Control or growth? (Part 5)

__From “my” business to “ours”…

My five-year legal battle to get a license for my mobile telecoms venture in Zimbabwe is well documented. I had been forced to sell the business I’d built with equity support from the IFC, as my legal battle to set up a mobile company became toxic. Finally, the court had ruled in my favor. The government had accepted the ruling of the Supreme Court of Zimbabwe.

The harassments of the so-called “rogue elements” of the CIO had become a way of life. They followed me everywhere, and occasionally pulled me in for questioning.

Fast forward:

It was 1998 and now I had my license, but this new venture’s business plan screamed for equity. I would have to finance it for at least three years before getting a return (equipment was expensive and had to be imported). At that point, local banks thought I was insane anyway, so I did not even bother to talk to them.

Initially, I thought of a “strategic investor,” a large player from the industry in South Africa, but our negotiations collapsed.

So where was I to get so much “equity” financing? International venture funds like the IFC window I had previously used were afraid of my political liability.

Whenever I walked on the streets of Harare, people would walk up to me and say how much they admired the way I had stood my ground. After one of those kind comments, I suddenly thought:

“Why not ask the public to invest?! Why not offer thousands of ordinary people the opportunity to be shareholders with me in the business!?”

But this was a “start-up”…

“Can you list a start-up?” This was the question I asked my legal team, comprising Tawanda Nyambirai and Nic Rudnick (now CEO of Liquid Telecom).

“Technically-speaking, there is nothing to stop us, but there is a tradition they apply which requires three years of experience. The Zimbabwe Stock Exchange Listing Committee would never agree.”

“Let’s give it a try,” I directed.

For a start-up from anywhere (let alone anywhere in Africa) to raise money through an Initial Public Offering (IPO) on a stock exchange, was unheard of, especially led by #People considered at that time to be inexperienced managers, with a new#Product, in a new market — the yet-unproven African cell phone industry!

It led to a legal stand-off, and we prepared to go to court, when they suddenly relented. We raised $10m underwritten by a local bank. It was oversubscribed. Thousands of ordinary Zimbabweans now owned a majority of the company, as my own beneficial interest was 40%.

By this time, I had matured in my understanding of “control.” I already knew that Bill Gates did not own 51% of Microsoft. It was growth I needed, and as long as I ran the business properly, my investors would allow me to control the destiny of the business.

Within a year I would face a hostile bid to take control of the company, and the loyalty of my investors would be tested.

There would be other tests ahead, including the return of the “rogue elements” forcing me to flee for dear life, and then the highest hyperinflation in history… when it turns out my earlier decision to give up 100% “control” actually saved our company!

To be continued. . .

 

 
by 25 Replies

About Strive Masiyiwa

Strive Masiyiwa is the Founder and Executive Chairman of Econet, a diversified global telecommunications group with operations and investments in over 15 countries. His business interests also include renewable energy, financial services, media and hospitality. Masiyiwa serves on a number of international boards, including Unilever, Rockefeller Foundation, the Council on Foreign Relations’ Global Advisory Board, the Africa Progress Panel, the UN Secretary General's Advisory Board for Sustainable Energy, Morehouse College, Hilton Foundation's Humanitarian Prize Jury and the Kenjin-Tatsujin International Advisory Council. He is one of the founders, with Sir Richard Branson, of the global think tank, the Carbon War Room, and a founding member of the Global Business Coalition on Education. Masiyiwa took over the Chairmanship of the Alliance for a Green Revolution in Africa (AGRA) from Kofi Annan. He is also Chair of the Micronutrient Initiative, a global organization focused on ending child hunger and improving nutrition. In 2012, Masiyiwa was invited by President Obama to address leaders at the Camp David G-8 Summit on how to increase food production and end hunger in parts of Africa. In 2014, Masiyiwa was selected to Fortune Magazine’s list of the “World’s 50 Greatest Leaders”. As a philanthropist, he is a member of the Giving Pledge, and his contributions to education, health and development have been widely recognized. Masiyiwa and his wife finance the Higher Life Foundation, which provides scholarships to over 42,000 African orphans. In 2015, he was the recipient of the International Rescue Committee’s Freedom Award and was presented with a UN Foundation Global Leadership Award for the work of the Africa Against Ebola Solidarity Trust, which he chairs and helped establish to fund the deployment of African healthcare workers to combat the outbreak in West Africa.

