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Vox Telecom: Douglas Reed

The inside story of how telecommunications entrepreneur, Douglas Reed, believes in generating wealth, not competing for it.

Monique Verduyn



Douglas Reed

Economic pressures are set to accelerate convergence of telecoms and the Internet, affecting telecom services in unexpected ways in 2009, according to North American consultancy inCode. That’s good news for Vox Telecom CEO Douglas Reed, who has built a conglomerate that crossed the divide a while ago and is already maximising convergence. An entrepreneur at heart, Reed completed the first year of his BCom and followed this with a job on a North Sea oil rig. At the age of 22 he took over Sandton City Hardware, a career move that culminated with his appointment as MD of Mica Distributors. “I’ve always focused strongly on growth,” he says, referring to his early ability to grow retail stores by between 45% and 50% per year.

One of the first management lessons Reed learnt was that entrepreneurs have to be managed loosely but stringently. “That sounds like a contradiction, but the first MD I worked for was very clear on this. I had the freedom to run my store as I wished, but I was measured on four things – debtors’ days, creditors’ days, stock turnover and profit. Reed realised during these early days that leaders must have good benchmarks in place across all areas of management. “I was great at sales and merchandising, but not so good at accounts. Luckily, I learn very quickly, and my time with Mica Hardware also gave me a solid understanding of cash flow.” In his late 30s, Reed realised that he was wasting his time working for other people. He wanted to go into his own business, but could not afford to start at the bottom. He had also had enough of an industry that was confined to four walls. It was at that point that he got an offer from Control Instruments to head up its IT business DataPro, a company that had provided IT support for Reed’s stores. The incumbent MD knew Reed well and was moving into another area of the group. “I made the decision based on gut feel,” Reed says. “DataPro was a small company at the time, turning over R150 000 a month. I took a salary cut and bought 30% of the business.”
The move from hardware retail to IT was not too much of a leap. Reed had always had a keen interest in technology and had rolled out systems that were ahead of their time in the somewhat conservative hardware sector.

“My goal was to transform DataPro into a national Internet service provider. I took over a company that had no business plan in place. The first three years demanded 12-hour days, six days a week.” In 1998, DataPro launched Internet services aimed at small and medium businesses, and was the first company to offer cheap dial-up-based email. By the end of that year, monthly recurring revenue exceeded R183 000. DataPro had 257 business clients and 51 contract customers. In 2000, it was one of the first ISPs in the country to become cash positive. “This was a big thing for us,” says Reed. “Even when you have budgeted to lose money, it’s horrid.”

Control Instruments, an electronics company that dealt with aviation and vehicle tracking, decided it was time to sell DataPro. “We were not core to Control Instruments’ business, and it would have been pointless for us to remain within the group. This was Internet boom time and I wanted to grow the company.”

Reed approached three financiers. BoE Private Equity Investments took the bait and agreed to fund a management buy-out from Control Instruments. DataPro was sold at a premium: the company was worth R15 million at the time, but Reed and his team paid twice that, recognising the value of a customer base that no other ISP could match. The relationship between DataPro and BoE got off to a good start, with a five-year plan in place that would have seen the shareholders make R50 million, but then Nedbank took over BoE and, as Reed says, their objectives were no longer aligned. “The bank wanted to sell us to the highest bidder and we had no desire to be owned by anyone.” Fortunately, a R65 million offer from MWeb was turned down. But while the bankers focused on the numbers, Reed and his team were looking to the future and the relationship grew ever more tenuous. The company ended off 2001 with monthly revenue exceeding R890 000 and with first-tier ISP status. It seemed there was no stopping DataPro. A year later it was achieving organic sales growth of 218% and launched South Africa’s first SOHO leased line solution. It also switched its international links from satellite to fibre, boosting the speed of its services. Monthly revenue soon exceeded R3,8 million.
In 2003, the company launched a least cost routing (LCR) division, as well as a high speed Internet access solution for the hospitality industry, enabling in-room and wireless connectivity. This was also a year of rapid consolidation and rationalisation in the Internet industry, and DataPro emerged as a strong player with significant market share. In 2004, BoE and DataPro parted ways when the company reverse listed on the JSE’s AltX. Ask Reed what he learnt from the transaction and his answer is blunt. “If you ask for money from a bank, you’re screwed. But if there is no alternative, the best thing to do is hold onto as many shares as possible, and then double the size of the company so that your money doubles, work hard for five years and buy back your business.”

