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South Africa: Terrible AC Conditions
My team and I arrived at OR Tambo airport in Johannesburg in the early evening and as we headed towards customs and the connection terminal for our next flight to Cape Town, Matt nudged me in the arm and told me to look up. Over the doorway we were about to walk into was a big sign that said, “Enter At Your Own Risk.” Matt said, “That’s not a good sign.” In fact, it would be prophetic.
Matt, my sister Mollie, and I found our way to Cape Town late that evening, after a series of terrific flights on South African Airways. We flew economy the whole way and while the legroom could use just one more inch, it was still a pretty comfortable way to fly. Good food (except for the pancakes— pretty hard to screw up pancakes but they did) and great service. Matt did lose his luggage but they got it to us a day and half later. So far, things were looking up.
In Cape Town, we connected with our friend and business partner Dave Toms of Peoples Development Fund Africa (PDFA). We were going to spend two days around Cape Town and then off to Zambia to look at a large agribusiness operation that together with Dave was seeking some expansion capital. Matt and Mollie, fresh out of college, would be additional eyes and ears to complete our market research on the project. We were also there to develop criteria for investment, but more on that later. [pic]
Cape Town was interesting— very much like San Francisco, it even has an old prison island in the middle of the bay where Nelson Mandela and other radicals were held. There is a huge plateau called Table Mountain that we rode up to in a cable car, and from there you can see the bulbous hills that form the horn of Africa. [pic] We also went to the Slave Museum which was pretty moving because it was mostly about America rather than Africa and to see African school children stare in wonder at a huge picture of the lynchings in Marion Indiana in the 1950s, with the white young teenagers smiling and drinking Coca-Colas, was an incredibly moving experience. A few of the school kids looked back at me as if I could explain it to them.
Crime and fear is everywhere in South Africa. In fact, it is very similar to 1950s southern Indiana, where there is great prosperity but nothing close to equality. Legally the rights exist, but socially, South Africa is a powder-keg dangerously close to combustion points. There is great anger and frustration between those who have wealth and power (mostly white) and those that don’t (blacks, colored/mullato, Indians). Poverty and wealth rubbing together like that in the historical context of apartheid and current-day racism generates incredible tension and anxiety, a lot of blaming, and very little constructive dialogue. Every middleclass house we saw or were in was surrounded by these nine-foot high walls topped with razor wire or broken glass and on the walls were big signs that said things like “Armed Response” or “Enter At Your Own Risk.” It’s not entirely unjustified as South Africa has more murders per capita than any other country except Columbia and when you see gun turret towers on gas stations and electricity plants, you realize this is a different everyday reality. However, some of this is just obvious paranoia as we were continually warned that just because we were white we were likely to be mugged, stabbed, or shot. The danger is real but somewhat manageable by using hired drivers and having a few friends to ask how to go about getting things done.
South Africa is a very difficult place to do mission work or my kind of work which falls under a label I’m hearing more and more called business-as-mission. One major roadblock is the country’s financial systems—for example, there are no tax deductions for charitable contributions, none at all. Also, if you are a South African citizen, you cannot move your money easily into foreign investments, which almost eliminates South Africans from investing in opportunities in the surrounding countries. This drags the entire region down since the primary economic engine (South Africa) is only operating at half-power. Many of the savvy investors in South Africa are finding every loophole they can to move their money out of the country because they know there is very little upside to investing in businesses in South Africa. Taxes are near socialist levels and interest rates at the time of our visit were pretty high at 11%, and while the Rand was strengthening against the dollar it wasn’t helping exports. I could quickly see why Dave Toms and PDFA was most interested in partnering with a successful business-as-mission operation in Zambia because doing business-as-mission in South Africa can be summed up by that sign we walked under when we entered the OR Tambo airport—“Enter At Your Own Risk.”
Zambia: Great AC Conditions in the Copperbelt
Talk about a juxtaposition! Compared to South Africa, Zambia is a country that is primed for business-as-mission opportunities. The country is small, and not anywhere close to the economic juggernaut of South Africa, but the economic growth rate is massive due to foreign investment and the surge of the copper and coal mines, dramatically changing this small country’s future. The short flight up to Ndola (a small city at the heart of the region called “The Copperbelt”) was basically an aerial survey of farm after farm after farm broken up by large tracts of forest and grasslands. Many farms were circular because they used central-pivot irrigation, and the water supply is quite adequate for the region’s potential. There is plenty of abject, gut-wrenching poverty [pic] but the country is putting the right pieces in place to become an economic power in the region. It is oddly benefiting from the destruction of the Zimbabwe economy and recently signed a trade agreement with Congo-Kinshasa to the west, whose southern tip juts into Zambia like a peninsula. In that southern tip region alone are a few major cities with populations in the millions that Zambian farmers will soon be doing regular trade with. It is a great Adventure Capitalism situation.
This is where we meet John Enright who is part Indiana Jones, part missionary, part Donald Trump and has carved a multi-million dollar agribusiness enterprise employing hundreds of local people and has done it out of unbelievable circumstances—and oh, by the way, has a terrific rule for his business-as-mission: if you become a partner in his organization, you must make more money than he does. He earns $1,500 a month and many of his employees earn many times that—one is earning 10 times that! We spoke with several of them, and while there is certainly the ups and downs of business, Enright’s Rivendale operation is the real deal; these people are making great money and several have become business owners and investors themselves. In just a few years, most of them have gone from earning $60 a month to earning thousands of dollars a month.
