My heart sank. We were all dressed up. It wasn’t a fortune, but we had spent several hundred dollars to look authentic. We were lucky enough to be in Swaziland just at the time of the Umhlanga, and we had missed it. I couldn’t be mad at Mkhululi because he had helped us with the clothing and had volunteered to escort us to the event. Around the office, we had mentioned that we were going on Monday, and no one had said anything. I didn’t know what to do. Mkhululi suggested that we go to the king’s lands where the thousands of young women were camping and the festival was held just to see if there were any activities planned for today. Based on our experience over the last two months, this made a lot of sense. In Swaziland, schedules for things like this were not well specified or publicized in advance. Somehow, people just kind of knew or found out. In fact, the specific date of the Umhlanga was only decided and publicized a few weeks prior. It’s not clear how the date is determined. If it were based on the sun or the moon, it certainly could be calculated years in advance, but it’s not. I guess that helps it retain some of the mystery, and more importantly, someone gets to retain his sense of importance because he gets to determine the date.
Not to look entirely stupid, we changed back into our regular clothes and drove to Mkhululi’s house. Mkhululi had just moved into his new house. While he was at work, his wife had done most of the moving and furniture arranging. She was exhausted and needed some sleep, so Mkhululi brought his one-year-old daughter along with us as we drove the few miles to the king’s lands. As we got close to the main festival site, we began to see lots of young women and the temporary infrastructure necessary to support them. It looked like the aftermath of a parade, the packing up of the circus, or the end of a Girl Scout camporee with some significant differences. As we approached, we crossed a small river on a one-lane bridge. Along the river banks, we could see dozens of young women washing their clothes and bathing. Those that were bathing were completely naked and seemed very comfortable with that fact. The Girl Scouts would not have approved.
We continued driving through the bustling crowds of young women and eventually arrived at a makeshift parking lot outside the gates to the king’s residence. A number of cars were parked, and there was a gaggle of police officers chatting among themselves. Mkhululi got out and approached one of the officers to find out if anything official was happening that day. He came back to the car and brought good news. Yesterday had been the ceremonial presentation of the reeds to the Queen Mother. However, today was scheduled for the parade and dancing for the king! We hadn’t missed it! The activities would start at 2:00 p.m. We would come back, and we wouldn’t even worry that the start was probably quoted in “Africa time.” It didn’t matter that we would have to sit and wait for a while; we were going to see the Reed Dance. We took Mkhululi back to his house and agreed to come back at 1:30 p.m.
After a few errands, lunch, and changing back into our traditional clothes, we drove back to Mkhululi’s house. His wife Katy was awake and would go with us to the Reed Dance along with their young daughter. Mkhululi had given us some coaching on our attire so now my two skirts were held up by knotting the ends of the cloth together rather than with safety pins, as had been the case this morning. The cloth around my torso still relied on the safety pins.
We piled into two cars and headed for the stadium at the king’s residence. As we approached, we had the same feeling that we’d had at Sonnyboy’s wedding, like arriving for an important high school football game in a small town, except here the crowds were bigger. We parked in crooked rows in a field next to the stadium and walked along the long fence to the stadium entrance. The metal detector we walked through at the entrance was something I’d never seen at a football game, but the feeling was still similar. The stadium had seats for probably five thousand spectators, but the parade ground in the center was over three times the size of a normal football field. The stands on the near side, next to the king’s reviewing area were full, so we had to walk around the entire field to get to the open seats. As we were walking, we went past thousands of half-naked young women lined up for their parade. We tried not to stare at them, and they tried not to stare too much at us. However, they were looking at us a lot. We definitely stood out. Out of probably four thousand spectators, we were among the less than 1 percent who were white and were probably the only white family in traditional dress. Did I say we stood out? And did I say that Mkhululi paraded us in front of most of the spectators in the stadium before we chose our seats?
Although we felt conspicuous, there was a friendly sensation coming from everyone who was looking at us. The people made us feel that we had made the right decision to dress traditionally. And we felt proud about how we looked. In fact, we got help on looking even better. As we were walking to our seats, two young men came up to us and said that they appreciated our dressing traditionally, but that we hadn’t gotten the outfits quite right. They would help us. I had the most serious problem. Although my top wrap covered the correct shoulder, I was using safety pins, which is taboo. The young men showed me how to knot the cloth so that it was properly held in place without pins. We thanked them, took some pictures, and then went on to our seats.
