-Investor” model gives small, growing businesses a unique advantage to solve the missing middle and management gap via a growth and human capital arbitrage strategy. Secha Capital focuses on established companies in the FMCG, agribusiness, health care and manufacturing sectors throughout Southern Africa. sechacapital.com — @SechaCapital — associate@sechacapital.com — +27 76 376 1629