Shopping spree

In 2005, DataPro branded its voice division as Vox Telecom. A number of significant acquisitions followed: WickIT, a regional Durban-based ISP; @lantic, a consumer-focused ISP; Pretoria-based corporate ISP Netralink; Definity Telecom, South Africa’s fourth largest LCR provider; Orion Telecom, the biggest LCR provider in the country and consumer ISPs MJVNET, XsiNet and Shisas. “Every acquisition has been a learning experience,” says Reed. “These transactions have a major impact on both the company being bought and the buyer. Each time we conclude a deal, both sides stop in their tracks for a few months, which costs us a lot of money. It’s vital to plan everything in great detail beforehand so that you minimise downtime. Rather take longer to conclude the deal and have the ability to hit the ground running. When we bought Storm Telecom, we did not have enough time to plan properly and it took four months to get the business going.”

Reed believes in being ruthless. “If the company you take over is your core business, then people are not an issue and we take virtually none of them into the fold; however, if it’s not our core business, it’s vital to buy a company that is well run, which means we bring the people on board.” Having consolidated its position in the market, DataPro became the largest listed company on the AltX in 2007, with a market capitalisation of R2,3 billion. The DataPro Group changed its name to Vox Telecom that same year to re-position it as a full-service telecommunications provider.What kind of personality does it take to build a R2 billion business? Reed refuses to work with people who are not self-motivated and driven. “Experience and education come second for me, because managing someone has to be the biggest waste of time. I believe in strong controls, but few of them.”
This philosophy runs deep throughout the group, with all companies having their own teams and cultures. Some are conservative and process-driven, while others are far more relaxed in their approach. “I make snowballs, roll them down the hill with my team, and then others take over and run with them. Most companies in the group manage themselves, so I spend my time focusing on innovation and getting new ideas off the ground. We introduce a major innovation every eight months; it’s critical in our industry, but I believe it’s a strategy that should be applied everywhere.” Reed says he treats everyone in the business as a partner, and leaves the hiring and firing of people up to line managers so that each employee knows that they will be rewarded or punished by the person who employed them. He believes in continuous learning and reads a business book at least every two weeks. Among his favourite writers is John Kehoe, who appeals to Reed’s naturally optimistic and positive personality. He also enjoys stories about real entrepreneurs, rather than books written by “professional managers”.

Re-Writing the rules: The Vox Telepreneur Story

Reed is sanguine about the fact that all Vox Telecom’s products lose money for the first 12 to 18 months. “Six months before we listed, we went big on uncapped ADSL; we ran it at a loss, but today it accounts for 30% of our earnings. The reality of this business is that you launch innovative products that gain traction over time and then become hugely cash generative.”

That’s how Vox Telecom’s latest offering, Vox Telepreneur, came about. “I always had it at the back of my mind that telcos are particularly well suited to multi-level marketing – telecommunication is an annuity product and it’s basically a necessity,” says Reed.

Then he read Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant. “I realised we were on a hiding to nothing by selling what everybody else is selling. The book got me thinking about how we could differentiate and grow our market share by selling something different to different people.