After the arrival of the queen mother and then the king, the actual events began, which weren’t spectacular. It was not like the closing ceremonies at the Olympics. It was just forty thousand half-naked young women, dressed in costume, divided into local groups, parading in formation around the stadium and then stopping to dance in front of the king. In recent years, the ceremony had attracted more very young girls, and the first group in the parade was comprised of toddlers with their chaperones trying to keep them in order. The second group was comprised of members of the royal family. After that, a knowledgeable Swazi citizen could probably tell the groups apart based on their home towns, but they began to all look the same to me. After a few thousand pairs of naked breasts, the novelty wears off. It was a unique cultural event, and I’m very glad I attended, but I won’t need to go back again right away. Mkhululi hadn’t been in ten years.
Later, when we discussed our experience with our friends and colleagues, we heard a surprising range of opinions on the Reed Dance festivities. Most of the Swazi men and some of the women thought that it was an important part of Swazi tradition and should be preserved. However, most of the women we knew (educated and city-dwelling) thought that it was demeaning to women and was just one example of how the Swazi culture and society were still male-dominated and oppressive to women. Mkhululi said his daughter would definitely participate as soon as she was older, but Katy said that wasn’t going to happen. It reflected the general Swaziland condition, a small country with strong and proud traditions (including a powerful king) confronting the modern world.
We didn’t stay to see all of the sections of young women parade in front of the king or the singing that followed. As we were leaving, a fashionable, attractive woman asked us to pose for a picture. An adolescent, who might have been her daughter, joined us in the photo. We thought nothing of it until we heard later that it was in the local newspaper. The caption under our picture congratulated whoever had helped the tourists to dress so authentically.
On Tuesday, we continued our short vacation and went to Cape Town. Any flight out of Swaziland is expensive, so we drove the four-plus hours to the Johannesburg airport to save over $600. We later learned that the shortest route on the map is not the shortest route in time; we saw a lot of small towns along our drive. We also saw the settlements (shantytowns/slums) near the Johannesburg and later the Cape Town airports. These were the remains of apartheid when black Africans were forced to live in “townships” on the outskirts of major cities. When apartheid went away, the residents of these townships could legally move elsewhere. However, that didn’t mean that they could afford to move elsewhere, so these communities remain. Evidently, they were slowly being upgraded with sewers, running water, and electricity; but this was, of course, very expensive for the government and was taking a long time. Today, the living conditions in the former townships remain a source of terrible frustration for millions of South Africans.
Within these communities, each individual dwelling (politically correct euphemism for shack, hovel, etc.) may be no worse than those in the poor communities in Swaziland, but the impression is very different. In these settlements, there are thousands and thousands of tiny makeshift dwellings packed tightly together housing hundreds of thousands of people. Some of the South African settlements are larger than the largest cities in Swaziland, and several together would contain more than Swaziland’s total population. Today, some of these former townships offer tours and overnight stays, but we had seen enough from a distance. Even from a distance, it makes a visceral impression that you don’t easily forget. I was angry at the former apartheid government and its supporters who had forced the residents into these conditions, and I tried not to despair about how difficult it will be to get everyone out of these settlements. I frequently had to remind myself that major change comes step by step and that lots of little steps add up over time.
After an uneventful flight, we drove to our Cape Town hotel and only got slightly lost along the way. Our hotel was in a community called Bantry Bay and, as might be expected, had a very nice ocean view. This part of the coast, near the tip of the continent, is a mixture of cliffs and small beaches. Our hotel was perched on a steep slope that rises up to Lion’s Head, one of the distinctive mountains surrounding Cape Town. After unpacking, we went out for dinner along the Victoria and Albert Wharf, a beautifully developed, modern, tourist, and shopping area.
