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How Founder Of 27four Investment Managers Drove Transformation In The Industry

Fatima Vawda of 27four Investment Managers unpacks the opportunities for South African SME growth.

Nadine Todd

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Vital Stats

  • Player: Fatima Vawda
  • Company: 27four Investment Managers
  • Affiliations: On the board of the Association of Savings and Investment South Africa (ASISA), and the reporting working committee of the Financial Sector Charter Council.
  • Est: 2007
  • Visit: www.27four.com 

South Africa has a unique business environment. Broad-Based Black Economic Empowerment (B-BBEE) has created opportunities for small black businesses that many other small and mid-sized businesses around the world don’t have. However, B-BBEE has also added layers of complexity to doing business in South Africa.

Many traditionally white-owned businesses have viewed these changes as stumbling blocks, when in fact, with the right mechanisms and strategic focus, B-BBEE offers opportunities to everyone, black and white alike. The goal is to build and support a rich, diverse economy in which SMEs play a vital role. When the economic foundation of a country is strong and stable, everybody wins.

Transformational growth

Fatima Vawda founded 27four Investment Managers in 2007. 27four is an asset management firm that historically only managed money in the listed market, including the JSE, South Africa’s bond markets and global markets.

Related: Silver-Sphere Trading Gives Top Advice About Investing In (The Right) Precious Metal

However, Fatima’s goal when launching the firm was to spearhead change, not only in the asset management space, but the South African economy as a whole. She wanted to be on the ground floor, impacting the transformation of her industry as well as her country.

Fatima’s first focus was on her industry. After 12 years in the asset management industry, Fatima started 27four with no money and no client base — but she knew she’d be a first mover in the market in terms of transformation. Today, 27four employs 60 staff members, including some highly skilled entrepreneurs, and has incubated 32 black asset managers who have since created 600 jobs. Just over a decade ago, black-owned asset management firms didn’t exist. Today they manage R415,5 billion rand of a R4,9 trillion investment and savings industry.

“We still have a long way to go, but we’ve already seen incredible change. The main value proposition I brought to market 11 years ago was that the asset management industry was largely untransformed. The entire industry flowed through white asset management firms. You could count on your fingers the number of black asset management professionals that were actually managing money within those firms, and no independent black asset management firms existed. Through 27four we established a black asset management incubator programme that looks for asset managers who have experience in the market, but who are also entrepreneurial and can run their own firms.”

Through the incubator, 27four places start-up managers, who then become emerging managers, mature managers, and finally graduate and exit the incubator when Fatima’s team feels they can compete with the industry’s incumbents. Once they exit the incubator, they become a part of 27four’s mainstream portfolios. For example, the first company 27four incubated was Mazi Capital, giving them their first R150 million to invest.

“Today, they are a R45 billion asset firm, have won multiple awards and employ more than 50 people. We afford them the same respect as we give to an Old Mutual or Coronation,” says Fatima.

“Many institutional pension fund investors don’t want to have all their eggs in one basket — this gives them diversified exposure. We essentially create a diversified pool for them.”

The incubation programme is helping Fatima realise her vision of a transformed asset management industry, but the next step was helping the economy as a whole grow and prosper, while still supporting B-BBEE codes.

The investment perspective

According to Fatima, there are strict criteria governing the funding of black business growth in South Africa. “It should go towards black-owned and controlled businesses, from start-up enterprises all the way to mid-market companies, to support the growth and development of these enterprises,” she explains.

“Ultimately however, if we look at funding for black business growth, it all comes down to the fact that we need to support enterprises to create more jobs to fuel the economy. If we’re able to create a cycle of positivity, job creation will naturally follow and business confidence will increase. When business confidence increases, economic growth improves, the commercial and industrial sectors pay more taxes to the fiscus, and there’s more money in the kitty to pay for healthcare, education and service delivery. It’s win-win for everyone.”

With this view in mind, 27four has launched a Black Business Growth Fund that offers real opportunities for mid-sized businesses to grow, regardless of the current B-BBEE ownership status of the business pre-funding.

27four’s Black Business Growth Fund has a clear focus on industrialisation and job creation. “The fund’s focus is on mid-market companies looking for capital outside of the formal banking sector. This is typically a private equity-type capital that allows them to expand and to grow. Through our fund, we can support these businesses, while also introducing a BEE shareholding into them.

