South Africa's Business Connexion finds new business growth from across the continent
South Africa is increasingly becoming a platform for ICT growth across Africa. A number of South African companies have targeted acquiring high-value corporate and government contracts. Donor-funded ICT developments in the governance area are providing a rich but highly competitive seam of business. These export-oriented companies work with local partners but use their own skills and expertise to help them win the business. Russell Southwood interviews Peter Retief, Regional Chief Executive: Africa, one of this breed of companies spreading their wings across the continent.
Where does Business Connexions come from as a company?
It’s a South African company, listed on the Johannesburg Stock Exchange. It grew out of series of mergers. The first of these mergers was between Persetel, a mainframe vendor and Qdata, a provider of development people, as well as a software developer. It became PQ Africa and it then ventured into Europe and the USA. As part of this strategic move, it bought Comparex in Germany and subsequently adopted Comparex as a group name.
It then decided it should orient the business towards Africa rather than Europe. It looked at what it was doing and realised that a substantial part of its market was in South Africa and that it was losing ground in Government markets because of BEE.
Business Connexion was a Black-owned company successful in the Microsoft market so we made a match between it and Comparex (as we were then named). Business Connexion shareholders got a 25% shareholding in the merged entity.
So we now have about 4,500 employees, mainly in South Africa and have an annual turnover of around USD500 million a year.
How did the decision to address the African market come about?
We had been working in Africa for a while so it was looking at the profitability of our European operations versus our African operations. We made the decision just before the dot-bomb so maybe it was foresight!
We’ve been growing in Africa since 1998. We had forays into Africa. For example we had a Namibian subsidiary with a 25% local shareholding. Then on the back of working with Global One, we went into Malawi, Swaziland and Zimbabwe. In 2000, we did a big upgrade of the internet backbone for the incumbent. We also built the Swaziland backbone for Global One and UNDP. And we then widened our field into Togo Eritrea and even Mauritania, where we did a consultancy contract. We did a fixed wireless project in Nigeria for Cyber Space with a backbone.
Then France Telecom took over Global One and part went into France Telecom and the rest into Equant. At this point, we took over a lot of the contacts for this kind of work.
You’ve done a lot of work in Ethiopia?
We’ve been working in Ethiopia since 2000 and have won a lot of contracts with our local partner GCS including: ETC (the Broadband Multimedia Network), the Government (a videoconferencing system), the Federal Inland Revenue network, the network for the new African Union building and a number of consultancy contracts.
So how many countries have you done work in?
We’ve done business in 23 countries, although some of these it has been just a single contract. We have branches in Namibia (80 employees), Zimbabwe (45 employees), Tanzania and have just opened an office in Mozambique. The countries where we work intensively but don’t have branches include: Nigeria, Ghana and Ethiopia.
How do you work in each country?
We like to work with a local partner and seek to choose ‘best of breed’: there has to be a trust ‘fit’ and a cultural ‘fit’ and then we can work together. The local partners provide local knowledge and support. We provide: technical expertise beyond what any single country company could provide; the financial strengths for large contracts; and a portfolio of successfully completed work. Our starting point is not that we come to this thing as the big brother.
What type of contracts are you looking to win?
Large contracts. Typically these might include telecoms projects of any kind, Government networks and banking networks and applications. The number one criteria for a project in Africa should be: will it work?
We represent Sun, IBM, HP, EMC and others and on the networking side we are a Cisco Gold Partner and represent Nortel, Avaya and Huawei.
That all sounds a bit similar to Didata?
The key difference is that 70% of our revenues are from services. In South Africa we’re predominantly an outsourcing company. We offer the full range of managed services including ‘back office’ and we’re much bigger in the sevice space, Major companies like SASOL and BHP Billiton are our customers.
So how much of your income comes from outside South Africa?
The rest of Africa is not as mature a market as South Africa and so it varies a bit. Last year was a bad year but the year before last it was 14%.
That sounds quite a modest figure?
Well put it in perspective. The South African economy is almost 50% of the total African economy. So the rest of Africa is 50%. Most networking and server companies are targeting 30%.
So who are your competitors?
It varies from tender to tender. We don’t find ourselves consistently up against particular companies. It’s people like Schlumberger, CFAO, Accenture and HP. In the telecoms sector, the competition is the Alcatel and Siemens of this world.
Where do you think new growth will come from for you?
There are two big markets: the mobile sector and Government software apps. The mobile operators are potentially significant clients. The incumbent telcos are largely Government-owned but there are some interesting changes in that sector.
The second major market is around better governance with funding from donors like the World Bank and the European Union. We sell things like a local government application: around half of the South African municipalities use it. The app includes things like payroll and HR and we’ve sold it out into a number of countries, including Zimbabwe.
Why have you bought Bidnet?
We made the acquisition in order to be able to provide a more comprehensive service to existing clients.