Cape Town is called the mother city of South Africa because it was the original European settlement. It is also southern Africa’s most attractive and cosmopolitan city. With its wonderful geography, some people think it is one of the most beautiful cities in the world. Many people will also tell you that it feels much more like Europe than Africa. One of the reasons for this is that in Cape Town, “Africans” are not the majority, and the population is much more racially diverse than other African cities. However, I need to explain this statement and the quotes around Africans. It has to do with approaches to racial classification and previous discrimination.
Historically in the United States, anyone with any African ancestors was referred to as colored, Negro, black, or African-American with all of these terms being synonymous but acceptable in different eras. Even people who had mostly white ancestors were categorized (and often discriminated against) using one of these terms. The rules of racial discrimination were different in South Africa. Instead of having basically two racial groups, black and white, South Africa has historically had three: white, black or African, and a third group called colored. The whites were pure white; the Africans were pure black; and the coloreds comprised everyone in between, including people of Asian as well as mixed-race background. Because of the history of the various races that came or were forcibly brought to Cape Town, and because of a generally more liberal populace, Cape Town has a high percentage colored population. In Cape Town, coloreds, not “Africans” comprise the majority. Cape Town’s cultural diversity plus the long history make it a very interesting city. For example, one of the sights we visited was the Jewish museum. This modern facility employs a wide variety of exhibits and media to chronicle the history of the Jews in South Africa, including their contributions to the community and the economy and their opposition to apartheid. In fact, it was a Jewish firm that gave Nelson Mandela his first job as a lawyer.
In addition to Cape Town’s historical, cultural, and topographical sights, e.g., Table Mountain, there is also the Cape Peninsula to visit. This is the peninsula that goes from the city of Cape Town down to the Cape of Good Hope. Cape Town has many similarities with San Francisco, e.g., water on three sides, hills/mountains, cool weather, and fog. The Cape Peninsula has a lot of similarities with the Monterey and Big Sur areas and makes for a nice oceans-hugging drive. If you start down the peninsula on the west, you’re driving along the Atlantic, and if you come back up on the east, you’re driving along the Indian Ocean. Even though the Cape of Good Hope is not really the most southern point in Africa, it is the most southwestern point and still considered the dividing line between the Atlantic and Indian Oceans.
Right next to the Cape of Good Hope is Cape Point, a little farther south but not as far west. At Cape Point, you can walk or ride a funicular up to the top of the point for a great view. When we arrived, we were told that the funicular was closed for maintenance, and we would have to walk. Overhearing some other tourists, we quickly realized that there was no maintenance going on. The funicular was closed because it was being held for Vladimir Putin, the president of Russia, who was visiting South Africa. As we neared the end of our climb up the walkway to the top, we saw the cavalcade of flashing lights coming down the road to Cape Point. Soon after, Vladimir Putin emerged from the top of the funicular, surrounded by guards and attendants. He was the shortest person in the group, but also the most intimidating. His steely visage was complemented by his wardrobe and muscular physique. He was dressed in a dark sport jacket and slacks with a black turtleneck that gave him the ominous look of a mafia don. Although he is short, you wouldn’t want to pick a fight with him. He has the build of a martial arts instructor and probably the skill as well. He looked briefly at the view, got back into the funicular with his entourage, and quickly the cavalcade left. We walked back down to our car and drove back up the east side of the cape, visiting a colony of “jackass” penguins along the way. Although now properly called African penguins, their braying sound makes it obvious how they got their name.
Business Finance and Other Challenges
Before our short vacation, Mpendulo and I had visited the Swaziland Investment Development Company (SIDC) to confirm their position on MPE Timbers. In our previous meeting, they had said that there could be money available to invest in a restructured company, but it wasn’t clear to me how much and under what conditions. SIDC had mentioned their interest in a new partner and some new management, but once again, it wasn’t clear as to how firm these interests were. Although we had found Dave, a possible new equity investor for MPE, Brian wanted to pursue the alternative of getting funding only from SIDC. If this could work, the existing shareholders could preserve their equity. If not, bringing in Dave would mean that existing shareholders, while receiving some compensation, would lose all their equity in the company.