Enright’s operation has several divisions but a few major ones make up the majority of the revenue stream—he has several Kerf King portable lumber mills and culls the local forests, doing spot cutting (not clear cutting) for hardwood and pine. The business is exporting hardwoods, making high-end doors and windows, and has even started a roofing truss manufacturing business. [pics] He has a banana growing operation with several hundred hectares of banana trees producing some of the biggest bananas you’ve ever seen. [pics] This has become so successful so fast, this division appears to be struggling due to saturation of bananas in the marketplace but that should be alleviated in a big way once exports increase to the mining cities in the Congo. He also has started fish farms, which is a great source of protein and their first harvests were sell-outs the day they took them to market. [pic] He’s also beginning a large-scale aloe vera operation—the aloe vera gel inside the leaves is distilled into a concentrate that customers mix with juice as a health-supplement. Aloe Vera has been shown to increase white blood cell counts and this is helpful where immune-compromising diseases are such everyday evils. [pic]
Aloe Vera is where Dave Toms and John Enright are working together—John is interested in “franchising” his operations, teaching another organization how to replicate his success. To do this, Dave needs to be a partner in Zambia and learn how to do business as mission on a large scale. The proposal before me and investors is expanding the aloe vera operation on a 200 hectare parcel that John recently purchased. The farm would need an irrigation system, the aloe vera plants, and other start up capital. The numbers are certainly interesting— close to 30% ROI over 3 years— but what is more interesting are the principles that John has built his organization upon, a methodology that might be replicated and repeated throughout Africa. This is the big picture and it is very compelling.
Let me say that unlike many people that visit his operation in Zambia, I am not a John Enright disciple and I see a lot of problems with his business, but those problems do not interfere with the accomplishments, nor undermine the soundness of their objectives.
John and his wife Kendra are former missionaries, having been chased out of the Congo just ahead of an assassination squad sent to kill them. They found their way to Zambia and started this new endeavor—one that breaks the traditional missionary model. I’ll dedicate a later post to the methodology behind John and Kendra’s work but I will say this: that theirs is perhaps one of the best examples of creating a business that does great things, true life transforming things. Their operation employs hundreds of people—from alcoholics and addicts to really savvy entrepreneurs— and the enterprise has become a multi-million dollar economic engine for the entire Ndola region.
There’s a great project ready for investment there: Patricia’s farm. Patricia has become a partner in the Enright’s operation. She takes care of eight kids, five of them orphans, one of whom is blind. [pic] The project will develop her land into a fish farm and agriculture business. The terms are favorable at 12% for 12 months, and we’ll use this project as pilot test to the partnership the Enrights are forming with Dave Toms. If the project goes well, we’ll likely seek to fund the larger Hilltops aloe vera project; which has some phenomenal cash flow potential and will have a big impact on the community.
On this trip, Matt also told me about two friends he knew from southern California who had visited Zambia for a soccer match a while back. These two young men decided to ditch their promising business career path to become Adventure Capitalists—they moved to Zambia and have started a bicycle business. Bicycles are everywhere in Zambia but they are often imported from China and India and the quality is sub-par. A broken down bicycle can mean not feeding your family… bicycles are very important in Zambia. These guys have begun importing high-quality bicycles and will soon be manufacturing high-quality bikes in Zambia. They have some impressive contracts already lined up. They’ve also begun a bicycle repair business which has started out well and employing a bunch of bike mechanics—these two “surfer guys” are already generating cash for their business and offering a great service to the people of Zambia. That’s Adventure Capitalism!!
I’ll be heading back to Zambia soon to finalize the investments there and my next post will be about John Enright’s methodology plus a fascinating business as mission trip to Kenya to help save a church there. In the meantime, here are some additional pictures of our South Africa and Zambia trip. Enjoy.
Prognostication: Copper prices will continue to fall over the next two years given that massive deposits in Zambia and Congo were recently discovered and about to be mined—so output will increase but the real engine of copper prices is China and China’s increasing inflation problems will likely slow demand, so I expect a glut of copper in the next eight to twelve months. Zambia’s future is tied tightly with China and this is where we find a hidden asset: Zambia’s coming trade with the major cities just over the Congo border. The trade tariffs have recently been removed and China has just signed a huge mining contract with Congo and that contract includes building a major road network connecting Congo cities with neighboring cities in Zambia. And China knows how to build high quality roads very fast. It’s a great inflection point for Zambia that reduces the risk from being too dependent on mining operations.
Humor Stuff:
Some Albert Einstein Quotes… from NPR’s Car Talk:
- Any intelligent fool can make things bigger and more complex. It takes a touch of genius and a lot of courage to move in the opposite direction.
- We can't solve problems by using the same kind of thinking we used when we created them.
- Imagination is more important than knowledge.
- It's not that I'm so smart, it's just that I stay with problems longer.
- Put your hand on a hot stove for a minute, and it seems like an hour. Sit with a pretty girl for an hour, and it seems like a minute. That's relativity.
- The hardest thing in the world to understand is income tax.
- You do not really understand something unless you can explain it to your grandmother.
- The difference between genius and stupidity is that genius has its limits.
- Reality is merely an illusion, albeit a very persistent one.
- Men marry women with the hope they will never change. Women marry men with the hope they will change. Invariably they are both disappointed.
- The secret of creativity is knowing how to hide your sources.
- Life is like riding a bicycle. To keep your balance you must keep moving.
- Intellectuals solve problems; geniuses prevent them.
- Not everything that counts can be counted, and not everything that can be counted counts.
- It is a miracle that curiosity survives formal education.
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