It has never been a better time to be a White Entrepreneur in South African history. That’s right I said it. Ignore the screams and cries around Black Economic Empowerment and Political Cronyism. Reject claims of economic exclusion and let’s revise your entire perspective on Africa’s richest and most fertile Economic market.
Through a combination of gross mismanagement and general incompetence – state capture, mismanagement of municipalities, graft, and rampant corruption - the Black ANC government has created the most fertile environment for White Economic prosperity in South African History.
Running the country’s fiscus into the ground and into their wallets, Black Incompetence indirectly has sowed the seeds for the creation of an unstoppable class of White mega-entrepreneurs. Via a simple strategy this class of entrepreneurs have created astronomical amounts of value by providing municipal and government services to South Africa’s income earning class.
Let’s unpack this simple strategy and establish how you too could become the next billionaire exploiting the state’s foibles.
A 5 step Guide to building a Billion Rand business in South Africa.
Step 1: Identify a government service that the state has no interest in improving – this is very easy, this is essentially all services.
Step 2: Identify what model the state is using to try service this need.
Step 3: Identify the institutional insanity that causes this erosion – this can be sheer incompetence or alternatively something asinine and outdated around unions or some other pseudo-socialist idea that enriches a very small handful of professional gas lighters.
Step 4: Invert the model and optimize for the Income earning class.
Step 5: Wait and watch the market defer to you.
Sounds suspiciously simple, doesn’t it? I know. But said model has been adopted by some of South Africa’s most successful businesses; DSTV/Showmax, Curro ($360M Market Cap), Fidelity Security, Attaq ($300M Market Cap) and ADvTECH Group($600M Market Cap). And will continue to be adopted by the next wave of entrepreneurs to dominate the economy.
Let’s use this framework to interpret the wildly successful educational services company Curro [Curro Holdings Ltd COH:SJ].
Step 1: Identify a government service that the state has no interest in improving.
In this instance Curro chose schools/education.
Step 2: Identify what model the state is using to try service this need
The state in their model:
- Uses unionized unregulated teaching talent that are borderline impossible to fire.
- Packs the industry with infinite Rent-seekers who are in no way accountable.
Step 3: Identify the institutional insanity that causes this erosion – this can be sheer incompetence or alternatively something stupid around unions or some other pseudo-socialist idea that enriches a very small handful of professional gas lighters,
In this instance it’s a unionized teaching body that has more power over the state than the state has power over it. Next to HIV, TB and Structural Racism, SADTU has been one of the most devastating scourges on South African economic progress. Compounding this is a psychopathic minister of Education who cannot be dislodged for political reasons. And then complete this absurd stew with the crazy notion that the state can act as a regulator, creator and executor in the Education space.
It's kind of like a dog overseeing walking times, eating volume and human employment time. The dog cannot be impartial and can only create perverted incentives for itself.
Step 4: Invert the model and optimize for the income earning class
Curro took a simple model that eliminated all the political posturing of the government sanctioned education system and optimized for education, safety and appearances. And it must be noted that they weren’t even that good at any of the above. Up until 7 years ago they were still being caught out for blatantly racist behaviors against black and brown paying clients.
However, the state alternative is so bad that these people would rather have their children be subjected to racism than deal with the government education system.
Step 5: Wait and watch the market defer to you
Through intelligent strategic placement of schools in newly developed areas they were able to service a market that the state could not and was unwilling to do. The state had the funds and legislative ability, but that damn Black Incompetence got in the way again!
Thus, they collected all these revenues in newly created cities/towns that the state couldn’t build or service ie Midrand, Centurion, etc. or alternatively opened shop in suburbs and environments that had public schools that were literally on the verge of collapse, but still had an income earning class – shout out to Hillcrest High!
I must stress at this point according to all information I was able to procure in researching this essay, the Curro group is incredibly well run, and their success is not purely a by-product of State Incompetency. State Incompetency simply accelerated it.
A competent state with decent town-planning skills and measurement tools would be able to have caught these trends well before they happened, but we’re dealing with the same state that causally paid R26 ($2) for a 1-ply roll of toilet paper. The ANC government is to incompetence what Jefferey Epstein is to pedophilia– the G.O.A.T’S!
There are obvious and cogent arguments that posit that the wealth will always seek out competitive advantages for their children, so a private education system of some kind was always inevitable. I agree with this notion. But in the examples, I’m presenting I’m not referencing elite private schools. Rather I’m highlighting that Curro is fulfilling the needs of middle-income South Africans not by offering a better product but rather a functional one.