The meeting with SIDC clearly answered my questions. I had prepared a long list of questions to gently probe our contact about their interests and direction. It wasn’t necessary. After answering my first question, Mr. Dlamini (slur the “d-luh-mee-nee,” the ancestral name of a large portion of the Swazi population) elaborated that SIDC was not interested in getting deeper into difficulty with MPE. They wanted a way to reengineer the situation and turn it into a favorable investment. To them, this meant getting an equity infusion from a new partner, preferably someone from the industry who would take an active role in management. If these conditions were satisfied, then SIDC might be willing to make an additional investment but only in a restructured company with high prospects for success. It was a short but pleasant meeting. All of our questions were clearly answered, and we knew what our path had to be going forward.
On our way back to the office, I planned my phone call to Brian. I had to make the situation clear, but I wanted to retain a sense of optimism and generate enthusiasm for working with Dave. I really thought Dave would be a good partner and would deal fairly with the existing stakeholders, giving them a chance to recoup their investments and make some money.
The call with Brian was long, as expected, but it went well. As often happened when conversing with Brian, I spent a lot of time listening as he recapped six years of plans, dashed hopes, struggles, and excuses for failures. However, after hearing how the meeting went with SIDC, Brian quickly grasped that he was not in a good negotiating position. Basically, he knew that Dave was his only hope for salvaging anything from MPE. So we began talking about what Dave’s conditions would be and what Brian would want out of the deal. As we talked, a scenario emerged that could be agreeable and beneficial to all sides. Both Brian and Dave believed that Brian could contribute a lot in getting the plant and the company running. However, after many years of working for himself, Brian was not interested in a long-term management position in a company where he didn’t own significant equity. Instead, he suggested the possibility of setting up his own sales company in South Africa selling treated poles coming from Dave’s plant. This type of scenario could fit with Dave’s preferred mode of operation, which was to have arrangements with independent responsibility, risk, and rewards but also including incentives for mutual success. Brian agreed to talk to Robert and explain the situation to him. I agreed to meet with Dave and explain their interest in moving forward. At the end of the day, I was feeling good that we had some direction and perhaps even momentum.
I continued to crank through some more numbers for MPE. Although not an Excel wizard, I could put together some pretty good spreadsheets. At least they clearly showed the important factors and consequences of various scenarios. I even graphed the cash flows over time resulting from alternative decisions. I wanted to make it as easy as possible to see what the choices were and what the outcomes could be. I also wanted to make it easy to see the effects of changing assumptions. My primary beneficiary was intended to be Dave. He’s a lawyer with a great intuitive sense of business, but not a numbers person. I wanted him to understand and be comfortable with the story the numbers told.
I met with Dave later in the day. I brought him up to speed on events and loaded him up with spreadsheets to review. I suggested to Dave that the next step would be to get all of the relevant parties together for a one-to-two-day meeting to begin working through the details of a start-up plan and a deal. He agreed, and I asked Mpendulo to schedule the meeting for two weeks in the future. Although I knew most of the work was still ahead, I was feeling good that we at least had a strategy. As I later told Wendy, “Although there are still 101 tactics that have to go right, at least we have a direction.” On Monday, after returning from Cape Town, I learned that Mpendulo had scheduled the two-day meeting among Brian and Robert from MPE Timbers and Dave to start on Tuesday but that it had been postponed until Wednesday because Robert and Brian had uncovered two new prospective investors, and one was actually visiting the treatment plant site that day. I was shocked that two potential investors had suddenly emerged, so I called Brian to see what was going on. Evidently, Brian and Robert had been talking more about Dave’s initial conditions for a deal, specifically that Dave would end up with 100 percent ownership, and they really didn’t want to agree to it. Independent of how much they might be compensated, they wanted to retain at least some ownership. Something in their discussion must have motivated them to try harder, and somehow they discovered their new financing candidates. One was the investment arm of a trade union group in South Africa. Robert had gone to college with one of the officers. The other was the Investment Development Corporation (IDC) of South Africa to whom Brian had been introduced by a friend of a friend.
Brian indicated that Robert had already taken his friend, from the South African trade union group, to see the plant and would probably want to stop by our office and talk with us in the afternoon. They were both still planning to meet with us the next day. Later, Robert did bring his friend to our office and wanted me to present my assessment of the project to them. This was something that I wasn’t really prepared to do. Since we had only one prospective investor, I hadn’t seen the need to pull together a formal report; although I had done a lot of the necessary financial analysis. So we met in our conference room, and I talked informally about the attractive characteristics of the project and said that I was working on the formal report. This seemed to be enough for today, but it was clear that I had to start some serious writing.