Because Vox Telecom cannot compete with the service provided by tiny IT companies, or with the products supplied by Telkom, Reed decided to create a market segment that no-one else is in: “I saw that the best way to grow the business is to bring in customers as part of the team and to harness small entrepreneurs. If we could bring them in, we would have an 18-month lead on other companies by the time they caught on. By the end of January 2009 it will be a year since we launched Vox Telepreneur, and it has been our most successful start-up ever, with the customer base growing by 20% a month.” The business model aims to empower entrepreneurs to endorse telecommunication products and services through their own social networks and, in return, have the opportunity to both save on their telephony costs and earn residual income. It’s new in the local market, but has proved to be successful in the US and Europe, with companies like Sprint and MCI (now part of Verizon) having used similar methodologies to achieve great success.
Leverage and community are the two key elements.
Leverage, says Reed, is a particularly powerful method of harnessing entrepreneurial energy to achieve rapid market penetration. By adopting a referral-marketing strategy, Vox Telepreneur is able to achieve lower overheads and do something that no telco has done before – reinvest in its customers. Up to 57% of gross profit is redistributed to the communities that generate it, and up to 43% is redistributed to product-focused resellers such as small IT outlets and PBX vendors. Vox Telepreneur aims to grow its community to more than 300 000 customers by 2010, which will make it the largest reseller of telco services in South Africa.
Vox Telepreneur’s community of customers and dealers are at the heart of the business model. “Telecommunications has entrenched itself in the daily lives of people,” says Reed. But telco costs, particularly in South Africa, are still high. Add to this the fact that debt is rising, disposable income is shrinking and convergence is gaining popularity, and it is clear that there is a consumer need for choice – a lower-cost, cutting-edge, converged, easy-to-use choice.” The growth of this new venture proves one of Reed’s business tenets: “To grow, any business has to improve a little every day. Many become stale after a few years, not noticing that the window display is dusty and faded. To avoid this, you have to constantly keep up to speed with what is happening in your market, understand the latest trends, and know what the theoretical driving forces of the business you are in. Remember that you don’t have to be original; use ideas that have worked in other countries and make them work here.”

Why the listing

Fearing that the company was going to be sold to the highest bidder, Reed and his team wanted to make sure that DataPro remained independent. The reverse listing sped up the move to autonomy.

Reverse listing defined

A reverse listing is a complex transaction that occurs when an unlisted company uses an already listed entity as a vehicle to bring its assets to market. Rather than starting from scratch, the unlisted company sells its assets into the existing listed company. You have to comply with all the same requirements as a totally new listing. The big benefits lie in timing and discussing and transacting with current owners. By using an existing listed entity you have the certainty that you are already listed and you start out with an existing shareholder base. Even with the need to meet the JSE’s requirements, the process does not take as long. The costs of the reverse listing route are similar to those involved in a new listing.

How DataPro did it

The company listed at a premium with Reed and his team buying back the business from BoE and listing it for double the amount the next day. “We were lucky because deregulation had been announced just three weeks before,” says Reed. “We only had to raise R36 million, but because it was a reverse listing, it was expensive and no cash went into the business. Had we not reverse listed, we could have pumped R30 million into the company.”

What was involved in the listing?

Aside from raising the cash, DataPro also had to prove that its expensive shares were priced correctly. The share price ran on sentiment and it ran high. “We had to rapidly grow the business into the rating it had received,” says Reed. “As a result, we had to do exceptionally well just to remain in the same position. That took an enormous amount of time and money. We made a few mistakes which cost us in the short-term, but we also did a lot of things right.”

The pros and cons of listing

“The biggest con is that listing makes the company very visible,” says Reed. “It also means that you are reliant on others, which is not great considering that the stock market is based on fear and greed.” Reed also points out that South Africans view a long-term investment as six months. “That means you have to grow the value of the shares like mad and build a telco at the same time,” he adds. “All the while you are told what your gross profit should be and what is wrong with your business model. Brokers use your price to earnings ration (stock price divided by per share earnings over the previous year), but you cannot be measured by PE only when you are building a business for the future.” On the positive side, Reed and his team would never have acquired the business back without the listing. “Being public property is unpleasant, but we had to do it.”

Monique Verduyn is a freelance writer. She has more than 12 years’ experience in writing for the corporate, SME, IT and entertainment sectors, and has interviewed many of South Africa’s most prominent business leaders and thinkers. Find her on Google+.

Entrepreneur Profiles

6 Lesson Gems From Appanna Ganapathy That Helped Him Launch A High-Growth Start-Up

Twenty years after first wanting to own a business, Appanna Ganapathy launched ART Technologies, a business he aims to grow throughout Africa, starting with Kenya thanks to a recently signed deal with Seacom. As a high-growth entrepreneur with big plans, Appanna spent two decades laying the foundations of success — and now he’s starting to collect.

Nadine Todd




Vital Stats

Like many entrepreneurs before him, Appanna Ganapathy hadn’t even finished school and he was already thinking about his first business venture. A friend could secure the licensing rights to open Nando’s franchises in Mozambique, and they were very keen on the idea — which Appanna’s mom quickly dampened. “You can do whatever you want,” she said. “As long as you finish your degree first.”

