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Cornastone: Hamilton Ratshefola

From Infrastructure to Services, this IT firm achieves massive growth from annuity income

Monique Verduyn

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Hamilton Ratshefola realised that he had reached a peak in his career when he grew IBM’s public sector business from R30 million in 1995 to R300 million in 1999. At the time, he had spent 10 years with the technology giant, where he started out as a mainframe engineer, then moved onto sales and eventually general management.

A graduate of North West University, Ratshefola had a BCom in accounting and information systems, but a year as an accountant proved to be too dull for him so he switched to IT. “While I was at IBM I completed a great number of training and development programmes, here and in the US and Europe.

A decade later I knew it was time to apply the wide range of skills and competencies I had acquired to developing my own business.”

In 2000, he and business partner Lufuno Nevhutalu took out a second bond on their homes, which they had already paid off, and launched Cornastone. The first order – for R900 000 – came from SA Mint. Within a few months the two achieved R2 million gross profits.

The company started out as an infrastructure provider, selling hardware and software. Today, Ratshefola heads up Cornastone Consulting, while Nevhutalu runs Cornastone Enterprise Systems. Together, the companies turned over R200 million last year, R70 million of which was contributed by the consulting arm.

Clients include South Africa’s biggest telcos, and retailers, as well as several government departments and parastatals. The BMI-T Forge Ahead Black IT Forum named Ratshefola as one of the Top 20 Black IT Professionals in South Africa and he was one of the top five in IT Personality of the Year 2006.

“Starting out in infrastructure was a good move,” says Ratshefola. “When you are a reseller, you quote on a system, the client buys it from you and you drop it off. The services you have to provide are minimal, and it’s easy to break even. That was important when we launched the business as there were only three of us and we needed to get things moving quickly.”

But Ratshefola did not believe the reseller model was sustainable, so he moved into consulting in 2003. “As a reseller if you don’t sell, you don’t earn. If your hardware and software partners decide to change their margins, your business can take a huge knock.

That was why we split the business into two and launched a consulting arm that would bring in annuity income.”The move brought in several big ticket contracts from companies that were keen to outsource their IT application requirements.“This year the services business will amount to over R110 million, with R70 million of that already guaranteed because of signed contracts.

It’s a sustainable business model that complements the enterprise systems side. I am a great believer in selling in advance so that you do not have to start each year from scratch.”The one challenge Cornastone faces on an ongoing basis is that of funding company growth. Ratshefola and Nevhutalu have resisted offers to invest in the business because they believe they have the best growth plans and are not ready to hand over the reins to anyone else.Without private equity, however, says Ratshefola, you have to approach the banks and they are notoriously cautious about funding business growth.

He has overcome this by investing in several complementary businesses and using the business’s own capital to fund further expansion. “We had to use our own cash reserves to fund growth, but that decision has worked out well,” he says. Cornastone’s focus for the next 12 to 18 months is capitalising on its existing customers and expanding the business.

“The demand out there is enormous, but our growth is dependent on finding the skills that will enable us to meet market demands,” Ratshefola notes. He has developed a strong recruitment programme that brings in young graduates every year, training and developing them in line with the company’s high standards.“As direct sellers, we’ve traditionally done very little marketing,” says Ratshefola.

“In the services business is a combination of intellectual capital and the process you develop. We have marketed the company by ensuring that every project we complete becomes a reference site.” 

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+.

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