“Because BEE legislation says that if you are a black private equity enterprise, you can transfer your BEE ownership to the underlying enterprise, as ‎27four we are able to provide debt and equity solutions to the businesses we invest in, while transferring our BEE ownership to them.

“For example, if we find a fantastic white business that’s innovative but struggling to gain access to market because they don’t have the necessary BEE points, we can assist them. In our experience, most of these businesses want to transform, but find it very difficult to do that as a white owner. We’ve also found that there are thousands of really, really good family-owned businesses that have been successfully operating for many years, but are now suddenly kicked out of the cycle because they don’t have the necessary empowerment credentials. They want those credentials, they’re wanting to transform and create jobs, they’re committed to the South African economy, but the avenues do not exist to allow them to be able to transform.

“When our managers invest in these businesses they prefer to take black equity ownership in them. This gives them the BEE credentials they need and also ensures that we’re committed to their success because we have skin in the game.

Related: Now Almost Anyone Can Invest In A Hedge Fund

“Once our managers have invested in a business they have regular meetings and engagements to ensure all management accounts are up to date, establish what the deal pipeline looks like, and so on. These businesses have first-hand access to a very skilled team and their expertise to ensure the business is strategically heading in the right direction.”

This is a mid-market fund, which means 27four is typically looking for businesses in the R100 million plus turnover range that are looking for growth opportunities. “The type of investors in the Black Business Growth Fund are pension funds. These are investors who want to earn an investment return, but also ensure their return is generated from doing good, contributing towards job creation, industrialisation, environmental and social changes. In addition, many institutional investors have so much money on the JSE, this value proposition provides them with an opportunity for investment returns uncorrelated to the listed market. They’re basically taking some of their allocated funds and putting them towards investments that are uncorrelated with global markets. If there’s a stock market crash, these returns will not be affected by it in the same way as listed returns will be.”

The lesson: Investment teams are always looking for deal pipeline. Throughout the private equity industry, deal makers and transactional people are looking for opportunities, and many of these come from word-of-mouth referrals. “We’re always talking to experts within the field, from SAVCA (the South African Venture Capital Association) to communities associated with SAVCA, business organisations and other experts in our network.” The lesson is simple. If you’re looking for investment, or you know that in the near future you will be, it’s important to start building a network that knows you, your business and what your growth goals are.

“Find people in those spaces to network with. Talk to them and find a fund that suits you. Often, it’s the fund that finds you because you’re having the right conversations with the right people.”

The second key point to consider when it comes to investments is what the investor’s due diligence will entail. “Due diligence is about identifying if this is a sound investment opportunity,” explains Fatima. “At this level we are looking for investment growth, because we need to deliver a return to the investors coming into the fund, and we’re looking for stable, good management in those businesses that will result in growth. This includes good free cash flow, sustainability in terms of their underlying client base and long-term contracts as well as looking at any motes that they may have: What are the barriers to entry in their market, what is their differentiator and so on.”

If you’re looking for investment, or you know that in the near future you will be, it’s important to start building a network that knows you, your business and what your growth goals are.

Nadine Todd is the Managing Editor of Entrepreneur Magazine, the How-To guide for growing businesses. Find her on Google+.

Leading

Become Your Best In Business

How can you streamline the actions you take in your business?

Dr John Demartini

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A few of the primary keys to becoming successful in business include having a clear intent or purpose, a truly inspiring vision, a grand message to share, a genuine social calling and a targeted niche to serve. From these initial basics arise the primary strategic objectives you would love to accomplish or achieve and a plan for their implementation. But before these objectives can be met, the mastery of the mind is to be initiated.

True business leaders are those who are congruent and integrated and who can organise and lead their inner parts purposefully. Once leaders govern themselves, they can govern others.

Time Is Life

When you loaf about, your mind starts thinking about all kinds of doubts, insecurities, fears, other people’s beliefs and worries about what’s happening and what isn’t happening. Such dead time can zap your energy and confidence levels and distract your mind from your purpose. Any time or space that’s not filled with high priorities often automatically becomes filled with low priorities.

Have you noticed that when you’re busy, you often accomplish and create much more? The more intensely you’re focused and active and the longer you maintain such a focus, the faster your accomplishments (time x intensity = results). Time spent on doubt, fear, or low-priority actions slows down your accomplishment process.