I personally think Curro is a piece of shit – as a school not as a business - and I wouldn’t send my hamster there, but millions of South Africans look at it as the best option for a meaningful education for their children. This despite paying up to 45% of their income to the state.
You can rinse and repeat this model for M-net/Showmax, Fidelity Security, ADvTECH Group and the pre-eminent REIT’s in the property field - Attaq and Balwin. The last example being the most insidious and disturbing. This is not to say that the state should provide all citizens with housing. We should have a private model for home development and ownership. However, at the current rate of mismanagement even government sponsored housing will have to come from the private sector.
Summarizing this thought, the simple outcome will be that if the rate of incompetence continues as is, we will see the most vulnerable in our society once again being held hostage by capital – private property developers – even though they are taxed and exploited by the state.
So where are we?
1. The Black ANC government via mismanagement and Incompetence destroys an industry/service.
2. This provides fertile ground for White entrepreneurship/entrepreneurs to monopolize this same service that was purposely monopolized by the state to protect the most insecure in our society.
One could look at this as a global phenomenon - So why is this a big deal in South Africa?
Well
1) Because me and Stone Cold said so.
2) The downstream effects of Racialization of corruption and mismanagement.
3) The future credit default and humanitarian crisis to come.
The downstream effects of Racialization of corruption and mismanagement
Racializing government performance allowed the ANC government to pull off one of the great propaganda bait and switches of the last century. Every time anyone claimed the Black South African Government was inept, they immediately tarnished said person with the brush of a “racist”.
For those who are unaware of the history of South Africa and Apartheid, one should know that this word – racist - immediately boots the rage program in the psyche of the average Black South African. This results in highly logical and intelligent Black people turning a blind eye to sheer incompetence due to a programming flaw from the previous release: Apartheid.
Black people like Jews on Israel will turn a blind eye and rather support an inept corrupt moron than look at the facts objectively if the accuser is labelled a racist/anti-Semite.
This is not to say that a huge number of these people aren’t racists, the gross majority are, but the sane individual in the crowd who shouts the emperor is naked, gets lynched regardless of how cogent or truthful their argument is.
Shaming Black South Africans is not something I hope to do here; I have the same source code and I know the rage. But it’s ineffective and converts one into a very useful idiot for even bigger idiots.
Escaping this trap will only be possible with a deracialization of politics.
This will be challenging. South African political freedom was won by highlighting the inequities of a race-based system of governance towards people of colour. So to now get these same people to reject that system and philosophy - that doesn’t prioritize a race orientated political spectrum - will be an enormously challenging task.
Challenging cannot begin to describe how hard this task will be, convincing someone that the thing that got them here, is not the same as the thing that will get them to where they need to go, is a monumental task.
The future National credit default and humanitarian crisis to come.
A private and state-run system of education/security/housing would be the ideal for all South Africans. The current system is not that. It is one wherein the state is repeatedly failing in their duties and there are no consequences for these actions, resulting in exponential entropy in Government services and infrastructure.
This results in the ultimate feedback loop around social and financial decay. The more money that gets diverted to private companies that are meant to be going to the state for services, the less funding the state gets to support the most vulnerable in our society.
The less capital there is to help poor people the quicker the state veers towards a humanitarian crisis. As it stands there are currently 18 million South Africans who survive off state welfare. If 5% of these people lose out on their social welfare checks due to mismanagement – this will happen btw - we will see 900 000 people plunged into extreme poverty. Extreme poverty in a country with the highest Gini coefficient in the world and some of the highest amount of violent crime in the world. Resulting in the crime startup vertical gaining millions of new entrepreneurs in the hopes that crime can replace the void that state used to fulfill.
One can imagine the longer this persists the quicker the conveyor belt of criminal startup entrepreneurs’ we’ll see scale in this market.
Let’s say I’m wrong and the state can somehow keep the coffers full via savvy taxation and international loans. That doesn’t stop the fact that the billions collected by these companies that should go to the state end up going to private companies and the collection of revenue will continue to decrease. One could argue that the state is still collecting these funds via these companies in the form of taxes. I disagree with this notion. Direct Revenue collection will always be higher than taxable profits in industries like education, transportation, and mineral extraction. Secondly if somehow, you could disprove this, my cheeky rebuttal to you there would be: then go full retard and completely divorce the state from these services. The state can act as a funder for these sectors but shouldn’t be regulator, enforcer, and referee.
