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Every Cloud Has A Golden Lining

At a time when airlines are under severe economic pressure, a resurgent carrier is looking to open up competition in the air over Africa.

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About 20 months ago, when Harvard-educated but little-known Inati Ntshanga was thrust into the position of CEO of South Africa’s state-owned regional airline, very few noticed.

One of the main reasons, of course, was that 18-year-old South African Express (SAX) had always been in the shadow of its bigger and much older brother, South African Airways (SAA), which has been a dominant force in the continental airspace for more than 75 years. So much so that SAX’s resilience has gone largely unnoticed, notwithstanding the fact that in its short life, not only has the airline survived several one-time competitors that have since gone under, it is now also debt free.

Now SAX wants to conquer Africa.

Whereas SAA has gone, cap-in-hand, to the South African government to beg for R6 billion to fund operational costs, its growth strategy and fleet renewal, SAX will be using its own balance sheet to raise the R4.5 billion it intends to spend on 15 new aircraft for its new growth plan. Seven of the aircraft have been delivered, while the rest will arrive between now and 2015 to coincide with the end of current leases of the “oldish” aircraft that the airline still has on the tarmac.

Most of SAX’s old fleet was acquired when jet fuel was in the $20-$30/barrel price range, airline industry analyst Linden Birns points out.

“With fuel today soaring above the $130/barrel mark, the economic model for these planes no longer holds any validity. Not only are they unable to generate sufficiently low seat-mile costs—the standard measure of the cost of production in the airline industry—but they are also rapidly losing their residual book value as demand for these aircraft in other markets has fallen off a cliff.”

In addition to several domestic routes—Johannesburg, Cape Town, Durban, Port Elizabeth, Bloemfontein, George, East London, Kimberley, Pietermaritzburg, Upington and Phalaborwa—SAX also flies to neighboring Botswana, Namibia, Mozambique and the Democratic Republic of Congo.

“All of them are profitable,” according to Ntshanga. He is now adding Malawi, Ghana and Uganda to the list and is in negotiations with several other African countries that subscribe to the idea of “open skies”.

While the continent has been slow to embrace open skies—an international policy concept calling for an easing of restrictions, for the liberalization of rules and regulations and for minimal government intervention in the airline industry—Ntshanga says those who have already done so are seeing the economic benefits.

He points to the latest International Air Transport Association (IATA) report, which analyzed the relationship between a country’s level of connectivity to the global air transport network and its level of productivity and economic growth, across 48 developing and developed countries during a 10 year period.

Not only is aviation a major industry in its own right, employing large numbers of highly skilled workers, the report said it is also an essential input into the rapidly growing global economy. The study found that greater connections to the global air transport network can boost the productivity and growth of economies by providing better access to markets; enhance links within and between businesses; and provide greater access to resources and international capital markets.

Noting how air traffic demand increased as economies grew, the report concluded that global economic growth has been a key driver of growth in air traffic demand.

This has not been confined to

North America, Europe, South-East Asia, Australia, Latin America and India, Birns points out: “If you want [further] proof of this, just look at

how the size of the South African domestic market grew with the advent of our low-cost airlines, kulula.com, 1Time and Mango, in the 2000s to see how the liberalized regulatory environment gave rise to mushrooming growth.”

 

THE PROBLEMS OF THE AFRICAN AIRLINE INDUSTRY

The rest of the African continent, though, is uniquely different, something Ntshanga is ready to concede upfront, if not to acknowledge that his ambition could even be thwarted by it.

SAX’s home base, South Africa, and the other countries the airline has been flying to until now adhere to high safety standards. The same can’t be said about many of the other countries on the continent, where carriers are notorious for their tendency to skimp on safety. The most recent IATA statistics reveal that in 2010 Africa had 7.41 accidents per million flights, the worst among the world’s regions and 12 times worse than the global average of 0.61.

Other common complaints usually cited by established airlines’ indifference to Africa are:

–              too few airports;

–              inadequate investment in infrastructure;

–              inconsistent government policies and laws.

Birns explains some of them, and their impact: “The artificial barriers to market access, known as the Bilateral Air Transport Agreements, which are applied in Africa, should be reviewed and liberalized. These agreements currently prescribe which airlines may operate on given routes, the number of flights each airline is permitted to operate on the route, and in some cases, even stipulate the maximum weekly or monthly capacity each designated airline may put into the market. The net effect is that airfares on intra-African routes remain artificially high. And with the global and regional economies under pressure, fewer people can afford to fly. If free or freer competition was permitted, fares would come down and the market would grow exponentially.”