These developments totally changed the nature of the meeting that we needed to have the next day. I called Dave and asked him to come to the office tomorrow afternoon. Mpendulo and I would meet with just Brian and Robert in the morning. We still needed to get a lot of details on the start-up plan, but we also needed to plot out how they wanted to approach the various investors.
On Wednesday, it became very obvious that I had to quickly issue TechnoServe’s version of the MPE business plan and funding request. Brian had met with the representative of IDC of South Africa, and he was also interested in getting our report. I committed to getting out the report by the end of the next week, which meant finishing it early in the week so that it could go through internal reviews and revisions. I also needed additional information from Brian to finalize some of my financial numbers. He committed to deliver it the next day.
Throughout the morning meeting with Brian and Robert, Mpendulo and I got our questions answered on the start-up plans. In the afternoon, we brought Dave in to talk about our original topic, the conditions for a deal. Dave was still opposed to less than 100 percent ownership, but he said that he would be willing to consider some shareholding for Brian and Robert, if he didn’t have to invest too much. The higher his necessary investment, the less he was willing to consider other shareholders. So everyone wanted to see my report and particularly the financial analysis that showed the required investment under various scenarios. We also discussed the most important risks remaining to start up the company. In addition to resolving the various sources of financing and ownership, the major risk was that MPE had not secured a sufficient long-term supply of poles (timber). There were lots of forests in close proximity to the MPE plant, but MPE had to get a commitment from one or more of them to supply poles. Robert agreed to work on this, and Dave said he would look into it as well with his contacts in the industry. Without the commitment for a supply of poles, I agreed with Dave that the risk of the deal was unreasonably high.
Overall, we had some good meetings. We weren’t moving ahead as quickly as I had hoped, but there was activity, and it was generally positive. I would write my report. Brian and Robert would show it to the new potential investors, I would send it to Dave, and then we’d go from there. Assuming that one of the investors would commit to the funding, we still had to resolve all of the other issues, which weren’t trivial. Several of the issues were deal killers if they remained unresolved, but I was hopeful. Once we got a lead investor, I thought the rest would be possible, but certainly not easy.
The following week, I finished the MPE Business Plan and Funding Request and sent it to Leslie for review and approval. To simplify my task, I had decided not to duplicate the materials that MPE had already produced that went into depth on the market and the particulars of their business. I focused on the big strategic and other critical areas, foremost, on the financial requirements and opportunity. Once the business got going, it could generate great profits, but in the short-term it would require a lot of capital, and there were still a number of serious risks. I put all of this into my document and hoped I hadn’t skewed it too far in one direction or the other.
Two days later, I incorporated comments from Leslie and Mpendulo and sent the document as a draft to Brian and Dave. Brian sent the report on to Robert and both of them planned to meet with the investors from South Africa the next day. Later Brian called and said he thought the document was fine as written, so I gave him permission to take “DRAFT” off the document and to present it to the interested investors.
On Sunday, Brian called to let me know that he would be going to England that evening to check on the health of his mother, who was in her eighties and diabetic. He had gotten a call from his sister requesting that he come visit and help make decisions about his mother’s condition and care. His mother had been living independently but had been having difficulty with her health and taking care of things in general. It was time to have her move to a retirement home.
Brian also wanted to let me know that the meeting with the union investors had gone well and that activities should continue whether or not he was able to return quickly from England. In three weeks, the union representatives would be coming to Swaziland to visit the plant and to meet with us in our offices. They wanted to hear an outside opinion on the project. I told Brian not to worry. We would be ready, and we would take care of them. Again, I felt a great sense of responsibility and wanted to present the situation appropriately. I wanted the deal to go through because it would generate jobs and economic growth, but I wasn’t supposed to be a salesman. The business could be very profitable, but that wasn’t guaranteed, and there were serious risks. I wanted to be enthusiastic but very factual, so began planning my presentation.