25 thoughts on “Control or growth? (Part 5)

  1. Strive Masiyiwa Post author

    Afterthought 1.
    George Soros, one of the greatest investors in history, had amongst his many funds one which invested in African public equities. One day whilst I was in New York, I was invited to visit his office. It was a real honor for me. As I sat in the reception, the great man walked in and said to me: “So you are Strive,” then put his arm warmly around my shoulder and said, “You were a great captain of your little ship during the worst storm possible. We did not lose our money, and that is just amazing.” Navigating the storm of Zimbabwe’s 500bn% hyperinflation economy took Grace (and my great team) nothing else.

    Reply
  2. Strive Masiyiwa Post author

    Afterthought 2.

    Someone commented that in their state in Nigeria, there are huge limestone deposits and I should invest and take on Aliko Dangote. “Now that would be the dumbest thing I have done in a very long time!” I said to myself. If you have been on this platform for awhile, you can explain why I would never even consider something like that… Remember the #Buffalo Hunter series!

    Reply
  3. Strive Masiyiwa Post author

    Afterthought 3.

    What does the investor want from you, as an entrepreneur? Unless you can answer this question, you will run around like a headless chicken! Please comment. I will “like” the comments that are accurate.

    Reply
  4. Strive Masiyiwa Post author

    Afterthought 4.

    If you are a school teacher in a small town in Liberia, would you agree for someone to put your life’s savings in a small business run by someone you have never met in Namibia, if you have never been there? What assurance would you want from the person to go and invest your money? I will “like” some comments.

    Reply
  5. Strive Masiyiwa Post author

    Afterthought 5.

    Believe it or not, most venture capital and institutional investors get their money from people like school teachers, municipal workers, nurses and doctors in their own countries. And if they lose the money through a bad investment or in a country with bad policies, those people lose their savings.

    When I sit with investors, this is what I’m thinking about and helps keep me humble. Getting investment is a very high degree of stewardship. Don’t treat it lightly.

    Reply
  6. Strive Masiyiwa Post author

    Afterthought:
    As an entrepreneur you must make yourself an expert of Stock Market including the one in your country. If there is no Exchange in your country you must lobby for one to be set up.
    Imagine if your country had no markets where farmers could sell their produce?!
    Or if there was no where for traders to sell their goods?!
    There SHOULD be no difference in SUBSTANCE between the Nigerian Stock Exchange and the Ikeja Market for traders!
    Or Zimbabwe Stock Exchange and the Mbare Msika Market!
    #Lets keep things simple, so everyone can understand and benefit.

    Reply
  7. Strive Masiyiwa Post author

    #The Audacity of faith!

    We build our understanding “precept upon precept”:
    When you look at my journey, it took 12 years from the time I started to when I finally managed to get a company listed on the Stock Market.
    What is important is that I held that as a vision for at least a decade!
    I would always say to people, “I’m going to get my company listed on the Stock Exchange”!

    During that time I followed what happens there as though I was already a part of it. Now you understand why I want you to go and buy some shares in a company in your country. It does not have to be much.

    When there is an IPO register to buy shares and follow the process.
    This is all practice for your own IPO, even if you do not even have a company yet!

    Reply
  8. Strive Masiyiwa Post author

    #Policy matters on this issue!

    If you are a leader of a country or central bank Governor, you must be able to answer this question quickly and unequivocally, based on “best practice globally”, otherwise serious investors will not come. This guy I was talking to controlled almost $100bn in global investment!