The erosion
At this point you may ask why does this actually matter. Let the state fail and then let the private market take care of the rest. The white man in me wearing a tweed jacket really wants to leave it at that. But the black person that I am knows that the “Free Market” in South Africa is rarely ever that. Even with state oversight, we still see some truly peculiar outcomes.
The most painful and real example of this is the over allocation of Black talent in Corporate South Africa because of Black Economic Empowerment policies.
South Africa’s young Black entrepreneurial class has been dramatically hamstrung by inflated salaries and an insatiable appetite of White corporates consuming them to benefit of a combination of tax and funding breaks from the state. If the South African Economy was 5x it’s current size this would be fine, South Africa could have both an entrepreneurial and white-collar class, but the truth is more sinister.
South Africa has some of the lowest number of entrepreneurs per graduates in the world. I can’t explain this phenomenon fully, but what I can say is that for someone who grew up with food insecurity the notion of earning a salary that could feed a family of four is extremely enticing. Entrepreneurship is not sexy when one hasn’t had stable housing and diet for most of their life.
Exaggerating the issue is that these corporates are also absorbing most of the best talent that would also be divvied up between themselves, the state and entrepreneurship. Instead, the only professional class that sees state work as desirable are lawyers and a handful of economists who choose the Treasury over Mckinsey. Leaving almost every other skillset to choose corporate employment over the state and entrepreneurship.
Leaving the state with the dregs of our intellectual class and further compounding the erosion. Smart people make smart decisions, unambitious, dumb people do not. And this class of dumbasses is currently saturating the employment rolls of the state.
Now What? Where to and how to right the ship
There’s nothing wrong with White entrepreneurs succeeding in South Africa. In fact, I’d love to see the number of White Entrepreneurs 10x in the next decade. White Entrepreneurs exploiting the state’s foibles for their own benefit is not evil, malicious, or even problematic, it’s literally, business. However, we must acknowledge a few fundamental truths about these entrepreneurs and South Africa. As someone who has worked in the startup space, I know how hard it is to scale a business. I’m also aware of 300 years of systemic racism that actively worked to oppress Brown people and empower White people. I know that the success these individuals enjoy is not a consequence of privilege and advantage exclusively. Like Curro, these individuals were not propped up by the current regime but rather the state’s incompetence simply accelerated their success.
Secondly, we must also acknowledge there has been some economic success for Black Entrepreneurs – I say some as I do not include the Eskom class - Their businesses are too fickle and state reliant to be considered actual success. The Black ANC government did provide the environment for them to scale and manifest. We cannot deny this either. The macro issue is that state erosion is directly funneling capital out of the state into the hands of entrepreneurs. These entrepreneurs generally tend to be white and male and there is nothing being done to stop or diversify this. When one questions this, they are met with fierce resistance around their race. So, we cannot even point out this massive systemic flaw without being called some racially charged epithet.
Perfecting this flawed strategy was the Zuma administration. Their insatiable appetite for corruption lead to them not even seeing the consequences of their own actions: eroding state resources to enrich themselves created an entire class of private municipal services that are not available to the people they claim to support: the poor.
Resulting in them repeatedly using racism as a scape goat for their own failures – whilst not acknowledging the irreversible mess they created.
With the world’s most illiterate president out of office one would expect this tide to turn, however, he was so exceptional at creating this environment that it will be almost impossible to undo his masterpiece of ineptitude.
Does this mean South Africa is doomed and one should drop everything and move to this fabled nation to get rich. No and Yes.
I can’t predict what underwear I’ll wear tomorrow let alone the future of South Africa. My prediction or view is that this trend will continue and will see sectors like, water distribution and purification, law, energy, transport – this is already happening via Uber - and foreign policy go the same way[MB3] .
“This way” being state services being provided exclusively to income earning citizens and the rest of the country being left to fend for themselves in squalor. This may sound absurd, but 30 years ago the notion that there would be more private security agents in RSA than Policemen would have sounded absurd. Today it’s a reality.
I don’t believe Mr Zuma or any other ANC member wanted to empower or enrich white men via incompetence, however the law of unintended consequences is a bitch and all technocrats should know that every policy, piece of legislation and program will always result in some kind of perverted outcome. How perverted is down to your governance system and the focus of the creators of said program.