Unlike many other entrepreneurs however, Appanna not only finished his degree, but realised that he had a lot of skills he needed to develop and lessons to learn before he’d be ready to launch the business he wanted.

“We launched ART Technologies just over two years ago. If I had started any earlier, I don’t think I would have been as successful as I am now,” he says.

Here are six key lessons that Appanna has learnt along his journey, which have allowed him to launch a high-growth start-up that is positioned to make an impact across Africa.

1. You don’t just need a product – you need clients as well

Business success is the ability to design and execute a great product and solution, and then be able to sell it. Without sales, there is no business. This is a lesson Appanna learnt while he was still at university.

“I was drawn to computers. I loved figuring out how they worked, playing computer games — everything about them,” he says. “My parents lived in Mozambique, and during my holidays I’d visit them and a friend who had a computer business. I helped him assemble them and thought I could do this too while I was studying. I convinced my dad to buy me a car so that I could set up my business — and never sold or assembled a single computer. I delivered pizzas instead.”

So, what went wrong? The simple truth was that at the time Appanna had the technical skills to build computers, but he lacked the ability to sell his product.

“If someone had said, ‘I’ve got an order for 30 computers’, I would have filled it — but to go out and get that order — I didn’t really even know where to start.”

2. Price and solution go hand-in-hand

As much as you need the ability to sell your solution, you also need a market that wants and needs what you’re offering, at a price point that works for everyone.

In 2007, Appanna was approached by a former supplier whom he had worked with while he was based in Mozambique. The supplier had an IT firm and he wanted to expand into South Africa. He was looking for a local partner who would purchase equity shares in the company and run the South African business.

“I loved the opportunity. This was something I could build from the ground up, in an area I understood well,” says Appanna. The firm set up and managed IT infrastructure for SMEs. The value proposition was simple: “We could offer SMEs a service that they could use for a relatively low cost, but that gave them everything an enterprise would have.”

The problem was that although Appanna and his team knew they had a great product, they were competing on price with inferior products. “If we couldn’t adequately unpack the value of our solution, an SME would choose the cheaper option. It was a big lesson for me to learn. It doesn’t matter how good the solution is that you’re offering — if it’s not at a price point that your target market accepts, they won’t choose you.”

It was this understanding that helped Appanna and his team develop the Desktop-as-a-Service solution that ART Technologies now offers the SME market.

“While I was developing the idea and the solution, I needed to take three key things into account: What do SMEs need from an IT infrastructure perspective, what is the most cost-effective way to offer them that solution, and what will the market pay (and is it enough to cover our costs and give us a small profit margin)?”

Appanna’s experience in the market had already taught him how cost-conscious SMEs are, and so he started developing a solution that could deliver value at a price point SMEs could accept. His solution? A unique Desktop-as-a-Service product that combines all the processing power and Microsoft products a business needs, without any capex outlay for servers or software.

“It’s a Cloud workstation that turns any device into a full Windows computer,” Appanna explains. “We hold the licences, and our clients just access our service. A set-up that would cost between R180 000 and R200 000 for 15 users is now available for R479 per user per month.”

It took Appanna and his partners time to build the solution, but they started with the price point in mind, which meant a solution could be designed that met their needs as well as the needs of the market.

“Too many businesses set everything up, invest in the solution, and then discover they can’t sell their product at the price point they need. My time in the market selling IT and infrastructure solutions gave me invaluable insights into what we needed to deliver on, and what we could realistically charge for our service.”

3. Get as much on-the-ground experience as you can


The time that Appanna spent building the IT firm he was a part-owner of was invaluable. “I started as a technical director before being promoted to GM and running the company for three and a half years. Those years were very, very important for me. They’re where I learnt everything about running a business.

“When I started, I was responsible for sales, but I didn’t have to actually go out and find clients, I just had to meet them, compile quotes and handle the installations. Everything I did was under the guidance of the company’s CEO, who was based in Mozambique. Being the guy who did everything was the best learning ground for me. It set me up for everything I’m doing today. In particular, I learnt how to approach and deal with people. Without people and clients your business is nothing.”