Finally the date for my MPE performance arrived. Robert had brought the trade union representatives from South Africa to our Swaziland office to hear the project overview. I think they understood my unusual position. Although I was promoting the project, I had the credibility of a third party. They evidently trusted that I could maintain the proper balance between the two roles. The conflict of interest was obvious, except that I would not benefit personally from a deal. Given that, I guess they saw that I could maintain my integrity.
Overall, the session went well, but it wasn’t easy. I didn’t really know the roles and responsibilities of the people who I presented to, but I think they were probably from the governing board of the union rather than investment professionals. They were intelligent and knowledgeable, but they weren’t financial experts and a lot of my presentation was about the financial aspects of the project. When contemplating an investment of nearly a million U.S. dollars, it was important that they understood all the aspects of the investment, both the business itself and the financial aspects of the deal. Robert had explained a lot about the business basics and the union team had already visited the mothballed MPE facility. My role was primarily to explain that we thought this business had good market and profit opportunity and what the required investment and expected financial returns could be. I also needed to back up my opinions with our analysis.
I had done some very thorough analysis, showing alternative scenarios for different rates of plant expansion and various financing approaches with different mixes of debt and equity. Although somewhat challenging, this was basic financial analysis and consequently the easy part. I knew what I was talking about but struggled with how to explain it and not make people’s eyes glaze over or put them to sleep. This was always a challenge in my consulting career. After doing extensive analysis on a company’s operations and coming up with many detailed findings and recommendations, how do you boil it all down into a crisp presentation that senior executives will listen to while sitting still.
The fact that this presentation was mostly about finance, an esoteric topic for many people, made it especially challenging. Most people, even some experienced business people, don’t understand why a company that will be profitable from day one needs financing. They don’t understand the difference between profits and cash flow. They don’t understand why an increase in an asset like accounts receivable can make a business run out of cash. The problem was that understanding all of these was important to understanding the MPE investment. A business can be very profitable, but if its customers don’t pay their bills for two months, the business will need a lot of cash (financing) to operate. I tried explaining all of these things, and in the end, it went very well, but I felt a lot of pressure throughout because the MPE team was depending on me. And this was with a very friendly audience. Fortunately, they wanted to understand, and in the end, I thought they did. The next step was just waiting as they discussed the opportunity with their colleagues and bosses, who would make the final decision.
While I was waiting on MPE, I focused on Tasty Meals. Before going to the Reed Dance and Cape Town, I had met with Phiwa who had brought me up to date on his progress. He was in the process of securing several small plots of land to grow Tasty Meal’s own maize. The plots were numerous and small because Phiwa had to be opportunistic to rent good land at an attractive price. We worked on Tasty Meals’s requirements, month by month, for planting and harvesting, and they looked promising. The bad news was still that once they planted the maize, it couldn’t be harvested for at least three (maybe four) months. The good news was that after the maize began producing, they didn’t need that many hectares of growing land to get them into the plentiful season. This would limit the expense but was still money that Phiwa and Tasty Meals didn’t have.
After spending most of our time on the supply, we talked about increasing sales. I told them what the sales and marketing plan would have to look like, and we began to explore ideas about increasing sales. I reemphasized that an important part of our activity had to be going from ideas to developing a real plan that would be actually used when mealies became available.
When we got back from Cape Town, Sonnyboy was also back from his honeymoon, so we visited Tasty Meals together. The first thing we heard from Phiwa was that absolutely no mealies were available at any reasonable price, so they had shut down production. Although they had been able to tentatively contract to rent land to grow their own maize (and pay at harvest), they had no money to pay for seed, fertilizer, etc. They were trying to tap all of their friends for short-term, high-interest loans, but so far they hadn’t been successful.
One great thing about Phiwa was that he could put aside these short-term, critical concerns and focus on the long-term business plan with the confidence that somehow the business would be successful. Maybe it came from growing up in Africa and achieving personal success in the past despite tremendous odds. I didn’t know what he was feeling inside. Despite the fact that his business was about to die and he was going to lose all of his investment and the collateral he had pledged against the loan, outside he seemed relatively relaxed and was able to focus on the analysis and planning. I admired his attitude and fortitude. It reminded me of some of the dedicated entrepreneurs I have seen in Silicon Valley.