 

THIS IS AFRICA’S NEXT BEST AIRLINE

“But the challenges do not mean it can’t be done,” Ntshanga says. He has confidence that he’s doing the right thing and is poised to strike gold.

The reason for his calm confidence, and some would say rather rapid expansion?

“Africa is, in fact, low hanging fruit for us… Our market research says we’ll be profitable within two months—and that’s even before those markets reach maturity.” Besides, the economist-by-training reckons, Africa is poised for unprecedented levels of growth, even though that’s admittedly off a low base.

Birns says SAX’s Africa route expansion strategy is “a good one in principle”, but to be sustainable it requires focus on markets with sufficient demand for business and tourism traffic.

That word—focus—is what Ntshanga says SAX swears by. “We have a very good, tried and tested model,” he says.

SAX doesn’t have its own distribution and handling systems but uses SAA’s for a fee. A lot of other services, including ground handling, are outsourced, leaving the airline with a staff complement of only 1 100.

While others still prefer jets, Ntshanga says SAX is opting for 50- to 100-seater aircraft that use turbo propellers but consume relatively less fuel, are as quiet as jets, are just as fast, and are more comfortable. Add to that the fact that the destinations the airline flies to are within a three-hour distance to and from South Africa.

“The lure of money, which often looks like easy money,” is one cause, Ntshanga believes, why other airlines fail. “You won’t catch us flying long routes, or very busy routes where we are a small boy playing with the big boys. We focus, we don’t straddle,” he says.

Birns believes SAX “never competed directly” with Nationwide, Velvet Sky, Sun Air, Flitestar or Phoenix—all of which went under—but was competing against SAA and Comair (the BA and Kulula operations) and 1Time. “It’s precisely because the high-density mainline routes are so fiercely fought over that SAX deliberately operates on different gauges and networks to the others.”

Birns thinks Velvet Sky went out of business “largely due to its failure to have sufficient economies of scale to offer a comprehensive domestic and regional service. Nationwide failed, not because of the engine incident and subsequent grounding—these were factors, but not catalysts of the failure—but because once it resumed operations, the shareholders and management failed to appreciate that they needed to invest heavily in restoring brand credibility and market confidence. They assumed, wrongly, that they could simply pick up where they’d left off and all would continue as if the crisis hadn’t happened.

“SAX is feeling the same economic pressures as every other airline around the world, ie. rampant fuel prices and soaring user charges, levies and taxes. We would be naïve to think these won’t negatively impact SAX’s bottom line. And like every other airline, SAX will want to invest in the latest available technology to help it keep those additional costs in check,” he says.

With humility, but also with authority, Ntshanga goes back a couple of years, before he was appointed CEO. Then, he was part of a crack team that achieved an important strategic tilt—developing and implementing strategies that led to the doubling of revenue and saw SAX become solvent for the first time since the airline’s inception 18 years ago. And that’s when everyone got up and noticed.

Ntshanga believes it’s a matter of time before others see that SAX is no longer the Cinderella operation that was established back in 1993 by black investors Thebe Investments (51%) and a Canadian consortium (49%), only to be sold to the government a few years down the line because it wasn’t doing that well.

Back in the day, SAX would fly to Bloemfontein twice a day. Today it flies there 10 times a day as well as to destinations across Africa dozens of times every month.

“This is Africa’s next best airline,” Ntshanga says.

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Gordon Ramsay Plots 100 US Restaurants With New Private Equity Deal

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On a given day at Caesars Palace in Las Vegas, chef Gordon Ramsay’s eponymous pub and grill will make around $20,000 from fish and chips. The 1,200-square-foot space sees around 1,300 guests a day. Since debuting on the strip in 2012, Ramsay has added another location in Atlantic City.

Combined, both have sold more than 300,000 fish and chips dishes. “It’s taken the nation by storm. I look at the lines outside the door,” Ramsay told Forbes on the phone earlier this week.

His steak restaurant, which launched seven years ago at Caesars’ Paris Las Vegas Hotel, has meanwhile expanded to Atlantic City and Baltimore, luring diners with beef Wellingtons (more than 250,000 sold since 2012) and sticky toffee puddings (more than 200,000 sold).

That kind of demand needs to be taken advantage of quickly. Which is why a year ago, Ramsay started looking for a partner to help him rapidly expand these brands. “I wasn’t ready to pedal this bike up a hill on my own. That would take me another 15 years,” Ramsay says. “Let’s get this thing done.”