Appanna didn’t just learn by default — he actively worked to expand his understanding of all facets of the business. “At the time I wasn’t planning on leaving to launch my own business,” he says. “I was a shareholder and I wanted to grow that business. That meant understanding as much as possible about how everything worked. If there was something I wasn’t sure of — a process, the numbers, how something worked — I asked. I took personal responsibility for any errors and got involved in every aspect of the business, including areas that weren’t officially ‘my job’. I wanted to really grow and support the business.”

4. Stay focused

Interestingly, while the experience Appanna has accumulated throughout his career has allowed him to build a high-growth start-up, it also taught him the importance of not wearing too many hats as an entrepreneur.

“I’m glad I’ve had the experience of wearing multiple hats, because I’ve learnt so much, but I’ve also learnt that it’s important to pick a lane, not only in what you do as a business, but in the role you play within your business. I also race superbikes in the South African Kawasaki ZX-10 Cup; through this I have learnt how important it is to focus in the moment without distractions and this is a discipline I have brought into the business.”

“If you’re the leader of an organisation, you need to let things go. You can’t be everything to everyone. When I launched ART Technologies, I knew the key to growth would be the fact that although I’m technical, I wasn’t going to run the technical side of the business. I have strong technical partners whom I trust, and there is an escalation framework in place, from tech, to tech manager, to the CTO to me — I speak tech and I’m available, but my focus is on strategy and growth. I believe this is the biggest mistake that many start-ups make. If you’re wearing all the hats, who is looking at where you’re going? When you’re down in the trenches, doing everything, it’s impossible to see the bigger picture.”

Appanna chose his partners carefully with this goal in mind.

“All the partners play a very important role in the business. Ruaan Jacobs’s strength is in the technical expertise he brings to the business and Terry Naidoo’s strength is in the support services he provides to our clients. Terry is our technical manager. He has the most incredible relationship with our customers — everyone wants to work with Terry. But there’s a problem with that too — if we want to scale this business, Terry can’t be the technical point for all of our customers.

“As partners we have decided what our blueprint for service levels will be; this is based on the way Terry deals with clients and he is developing a technical manual that doesn’t only cover the tech side of the business, but how ART Technologies engages with its customers.

“Terry’s putting his essence down on paper — a step-by-step guide to how we do business. That’s how you build a service culture.”

5. Reputation, network and experience count

Many start-ups lack three crucial things when they launch: Their founders haven’t built up a large network, they don’t have a reputation in the market, and they lack experience. All three of these things can (and should) be addressed during start-up phase, but launching with all three can give the business a valuable boost.

Appanna learnt the value of networks at a young age. Born in India, he moved to Zambia with his family as a young child. From there he moved to Tanzania and then Mozambique, attending boarding school in Swaziland and KwaZulu Natal. At each new school, he was greeted by kids who had formed strong bonds.

“I made good friends in those years, but at each new school I recognised how important strong bonds are, particularly as the outsider.”

Appanna’s early career took him back to Mozambique, working with the UN and EY on various projects. When he moved to South Africa, as a non-citizen he connected with his old boss from the UN who offered him a position as information officer for the Regional Director’s team.

His next move would be to the tech company that he would run for just over three years — also the product of previous connections. “Who you know is important, but how you conduct yourself is even more so,” says Appanna. “If your reputation in the market place is good, people will want to do business with you.”

Appanna experienced this first hand when he left to launch his own business. “Some key clients wanted to move with me,” he says. “If I had brought them in it would have settled our business, but I said no to some key customers who hadn’t been mine. I wasn’t ethically comfortable taking them with me.”

One of those multinational clients approached Appanna again six months later, stating they were taking their business out to tender and that they were hoping ART Technologies would pitch for it. “Apart from the Desktop-as-a-Service product, we also provide managed IT services for clients, particularly larger enterprise clients. Due to the client going out on tender and requesting for us to participate, we pitched for the business and won. The relationship with this client has grown, allowing us to offer them some of our services that they are currently testing to implement throughout Africa.”

“I believe how we conduct ourselves is essential. You need your own personal code of ethics, and you need to live by it. Business — particularly in our environment — is built on trust. Our customers need to trust us with their data. Your reputation is key when it comes to trust.”

Interestingly, although Appanna and his team developed their product based on a specific price point, once that trust is built and a certain standard of service is delivered, customers will pay more.