Personally, I don’t think the state should stop this or attempt to. It will be too difficult and will only accelerate the massive brain drain already happening in South Africa. Rather my belief is that the state should move to a more progressive model that empowers the state to act as regulator and referee. This would ensure that cronyism and ineptitude could be eliminated from the execution aspect of policy, and we could unwedge the high concentration of talent in corporate SA and unleash them onto the world as entrepreneurs.
Removing themselves as Executor, the State could provide endless opportunities to Black entrepreneurs lodged in the corporate sector to create new interpretations of services that create more value for the economy. And deleverage our middle class from employment as the primary vehicle for wealth creation.
Final thoughts – how we got here and how to get out.
At a fundamental level all I believe a lot of this can be attributed to a lack of growth and this can be attributed to extremely poor governance.
This is in turn sets off a domino effect of economic stagnation.
Poor Governance results in lessened foreign investment which in turn results in less capital flows which in turn erodes business and consumer confidence, which support conservative business practices that aim to dislodge state services to channel state revenues into private enterprises.
The tree may look like White success but the seeds that grew it were Black Ineptitude.
An economy without growth sees some pretty peculiar outcomes and the cannibalization of the state by private companies is one of the most peculiar. But one must always remember that the class of entrepreneurs who built these companies also grew up in a military state and said state was seen as consumable by its citizens. The state was an economic partner and therefore one to be exploited. This in a well-run state would be fine. There would be enough growth for a dynamic education system and a company like Curro. However, in a low growth economy with relatively strict exchange controls, capital will look for any outlet for growth and one of the most lucrative and anti-competitive spaces is state services. Your opportunity to become Mega rich!
State Services lean aggressively towards monopolies – Eskom, PRASA, The Police - and this means that these companies that attack these verticals can potentially capture entire monopolies before the state can even catch on to what has occurred.
Capital that cannot escape the borders of the country gets channelled into companies like Curro.
Creating a competitive environment in environments that are meant to be monopolistic and non-competitive. The state can’t compete with itself let alone a private company. Thus, going one on one with companies like Fidelity and Curro results in the state getting annihilated and these companies capturing all the returns. Returns that should have been directed to the state. Resulting in a strange cannibalism of the state, wherein the snake eats its own tail. State fails – corporation steps in to solve the need but doesn’t necessarily create new growth rather they simply absorb the capital that would have gone to the state.
Simply put, the notion that the state has a monopoly on certain sectors is false. The state does not have a True monopoly. The state is in active competition with the private sector, sometimes directly – Curro – other times indirectly – HNWI (High Net Worth Individuals) getting off the power and water grid.
State failures enable the private sector but don’t create real economic growth.
Therefore, the success of the state in the distribution of services is not a trivial matter. If anything, their success is critical to the success of the nation and protection of the most vulnerable.
Therefore, State Capture and Black Ineptitude are deeply vicious crimes as they don’t simply hurt the most vulnerable but imprison them in poverty that is borderline inescapable with a broken state.
We can’t take state failure as a joke, the more the state fails the more it relegates people to perpetual poverty and solidifies and calcifies inequality and social ills.
In summary, I hope this serves as a rallying cry to disrobe ourselves from racial binaries being used to gaslight us into supporting absurd politicians and ideals and begin the process of reorganizing the great nation of Azania (South Africa, for the whites).
Saying this and doing this are two fundamentally different activities. Manifesting it will be the great challenge of the post-Mandela generation. I’m afraid the dreams of utopia we all grew up with will have to be placed on hold till we find a more effective political consensus mechanisms and stop having a potato with eyes for a president.
Rejecting the current system and looking for bold new solutions that eliminate highly exploitative practises like race baiting is our only solution out of this mess. South Africa is a highly complex and challenging country. However, it has the revolutionary potential to kickstart not only an entrepreneurial but also political revolution. Revolutions that look past new options in the current framework and choose a wholly new one altogether – we don’t need a different Black political party we need to get rid of traditional representative democracy altogether! This tragedy is the ultimate opportunity for us to reorganize the great nation of Azania and choose a future that escapes traps around ethnicity and race and forces the best of us to work towards an inclusive, accountable state that creates programs that are good in principle not good on political campaigns.
Let’s build the future!
Great insights. Spot on analysis. But why do young people swear?