The study of economics is all premised around the concept of scarcity. If a good or service is in high demand but there is limited supply, the price should go up – it’s why oil prices rocketed in the first six months of the year thanks to the ability of the cartel, OPEC, to limit supply at a time of severe energy disruption in Europe as a result of sanctions imposed on Russia over its invasion of Ukraine.
Scarcity is one of the reasons why so many South African companies have sought to globalize over the past 30 years; be it a scarcity of markets, talent or capital for domestic growth, hundreds of firms have left home seeking fame and fortune. Relative to the size of the local economy which makes up less than 0.5% of global GDP, a disproportionate number have succeeded.
I remember the day this realisation dawned on me, like it was yesterday.
I emerged from a pub in Manchester on a gloomy late autumn afternoon a little over a decade ago, amazed by the fact that at least half a dozen of the beers available on tap in that establishment were brewed by SABMiller – then the second biggest brewer in the world. Brands like Fosters of Australia, Miller Genuine Draft of the USA, Tyskie of Poland, Pilsner Urquell of the Czech Republic and others were all represented alongside the local Boddingtons and essential London Pride.
As I pondered the remarkable success of SABMiller which had grown in a global behemoth from its South African base where it had been constrained through the global sanctions regime imposed on local firms during the apartheid era, I noticed something quite bizarre: a Bidvest truck came trundling past.
Bidvest was started by entrepreneur Brian Joffe in 1987 as a domestic food services business and had expanded internationally and had become a leading global player almost everywhere on earth, except in the highly competitive United States.
A Bidvest truck in Manchester? I promise, I had drunk just one beer. Slowly. I was not hallucinating.
My eyes followed it down the road and there in the half-light of the gathering dusk was another symbol I recognised: Nando’s.
The distinctive cockerel symbol had convinced British people that the brand was from Portugal when in fact its roots lay in a single take-away joint in the suburb of Rosettenville South of Johannesburg. So successful was Nando’s in inculcating itself into UK popular culture that many of its customers believe it to be a local brand when nothing could be further from the truth.
Founders Robbie Brozin and Fernando Duarte stumbled across the chicken marinated in Mozambiquan flavours on one of their regular lunchtime outings from their day jobs selling electronics. They forget who said it first but one of them uttered the fateful words: “Let’s take this chicken to the world.”
And they did.
I shook my head in disbelief and then reflected on the fact that I could have had precisely the same experience in London. In addition, I might have had the Investec zebra thrown into the mix as well. At the time, the zebra was everywhere. Investec advertised its banking and asset management operations extensively on the London Underground and the sides of taxis. All I needed at the time was a man in a green tie offering to sell me an Old Mutual life insurance policy and my day would have been complete.
It really got me thinking about the outsized success of a large number of South African firms in global are truly extraordinary. If you consider the global economy is worth about $100trn and South Africa at $435bn is less than half a percent of that – then the performance of domestic firms on the global stage is remarkable.
This has got me thinking about the importance and the power of scarcity as a key driver of business performance.
For SABMiller, it was a massive fish in a tiny leaky pond. It did not wake up one morning in the early 1990’s and decide to expand. Its rapid international growth was a result of it being trapped in South Africa by virtue of it being a global pariah state. However, the leadership team at SABMiller recognised that the writing was on the wall and it was only a question of time before the National Party government would either be overthrown or have to negotiate a settlement with the ANC and other liberation movements. They also anticipated the fall of communism and the effect that would have on economies not only in eastern Europe but also across Africa and if the ideology collapsed in Russia, surely China would reform too. It understood brewing, distribution, branding and markets.
Unlike many of global rivals it was not seeking to export its key brands but did something altogether more brilliant: It became a distributor of superlative systems related to brewing and put its own people in charge of operations worldwide as it acquired them to ensure that each business they bought would be run along the same principles and with the same pedantry with which it was managed from South Africa. The result was an astounding and rapid success all the way until it was finally rebuffed by the controlling family in Heineken who declined its offer of a takeover opening the way for a bid from the biggest brewer in the world AB Inbev.
Nando’s was born out of a different scarcity – the founders had a big idea but not enough money to take the high-flying restaurant concept global. They struck it lucky in many ways. The founders had not met Dick Enthoven, the man who over a plate of chicken at their third store at Savoy in Johannesburg told them he would fund their growth ambition on some unusual terms. Most funders seek to de-risk their investment by assuming control of the business – Enthoven took a minority stake and continued to provide funding for the business multiple times in its wild evolution that sees it with 1,400 outlets in more than 30 countries.
Perhaps the most compelling story around scarcity however is akin to the story of oil. De Beers dominated the global diamond market in the 20th century and thanks in part to the huge discovery of the single biggest haul of stones in history at Kimberly in the latter part of the 19th century decided the best way to solve the problem was two-fold. Limit supply and create demand.
It wasn’t until the firm hired a New York ad agency NW Ayer however and created some of the most memorable marketing initiatives that it changed the way in which young men felt obliged to sacrifice up to three months salary buying a diamond as a token of their love and as part of the marriage proposal. DeBeers limited supply, elevating prices and then created demand through clever marketing in order to sell its product. It created the scarcity it needed to create demand for its product – something only a monopoly can do.
I have more details on these an other stories about how a host of companies from the southern tip of Africa looked up and realised there was a world of opportunity upon which to capitalise and created sought after global brands and opportunities, in my new book Genius: How to Take Smart Ideas Global, and pull it all together in my new keynote: How to Thrive at the Edge of Chaos.