    Afterthought:
    I was talking to a very serious global investor in New York.

    “We invested $xxm, in a small African company in country yyy. We gave them a lot of support, and they have done very well. We must now exit, because we are a Fund. Who is going to buy these shares from us, and how do we get our money out of the country, after selling our stake?”
    I get asked this type of question all the time. Don’t try and answer if you are not in senior class.

    Reply
  9. Strive Masiyiwa Post author

    Austin writes,

    Breaking News sir!

    Wow! CONGRATULATIONS TO MY ROLE MODEL Dr Strive Masiyiwa He made the Forbes list. Here is the link
    https://www.forbes.com/africa-billionaires/list/#tab:overall

    I’m very glad this is happening at a time few weeks to my travel to the States. I can now make request for pocket money lol! Wow I am supper excited for this news sir.

    My reply,
    You are welcome.
    Thank you.
    Even as they say there in Nigeria, “WE THANK GOD FOR HIS GRACE”!

    If I do my job well with teaching and inspiring you, then one day many on this platform will dominate this list, and many jobs and wealth will be created across Africa.

    Reply
  10. Stephen Kamugasa

    Hi,
    I am ashamed to say that I had never heard of you until today, when I watched a delightful interview you did at Stanford Business School at the end of 2017. I have just perused you latest blog post, and the advice you offer is spot on. It is what is most needed in Africa today. You really are an inspiration. There is hope in Africa.

    Reply
  11. Strive Masiyiwa Post author

    #Answer to a question I posed:

    Afterthought 2.

    Someone commented that in their state in Nigeria, there are huge limestone deposits and I should invest and take on Aliko Dangote. “Now that would be the dumbest thing I have done in a very long time!” I said to myself. If you have been on this platform for awhile, you can explain why I would never even consider something like that… Remember the #Buffalo Hunter series!

    My answer:
    My friend Aliko would kick my behind (from an entrepreneurial point of view) if I entered his area of expertise on his home turf! With respect the same would probably happen to him if he came into telecoms.
    Aliko knew about the telecoms opportunity in Nigeria when it happened but being wise he knew to focus on where his own competitive skills lay which was in Industrial manufacturing.

    To find an opportunity that will make you an Aliko or a Bill Gates, focus on your own competence, and stay there. Don’t be attracted by shinny objects you see others holding, because all you need to do is polish the diamond in your own hand.

    Reply
  12. Strive Masiyiwa Post author

    #Answer to something I said in Afterthought 2:

    If you go back to some of my earliest lessons you will remember that I have always stressed that true entrepreneurial success is not based on a sector. If you find diamonds or oil, it does not necessarily mean you will make more money than a guy who is farming, or running supermarkets!

    The key is mastery of the “3Ps”, properly applied.
    If you offer me a diamond field, or oil block, I would not know what to do with them, and I’m really not that interested in them. This is senior class stuff now!

    Reply
  13. Strive Masiyiwa Post author

    Osmo writes,

    Strive Masiyiwa, Question: What determines the equity you give an investor for capital? For example, you got $250 000 equity capital for a 25% stake, and with regards to listing on the ZSE, you said your “own beneficial interest was 40%.”
    Does it have to do with the value of the business, if so, what or who determines the value, especially concerning the $250 000 you got?

    My reply,
    This is actually a good question.
    The Venture Capital Investor does an evaluation of your business based on its historical performance. There is a combination of science, and negotiations which take place.
    For a public listing the Evaluation is done by professional bankers. The principals are the same for all investors, but the process is just different. For an IPO there are also stringent rules and laws which must be followed. It is much harder.
    When I raised money from Venture Capital Investors I was already in business for more than 4 years, and I had audited accounts.
    By the time of the public listing I had been in business for 12 years, even though the particular venture was new. Investors look at the entrepreneur as much as the type venture.