6. Start smart and start lean

Appanna was able to launch ART Technologies with the savings he and his wife, Kate, had put aside. He reached a point where he had ideas he wanted to take to market, but he couldn’t get his current business partners to agree to them — and so setting up his own business became inevitable.

Although he was fortunate to have savings to bootstrap the business, it was essential for the business to be lean and start generating income as quickly as possible. This was achieved in a number of ways.

First, Appanna and Kate agreed on a start-up figure. They would not go beyond it. “We had a budget, and the business needed to make money before that budget was reached.” The runway Appanna gave himself was only six months — highly ambitious given the 18-month runway most start-ups need. “Other than my salary we broke even in month three, which actually extended our runway a bit,” says Appanna.

Appanna had a server that he used to start with, and purchased a second, bigger server four months later. He also launched another business one month before launching ART Technologies — ART Call Management, a virtual PA services business that needed a PABX system, some call centre technology and two employees.

“I’d been playing around with the idea for a while,” says Appanna. “We were focused on SMEs, and I started noticing other challenges they faced. A lot of entrepreneurs just have their cellphones, but they aren’t answering them as businesses — it’s not professional.

“In essence we sell minutes — for R295 you get 25 incoming calls and 50 minutes of transferred calls. We answer the phone as your receptionist, transfer calls and take messages. How you use your minutes is up to you. For example, if you supply the leads, we can cold call for you. ART Technologies uses the call management business as a reception service and to do all of our cold calling. It’s kept the business lean, but it’s also brought in an income that helped us with our runway.” In 2017 ART Call Management was selected as one of the top ten in the SAGE-702 Small Business Awards.

The only problem with almost simultaneously launching two businesses is focus. “It’s incredibly important to know where you’re putting your focus,” says Appanna. “The call management business has been essential to our overall strategy, but my focus has been pulled in different directions at times, and I need to be conscious of that. The most important thing for any start-up is to know exactly where your focus lies.”

Into Africa

Thanks to a distribution deal signed locally with First Distribution, ART Technologies was introduced to Seacom, which has available infrastructure in a data centre in Kenya.

“It’s a pay-per-client model that allows us to pay Seacom a percentage of every client we sign up,” says Appanna. “First Distribution will be our sales arm. They have a webstore and resellers, and we will be opening ART Kenya with a shareholder who knows the local market.”

From there, Appanna is looking to West Africa and Mauritius. “We have the product and the relationship with Seacom gives us the foothold we need to grow into East Africa.”

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Entrepreneur Profiles

Kid Entrepreneurs Who Have Already Built Successful Businesses (And How You Can Too)

All over the world kids are abandoning the traditional notion of choosing a career to pursue until retirement. Gen Z aren’t looking to become employable job-seekers, but creative innovators as emerging business owners.

Diana Albertyn



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Do kids have an advantage or disadvantage when it comes to starting and building a company? It depends on how you look it. Juggling school, friends, family and other aspects of childhood and adolescence comes with its own requirements, but perhaps this is the best age to start.

“Being an entrepreneur means having to learn, focus, and connect to people and these are all traits that are valuable throughout life. Learning this when you are young is especially crucial, and will set you up for success and to be more open to other opportunities,” says billionaire investor, Shark Tank personality and author Mark Cuban.

Here are some of the most successful kidpreneurs who have cashed in on their hobbies, interests and needs to start and grow million dollar businesses borne from passion and innovation:

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Entrepreneur Profiles

30 Top Influential SA Business Leaders

Learn from these South African titans of industry to guide you on your entrepreneurial journey to success.

Nicole Crampton



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Entrepreneurship is said to be the answer to South Africa’s unemployment challenges and slow growth, but to foster entrepreneurship we ideally need business leaders to impact grass root efforts. Business leadership is vital to improved confidence and growth. These three titans of global industry say:

  • “As we look ahead, leaders will be those who empower others.” – Bill Gates
  • “Leaders are also expected to work harder than those who report to them and always make sure that their needs are taken care of before yours.” – Elon Musk
  • “Management is about persuading people to do things they do not want to do, while leadership is about inspiring people to do things they never thought they could.” – Steve Jobs

Here are 30 top influential SA business leaders forging the path towards a prosperous South African future.

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