When you take your mind off your focus, all you see are obstacles. When your mind is focused on your dreams, you don’t have time for the many self-doubts that block them.

Raise Your Standard

Anything you do consumes time. To maximise the value of your time, prioritise your interactions. People who seem less busy and want to consume your time may think you’re being rude when you say no to their invitations, but busy people understand immediately that you’re just choosing to prioritise and wisely manage your time.

People who don’t value their own time want to take up yours with small talk, and if you keep associating with people who talk small, you could end up with a small life. You’ll find out what kind of people they are by putting a fee on your time and raising that fee regularly. If people really value your skills and time, they’ll pay for it.

“A man’s growth is seen in the successive choirs of his friends.” – Ralph Waldo Emerson

Efficiency and Effectiveness

Often when you perform a service for less than you feel you deserve, you lower your worth and enthusiasm and slow down your business. Even though you may be working like a ‘dog’, it’s neither efficient nor effective.

Any aspect of your work that pays less than you truly feel you deserve can become the weak link of your business. In addition to undermining your motivation, inefficiency and ineffectiveness can also reduce profit margins. When you or your employees perform effective actions in an inefficient way, ineffective actions in an efficient way or ineffective actions in an inefficient way, your business becomes undermined. Your worth can be determined by how efficient and effective you are at performing high-priority actions. Business masters are those who love what they do, do what they love, and work efficiently and effectively. They delegate everything else to those who desire to do the same.

How can you streamline the actions you take in your business? Ask yourself, “What can I delegate?” You’ll be far more productive, energised, and inspired at the end of the day when you can stick to actions you deem to be high-priority. Unless you value your time, neither will the world.

For more information on Dr Demartini’s teachings, visit www.drdemartini.com

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How To Be A Leader

Lead by example and you’ll win the respect and loyalty of your staff.

Richard Mukheibir

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Being a successful entrepreneur is not about locking yourself away in your workshop and bringing a great innovation to life. Certainly, you need a must-have product that will have customers beating a path to your door. But you also need the business skills to ensure you can scale up production – and the leadership skills to motivate the staff you have employed to help you make this happen.

It is rare to find these three key skills balanced equally in an entrepreneur. Most have more of one quality than another – but there is one of these qualities that we tend to fool ourselves about.

Most of us know whether we have creative skills that can produce great innovations or whether we need to improve our business skills. Almost all of us assume we can be leaders if circumstances mean we have to step up to the plate. However, almost all of us are wrong about that.

Leadership skills are something that you develop and hone as your career progresses. You might think that being head girl at school, rugby captain or president of your Toastmasters’ branch means that you have got leadership nailed.

You would be right that you have some leadership experience. But you are wrong because so much about leadership depends on context. Just as what works on the rugby field and what works in the debating chamber are not the same, so what works in business is different.

In part, it can depend on the size and sector of your business. That in turn is partly because your understanding of the context – your business savvy as opposed to your business skills – is as important as your credibility as a leader.

But there are some common traits in leaders that work in all business contexts. Once you have these nailed, you will find that you can reuse them in different businesses as you expand your entrepreneurial interests.

Here are three starter principles to put into practice today:

1. Be first

Get to work first and leave last. As an entrepreneur, one of the prime qualities you need is energy. You need to put mental and physical energy into knowing the detail of what is going on in your business.   Listen to the insights of your staff as to how your systems are taking strain or could be streamlined. If you are serious about growing your business, you cannot expect to achieve this as a sleeping partner who drops by the business premises at best once a week.

2. Be a team player

Make it clear that you are not giving yourself privileges just because you are the boss. If your business involves any kind of production line, whether actual or virtual, you should be able to pitch in and help out if there is a rush of demand or an unusual number of staff hit by the virus that is going round. This is also an opportunity to check personally on the effectiveness of the systems you have set up and make tweaks where you see bottlenecks or downtime occurring.

3. Be last

As well as leaving work last, you should also pay yourself last. Consider this part of your investment in your business – and also an investment that will pay dividends in consolidating staff loyalty.

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Peak Performance – How To Become A Strong And Legendary Business Leader

The starting point is to consistently and constantly build and mould an unshakeable character and add a clear strategy for your personal life and your business.

Dirk Coetsee

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‘Leadership is a potent combination of Character and strategy’

– General Norman Schwarzkopf

Leadership has long fallen into the category of the enigmatic. It is no longer the case considering the ‘deep dive’ neuroscientists, psychologists and industrial psychologists have taken into understanding the brain and human behaviour in general.