    Reply
  14. Strive Masiyiwa Post author

    Zewelanji writes,

    Sir how can this be when we clearly see sectors where growth/profitability is more than other sectors.This is b one honestly I have struggled with.For example Mckinsey reports show 6 white sectors which are poised to grow more tremendously than others(https://hbr.org/2016/09/these-6-sectors-of-africas-economy-are-poised-for-growth)

    My reply,
    Every sector offers each one of us the same opportunity based on our competence in the “3Ps”. The richest guy in Africa is in cement, but if we all try to get into cement we would not necessarily prosper. The richest guy in the world (Jeff Bezos) is in eCommerce, but if we all rush there we will not all necessarily prosper as he has done.
    This type of report by McKinsey has a different purpose all together and should not be used to help us find opportunities as entrepreneurs.

    Reply
  15. Strive Masiyiwa Post author

    Oagana asks,

    Great insight…

    I had also thought also as to what guides or determines the amount of ordinary shares one has to offer for an IPO and the share price at that time.

    My reply,
    Once you and your advisors decide how much money you want to raise in the IPO, you can also decide what type of investors you want. Since you can raise all the money from big institutions they don’t care what the initial price per share is, but it matters to ordinary people.

    In the case of Zimbabwe I wanted ordinary people to have a chance to buy shares, so I directed that a minimum price be set of ZWD$1 per share, and a person just needed to buy 100 shares. This was before hyper inflation. This is what allowed even my domestic worker to buy shares. Every single worker was allocated shares.
    Whenever the price per share has become too high, I ask the shareholders to allow us to “split” them into smaller units so ordinary people can continue to buy. This still happens even today.

    Remember Econet Wireless Zimbabwe is the most “widely held” public company in the country, and the majority shareholder is not me: it’s the public investors.

    Reply
  16. Strive Masiyiwa Post author

    Loko writes,

    I would also like to ask what your take is on crypto currencies? Today I saw on the news the Nigerian central bank warning its public to stay clear from it. What possibly could be their reasons? Garcia

    My reply,
    I have deliberately avoided talking about cryptocurrencies for two reasons:
    #1. It is not my business area, and I don’t know enough about it. There are a lot of things going on out there, and I cannot be involved in them all.
    #2. I’m not an investor looking for opportunities to make money. If I have surplus money to invest (outside my core competence) I generally prefer businesses that I understand, that are listed on a Stock Exchange, where there is accountable management.

    Having said all that I have an insatiable curiosity so I do read a lot about cryptocurrency as well as it’s underlying technology Blockchain from the world’s leading experts on the subject.
    Just be careful my friend, unless you are REALLY smart, in which case you don’t need my advice.

    Reply
  17. Strive Masiyiwa Post author

    Afterthought:
    #Why I want you to buy some shares!

    When I asked you to buy some shares on your local Stock Exchange, my intention was not to encourage you to become an investor or to commit all your savings into shares.
    Here is my reason:
    This is an exercise I want you to do as an entrepreneur or someone who one day wants to be a successful entrepreneur:
    I want you to buy the (minimum) number allowed, and do it if possible for just a few companies:
    At that point you are now one of THE OWNERS of that business, and you must now behave as an Owner!
    -An owner knows their company intimately;
    -An owner cares for their company and its employees;
    -An owner is fiercely loyal to the products and services of their company;
    -An owner attends meetings and asks questions of management;
    -An owner participates in decision making.

    There are just some things in life that are difficult to reach, if there are no practical examples.
    I can give you lessons in swimming techniques, but if I don’t get you into the pool it’s a waste of time!
    I need you to learn about using a Stock Exchange for its primary role:
    Raising Capital For Entrepreneurs Like You!!!

