From Silicon Valley to Swaziland by Rick & Wendy Walleigh (read aloud txt) 📖

money would be no problem and agreed to give them what they needed. They verbally agreed on a disbursement schedule, and the pole plant again started moving toward production. Very quickly, the investor said that he was having problems collecting amounts due him from government projects, and he could not deliver cash in the amounts and on the agreed to schedule. Although the investor ultimately gave our entrepreneurs 80 percent of what he had initially promised, they again ran out of cash, having only performed test runs at the plant with no significant sales.

MPE Timbers had come to TechnoServe to help them find financing for a project that still looked very favorable on paper; although the estimates of the capital required were now triple what they had been originally. We all agreed that our review and recommendations on the project might lend it sufficient credibility to get a better chance at funding. I felt the whole story was strange because it had been six years since the company had been formed and over four years since they had taken out the original loan. This was a different business world for me. I was accustomed to the pace of Silicon Valley where things happen fast, and when you run out of money, you sell the furniture, vacate the premises, and move on to your next job within a few months. If this was such a good business, why hadn’t it succeeded? Or if it wasn’t, why hadn’t it been put out of its misery? This was a very different animal, and I was intrigued to figure out what could and should be done.

As I asked questions around the office, I learned that from the perspective of local economic development, everyone was enthusiastic about this project and still wanted it to succeed. It would provide over two hundred jobs in Swaziland, including harvesting the timber. It would also provide the local utilities with home-grown poles at a much lower cost. It looked great on paper. I thought maybe I could apply my consulting experience to understand the situation and create a potential solution.

As I puzzled over MPE, I read the business plan from my second client. He wanted to start a bottled water company. A group of college students had done a study for him of the local bottled water market and found that there were approximately eight companies competing, including Coke and Nestle. They also found wide discrepancies in the prices that these companies charged and consequently concluded that the price that is charged doesn’t matter much to consumers. Our entrepreneur thought he would be able to capture 20 percent of the market. He owned some land with a well that would be his source of water and had analyzed what equipment a bottling plant would need and what it would cost to purchase and operate it. He had committed to putting up 15 percent of the total investment himself and was looking to borrow the other 85 percent. Because this was already a large amount of money, he decided that he couldn’t afford to set up his own distribution capability, so he planned to subcontract it.

In business school, we occasionally got cases like these, often on exams. They were great vehicles for demonstrating everything you knew about an area of business because there were so many things that you could explain were wrong and why. Sometimes after discussing a case in class, the professor told us what had happened to the company. With this type of case, we always hoped it wasn’t the one exception in a million that was successful despite violating every known business principle. I don’t remember a single case that surprised us. knew the right answer for my client. My challenge was how to tell him in a credible and empathetic way.

In discussing this with my junior colleague, Mpendulo (again, hum the m, then “pen-du-lo” with long vowel sounds for the u and the o), I explained that the only way that this business could succeed would be to establish a unique brand that addressed a specific niche and to do this with very little money available for advertising (against Coke and Nestle). Obviously tongue in cheek, I suggested that we start a rumor that this water would either heal very sick people or increase male potency. Those were the only ways I could think of to make this business successful. More seriously, we set about collecting information that would clearly demonstrate the futility to our client.

For both Wendy and me, the first week of work was intense as we jumped into our new assignments, and the days went by quickly. To our surprise, after only one week of work, we got a three-day weekend. Saturday was declared a national holiday in Swaziland because it was the birthday of the prior king, Sobhuza II (“So-bu-za” with long vowel sounds for the o and u, short for the a). As with many holidays in Swaziland, the holiday declaration seemed to come at the last minute and to be a surprise, even though Sobhuza II’s birthday was well known. Sobhuza II was the father of the current king, Mswati III, and the longest reigning monarch in any country in history. (It must have been his eighty wives who kept him healthy). Leslie decided that it would be unfair to celebrate a holiday on a Saturday, so she closed the office on Monday and gave us all a three-day weekend. Not bad for our first week on the job. We rented a car and drove to Kruger Park in South Africa for three days of big game viewing.

Back at work on Tuesday, Mpendulo and I met with the man who wanted to start a bottled water company. He was a very pleasant, gray-haired gentleman, probably not much older than me. He was retired but had a BS degree from Penn State University in agricultural mechanization, which had been his specialty throughout his career. Based on his idea and a good source of clean water, he had hired one consultant to write a business plan for the bottled water business and another consultant from the beverage industry to develop a set of specifications for a bottling plant.

However hopeful, our entrepreneur had very little in the way of ideas as to how he would compete with the large companies that were already in the market. He thought that he might be able to get preferences from local merchants because his would be a local Swazi company. He had talked to a number of retailers, although not the large ones, who had been encouraging, but all told him to come back when he had actual product to sell. He indicated that local hotels already had deals with existing water companies, but he thought he could break into this market if he formed a partnership with Tibiyo, the Royal Swazi company, that had investments and influence in many businesses throughout Swaziland. He hadn’t yet talked to Tibiyo in the two years that he had been pursuing his idea. He had talked to a large multinational food products company with a local presence about doing his distribution. In the discussions with the large multinational, the local manager had indicated a possible interest in sourcing private labeled water from him. However, the manager who had been encouraging had now been transferred to another location and the new manager didn’t show as much interest. When asked how he intended to promote his product, which we thought would be critical to any possible success, our entrepreneur had a one-word answer, advertising.

Mpendulo and I also inquired about the planned capacity of his plant and the size of the Swazi market. His planned capacity was roughly 60 percent of the total Swazi market, but he hoped to export to Mozambique and South Africa.

While any potential investor in the United States would have quickly dismissed this proposal, TechnoServe was trying to encourage entrepreneurship in a developing country. We needed to put in the extra effort to explore any possibility. I was also new to Swaziland and didn’t want to alienate anyone. This meant that I needed to thoroughly research a proposal before giving someone the bad news that their idea just wasn’t justifiable. So Mpendulo and I planned our investigation.