For those that have a deep and driving desire to understand themselves better volumes of highly beneficial research are available to you. How willing you are to seek for and apply the infinite amount of knowledge out there is dependent upon your priorities, your ‘grit’ and your level of desire to personally transform and be impactful in this world.

Most of all a strong belief in your own abilities to become a legendary business leader is a basic requirement for the alchemy from follower to leader to take place.

The human nature guru Robert Greene describes a strong character as follows:

“Strong character has a tensile quality like a good piece of metal – it can give and bend but still retains its overall shape and never breaks”

Character is who you really are, not what you want others to think of you. Who you truly are is especially revealed under the most challenging circumstances. How your investors, co-founders, employees and clients view you is highly dependent upon your actions during times of business crisis, failure or when you as an entrepreneur are faced with turbulent personal circumstances.

The ability to authentically and empathetically (towards yourself and others) take a stand for your beliefs, admit (to yourself most of all) to your mistakes, rectify them (the highest and truest form of an apology) within times of strife and difficulty leads to a strong and un-breakable character.

Through this writing you are strongly urged to reflect on the fact that a strong character will not fall from the sky and simply be bestowed upon you, instead a strong character, akin to steel, is moulded and shaped by fire meaning that your character is mostly shaped by challenging times.

As the late master poet Leonard Cohen said –

‘There is a crack in everything that is where the light seeps in’

Nothing is perfect and when you truly learn from failures and mistakes your wounds can become blessings, your tests can become testimonies and you can lead others to achieve the same.

Those that have a slight and very determined smile on their face and maintain belief and even dramatically increase their levels of performance the moment they recognise that they have arrived within a highly challenging space are the ones that have trained for that exact moment.

The Navy Seals say:

“You do not rise to the challenge you fall to your level of training”

All external information gathered within each moment enters the brain and is processed through the Amygdala first – that part of the brain that provides housing for the ‘fight or flight’ response. Information is first filtered through your very own doubts, fears and insecurities.

If you have not worked on your own fears diligently and instilled habitual mechanisms of effective action triggered by fear your re-actions of lack of action (procrastination) will not be optimal at all. ‘Grit’ is born at the intersection of passion and perseverance and can be trained. Bravery can be trained. Leadership can be trained. Character although influenced by genetics can be trained.

All tools to succeed at the aforementioned subjects are within us all, in a lot of cases lying dormant and anxiously awaiting your increased levels of awareness which will empower you to use the tools required effectively.

As a practical example I coach my ‘Peak Performance’ clients to train for Grit in the following way – Choose a day of the week when you are especially tired and not in the greatest of moods force yourself to the gym and train the toughest muscle group for you (usually legs) and where you normally do three sets of squats do seven and make those sets harder than before in every way.

Or again choose a day of the week again where you are very tired and instead of taking a plunge onto the couch to watch ‘Game of Thrones’ or whatever it is, go and hike, a long tough hike that will really test you.

It does sound harsh but you will thank yourself when the tough times occur and they will, that you have willingly trained yourself for grit.

On to the subject of Strategy which forms a potent combination with character and results in Leadership.

Dictionary.com defines strategy as:

A plan, method, or series of manoeuvres or stratagems for obtaining a specific goal or result.

For a strategy to be effective a basic requirement of many requirements is that a clear and highly specific end vision and/or goal, and/or result must be defined. Visions, goals or desired results are often vaguely defined because the often subconscious fear of clearly defining our failures by setting clear and measurable goals plagues us.

The mind struggles with finding solutions, answers and strategies when vague goals are set. It is also very hard to retain focus on anything that is very vague. As the importance of an effective plan to achieve your well defined Vision and goals cannot be overstated I strongly recommend getting expert help to facilitate a future session.

Once the desired end result, goals and vision is crystal clear we can ‘reverse engineer’ an effective plan that can actualise our dreams. We need to create a metric system that constantly, consistently and visibly measures our progress and success of our plan. The metrics will notify us of challenges and will signal a need for adjustments within our strategy.

The very good news emanating from this article is that anyone can be a legendary leader should they not only sincerely wish to be a leader but also take effective action on becoming one. The starting point is to consistently and constantly build and mould an unshakeable character and add a clear strategy for your personal life and your business.

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