    Reply
  18. Strive Masiyiwa Post author

    Afterthought:
    Your “practical” on buying shares as an entrepreneur and not as an investor:

    Once you have a minimum number of shares in a company, you are allowed to attend its meetings, and to get important information:
    Let me share a secret!
    I used to buy shares simply to enable me to attend meetings to learn about public companies. I did not buy shares because I was interested in investment through shares.
    I wanted to understand how the system works!
    When I said “let’s give it a try”, it was not just an act of faith, but one buttressed by a “sound mind”. Remember these words are for a practical world:

    2 Timothy 1:7
    “For God did not give us a spirit of timidity (of cowardice, of craven and cringing and fawning fear), but [He has given us a spirit] of power and of love and of calm and well-balanced mind and discipline and self-control.”

    Reply
  19. Strive Masiyiwa Post author

    #Answer to Afterthought 4:

    Afterthought 4.

    If you are a school teacher in a small town in Liberia, would you agree for someone to put your life’s savings in a small business run by someone you have never met in Namibia, if you have never been there? What assurance would you want from the person to go and invest your money? I will “like” some comments.

    My reply,
    School teachers, especially in the developed economies of the US, Asia and Europe and even South Africa, are actually amongst the largest investors in the world, as are civil servants and local government employees.
    Surprised?
    So would many of them but they own large stakes in companies like Apple, Microsoft, Alibaba and so on. They also own shares in companies on Stock Exchanges all over the world including Africa.
    Every month these teachers and other public workers have money deducted for their retirement. Given their numbers this money is very large, hundreds of billions of dollars; and their pension funds do not have the skills to find good investments, so they give it to people like George Soros to invest it on their behalf for a commission:
    These fund managers are the ones who go around looking for investments as Foreign Direct Investors: using terms like Venture Capital Investors, and Private Equity Funds, Hedge Funds etc.,

    Reply
  20. Strive Masiyiwa Post author

    Emmanuel writes,

    This is something I have been looking for a long time, thank you for opening my eyes.
    I know things happen in the Board Room, Board Room is the operation theatre for the company.
    I must shares within this month and I know I will get where I want to go and what I want.
    Again, thank you for your time and God bless you more with His Wisdom.

    My reply,
    The “Board Room is The Operations Theatre of a Company”, is something I have said before. However this is provided the people who sit on that board know what they are doing, and are properly qualified and accountable.
    The most dysfunctional boards I have ever seen in my life are usually with respect to State Owned Enterprises in Africa. Sometimes it makes me want to cry when I see the type of people who get appointed on these boards, then we all wonder why these organizations fail.

    Reply
  21. Strive Masiyiwa Post author

    NBA Basketball game in London last night!

    Last night my wife and some of our daughters went to watch an NBA Basketball Game in London, similar to the one we organize each year with the NBA in Joburg.

    We had a lot of fun!
    It was also great to know that the same game was being broadcast live in over 40 countries EXCLUSIVELY by Kwese Sports and its partners. How cool is that?!

    Reply
  22. Strive Masiyiwa Post author

    @RealTrump should read this:
    Matthew 12:35 (Living Bible)
    “A good man’s speech reveals the rich treasures within him. An evil-hearted man is filled with venom, and his speech reveals it.”

    #” An evil-hearted man is filled with venom, and his speech reveals it.”

    Let’s not dignify what he allegedly said by ourselves engaging in speech (using words, and derogatory insults) that would make us also “evil-hearted”. Certainly not on this platform, let us rather focus our energy on “making the World (including America) greater.”
    Strive Masiyiwa

    Reply
  23. Strive Masiyiwa Post author

    John Mwangi asks,

    Sir can I ask who have you honoured with today’s photo

    My reply,
    When I have written a post for Facebook, my team gives me different photo options to look at. I just loved this photo of a happy African couple with a cell phone.
    I don’t know them, or even the country where it was taken, but it is so beautiful!
    Money will never buy you the happiness that you see in this photo.

    I think this couple is watching Shark Tank on Kwese Inc on their mobile phones. They are probably laughing at some young couple that are dancing after getting money from “Mr Wonderful”!
    What Kwese TV show do you think they are watching?

    Reply

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