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And now Ramsay has inked a deal with Lion Capital, a private equity outfit with offices in London and Los Angeles, which has scaled restaurants like wagamama, the pan-Asian noodle chain, as well as brands like Kettle chips and Jimmy Cho. Lion now owns 50% of Gordon Ramsay North America, while the other 50% is controlled by Ramsay.

He declined to comment on the size of the transaction, but the deal stipulates that Lion will invest $100 million over five years to build an empire of Gordon Ramsay restaurants across America. The joint venture expects to open 100 new locations across the U.S by 2024. 

“I fell in love with this country 20 years ago. There’s a will here. My goal, right now, is to establish one of the most exciting food brands in America,” Ramsay says. “Being a control freak, I needed the right partner on board. There’s a lot of businesses that don’t like that kind of stranglehold. For me, the partnership was crucial.”

Ramsay already has eight restaurants across Las Vegas, Atlantic City and Baltimore in partnership with Caesars Entertainment. There’s five concepts in Las Vegas, of which three are brands that will be expanded through the new deal — Gordon Ramsay Steak, Gordon Ramsay Pub & Grill, Gordon Ramsay Fish & Chips.

“Vegas has been the most amazing platform. Everyone thinks it is just full of partying and entertainment, but it’s one of the most severe and revered culinary capitals anywhere in the world. You don’t get a second shot at it,” Ramsay says.

The restaurant concept, Gordon Ramsay Steak, launched in 2012 inside Caesar Entertainment's Paris Las Vegas Hotel & Casino on the Las Vegas Strip.
The restaurant concept, Gordon Ramsay Steak, launched in 2012 inside Caesar Entertainment’s Paris Las Vegas Hotel & Casino on the Las Vegas Strip.GORDON RAMSAY STEAK

The deal will also bring two more concepts to the U.S.: Gordon Ramsay Street Pizza and Gordon Ramsay Bread Street Kitchen, which he calls “a modern Cheesecake Factory.” It already has successful locations in London, Hong Kong, Dubai and Singapore. 

Ramsay is a six-time Celebrity 100 listmaker who earned $62 million last year, mainly from his television deal with Fox, in which he produces and stars in shows MasterChef, Hell’s Kitchen, MasterChef Jr. as well as 24 Hours to Hell and Back.

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“It may seem aggressive, but we’re not opening up 80 or 90 of the same restaurant. We’re crossing over with a multilayered brand. That’s the bit that I’ve worked hard at. We’ve divided and conquered.”

Ramsay’s 15 restaurants in London won’t be impacted by the Lion Capital investment. The announcement comes just a few weeks after British chef Jamie Oliver announced that all but three of his 25 restaurants in the U.K. will close.

“It’s a very oversaturated market there, and you need to be very careful with that level of expansion. It’s unfortunate to see the situation he got himself into, but that’s what happens when you’ve got a juggernaut that’s out of control, as opposed to being in control,” Ramsay says. “I’ve sat patiently, learning from other people’s mistakes.”=

-Chloe Sorvino; Forbes Staff

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Pain, Poison And Potential

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For a man who wanted to end his life at one time, it is quite ironic that Steve Harris is today one of Nigeria’s most successful life and business strategists.


Being born into a lower middle class family is one thing; trying to make a name for yourself after dropping out of university twice is another. That is what Steve Harris, a life and business strategist and motivational speaker, fondly known as ‘Mr. Ruthless Execution’, has accomplished.

Harris learned the sinusoidal motions of the entrepreneurship journey very early in life.

At 40, he is the Chief Executive Officer of EdgeEcution, an organization that helps high performance individuals and institutions bridge the gap between their performance and potential.

Today, he is among one of the most downloaded, quoted and followed personal development trainers in Nigeria, a feat that is outstanding when you consider that he almost committed suicide before this journey even began.

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The events leading up to his worst day began to unfold when Harris gained admission into the University of Benin in Nigeria. His parents wanted him to become an engineer but his failure to attain the required grades meant he had to take the Industrial Maths class instead. That is when his emotional saga began.

“I had altercations with my lecturers and I was flunking because I was not cut out for math. I had issues with my lecturers because at the time, my department was the most corrupt department in the university and if you wanted to pass, you needed to bribe your lecturers. So they were pretty much a cartel and if you didn’t pay, you wouldn’t pass, so someone like me who at best was a C student became an F student.”

As a result, he scored 4% or 11% in his exams even when he had prepared well enough.

“I eventually got kicked out [of university] in 2004.”

Harris managed to get into a private university but this time, he was required to start all over again.

“I couldn’t go the distance and I dropped out in my seventh month. I couldn’t handle it because my mates were already working. My younger sister was also already working and I was going back to my first year of university. I started having suicidal thoughts and I couldn’t handle it anymore so I dropped out.”

Those suicidal thoughts would come back to haunt him later.

Being the first-born of three children, Harris was the one most likely to succeed. As fate would have it, his two failed attempts at university made him the black sheep of the family.

“I remember coming back home and my younger sister had graduated and my parents were super stoked, and here I am, the first child and I didn’t even get it together. Very quickly, she got a job and started earning money. She began buying things for the house and taking care of responsibilities and started giving me an allowance. I remember she gave me N10,000 ($28) and I was very grateful because I didn’t have any money,” says Harris.

“Like all African parents, my parents started complaining and reminding me about how I wasted their money and how I failed. How the children of others were working in [companies like] Shell and I was just at home.

“I would hide from friends and family members when they visited so I wouldn’t have to tell them my situation. The next month, my sister gave me N5,000 ($14) and I couldn’t ask her where the other N5,000 had gone. She was such a high-flyer that within six months, she moved into her own place and bought a car and here I am, first-born and I couldn’t even afford to buy a Christmas card,” avers Harris.

Then came the straw that broke the camel’s back.

“One day, my sister asked me to come over to her house for my monthly allowance. I went in and she had everything I wanted, she had a flat-screen TV, the whole nine yards, and I was just sitting there comparing my little sister with myself and I was thinking ‘there is no way I was ever going to catch up with her’. We were talking and in the middle of the conversation, I pissed her off and she said, ‘I am not even going to give you any more money’ and she kicked me out of her house.

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“I felt so embarrassed and ashamed and here I was, the one who everyone thought was most likely to succeed and I was being kicked out of my younger sister’s house because I didn’t have money. That messed with my mind. I remember sitting at home and I had bought rat poison. I kept thinking that it would be so much better to die than being alive and subjected to the misery I was giving my parents,” says Harris.

As he sat down with the box of poison, mentally preparing himself to end the pain and embarrassment he had brought to his family, one of his siblings walked into the house, in the nick of time.

“That is what stopped me. Then, I also found out that if you commit suicide, you will go to hell and here I am, living my own hell on earth and if I died, you are telling me I am going to be in hell forever?”

That was the wakeup call Harris so desperately needed.

He began to work his way up, starting off with volunteer jobs such as being a church driver for his pastor and also working as an office assistant with Fela Durotoye, a management consultant and recent presidential candidate of the Nigerian elections.

Harris grew through the ranks until he became a management consultant before starting off on his own entrepreneurial journey. Amid the challenges of finding his true purpose, certain thoughts came to his mind that changed his outlook towards life forever. He began asking himself: ‘why am I on this earth?’, ‘how can I make enough money to take care of myself and my family?’ and ‘how do I use my talent to help others?’

He found the answers in books on business written by authors such as Tom Peters and Michael Porter. That is when Harris first discovered he had a penchant for success.

And with his ability to overcome failure, Harris is now on a mission to empower millennials to look inward at their strengths and inner power, and with his able guidance, build brands that can beat the odds and survive, just as he did. 

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Rewriting The News On Africa

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African media can reverse the downward spiral affecting newsrooms across the continent, says APO Group chairman, Nicolas Pompigne-Mognard.


The media landscape has changed dramatically over the last decade. As a result, newsrooms have been forced to make monumental changes such as reducing the staff complement to keep up with the demands, or they have simply had to shut down.

With some African newsrooms being written out of history, there has been an emergence of international media setting up shop on the continent. This interest serves as a double-edged sword for African media that often finds itself under-resourced. 

Nicolas Pompigne-Mognard, the founder and chairman of the APO Group, is of the view that the African media landscape has faced challenges that precede digital migration, which have compounded existing problems. An incident that stands out for him, before the digitizing of media, was a lack of access to information for African reporters, and that propelled him to start one of the foremost media relations firms on the continent.

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 When he was a journalist for online publication, Gabonews, and the deputy president of the Pan-African Press Organisation in France, between 2005 and 2007, Pompigne-Mognard says this was a recurring problem hampering the productivity of African reporters. 

“If you wanted the right to attend an international press conference, you would need an official card.

“As an African correspondent, the only way for you to have that card and get access was to prove that you were getting at least €1,000 ($1,121) of earnings, and most of them didn’t have that,” says Pompigne-Mognard.

“It was rooted in disparity. If you have two journalists and one of them has the right card and the other doesn’t, then of course, the other one cannot do his job. He cannot earn money or write articles. 

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“More than that, it reinforced the dependence of African media on international media. They had no other choice but to rely on the information provided by the biggest media.”

To remedy the circumstances that seemed to disempower his peers on the continent, Pompigne-Mognard founded APO from his living room, using $11,000 in savings.

APO has grown since its inception as it provides a variety of media offerings such as press releases, videos, photos, documents and audio-files.

The company has sources such as global Fortune 1,000 companies, reputable international and Africa-based PR agencies, governments and international institutions.

“I didn’t start it to make money. I didn’t start it as a business. I wasn’t an entrepreneur at the time. I was a journalist and I wanted to address a problem. At the beginning, I wasn’t even aware that companies were paid to distribute press releases.”

Pompigne-Mognard has since realized many things through the medium of his company as APO delivered growth of 60% in 2018, representing a turnover that has more than doubled in two years.

As a correspondent of Gabonews, before the inception of his company, Pompigne-Mognard was covering Europe, and he had to report Africa-related news and needed information. As a result, he would ensure he was receiving as many press releases as possible; however, this came with its own logistic challenges.

“That’s when I realized it was extremely difficult to actually ensure I received all the press releases from institutions like the United Nations, as an example. There was not one point where I could get all the African information issued by the international system. 

“Journalists had to rely on information that was on websites. It was very time-consuming to get access to all the content…

“It got me thinking about how if international media was not receiving information from our most important institutions, then what does that say about our voices in the world?”

A single conversation propelled him to make decisive change, Pompigne-Mognard says.

“I had a serious meeting with the president of the African Development Bank at the time, Donald Kaberuka, and he told me something that was instrumental because that’s when I decided I wanted to do something about it.

“What he told me is that the destination of information about African economies contributes to the growth of the continent, because at the time everybody was talking about poverty, war and struggle.”

Over the years, Pompigne-Mognard has observed a similar trend in the way press releases are compiled and disseminated.

He feels this has contributed in transforming the narrative on Africa.

“Something that is specific with press releases is that 95 percent of them convey good news. Usually, when a company issues one, it is to say that they are appointing a new CEO, they are opening a new branch, or they are expanding into new markets.

“We (APO) have been participating, for several years now, in changing the African narrative. We are in a unique place where we have a chance to influence the narrative and make sure that Africa has its own voice and is not influenced by the bias of international media.

Although information is accessible to those who seek it, he says there is currently another challenge that African media needs to resolve in order to maintain autonomy and make money to sustain itself.

“I think there is a big problem coming towards us and it is coming fast,” says a concerned Pompigne-Mognard.

“Nigeria is starting to watch more international media than the local media. Think about the international companies which are willing to expand on the continent. What if 10 years from now, the conclusion is that in the most developed economies on the continent, the nationals are watching more international media? Where exactly do we think the international companies are going to spend on advertisements?

“As an international company, why would I deal with five national TV stations in different countries, if I can approach a single international station and get, not only those five countries, but also better coverage?”

Pompigne-Mognard says the continent is ripe with potential and international media companies, which have observed the budding possibilities, are striking while the iron is hot.

“They know the population is going to grow, the middle class is growing and that purchasing power is growing.”

Finances remain a colossal inhibiter to the growth of newsrooms, as many have had to retrench to make ends meet.

The ripple effect is that the quality of the content produced eventually suffers.

“On a global scale, the media landscape is in a challenging position. It has become very difficult to finance content and to find new ways to make money. Africans also have the same challenges, but often they don’t have the same means or resources.

“I would prefer to be wrong on this matter, but if I’m right, in 15 years’ time, the media landscape in Africa will be completely different – in a bad way.

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“I want Africa to have a strong media landscape. But in order to do that, people need to understand that media companies need to be run as businesses.”

But it’s not all doom and gloom for African media; Pompigne-Mognard sees hope. He says the status quo can be reversed if there is a joint effort to curb the problem. 

“One of the solutions is to create pan-African media,” he says. “The person who is going to crack the code and make it happen could be extremely rich. It doesn’t have to be [entirely] pan-African, even 30-35 countries are more than enough.

“There’s a thing about Africa which is a strength and a weakness; it’s that doing something here will always be more difficult. But the good news is that for those who manage to do that thing in Africa, they can do it anywhere.”

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