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Upper Echelon: Martin Feinstein – CEO of Traction

Insights from the founder of Proudly South African

HILTON TARRANT: Well, in Upper Echelon this week we’re joined by Martin Feinstein, he’s chief executive of Traction, also chief executive of something called Blah Blah Blah Studios, we’ll get to both of those in a bit. Most listeners and most readers will be familiar with Martin as being the founder of Proudly South African. Martin, let’s start there, Proudly South African back in 2001, this was an initiative that you founded, brought a whole bunch of people together and something that lives on very, very strongly today.

MARTIN FEINSTEIN: Ja, it was a very exciting project, what made it quite challenging was that it had really four shareholders – government, organised labour, organised business and something that is strangely called civil society. We really had to build a brand from nothing, literally from a piece of paper with fairly limited funding, make it sustainable and try and get it into the consciousness of every South African that it’s important to support local production, local content, local creativity and local enterprise in the face of a massive – what was then really just starting in around the year 2000 – onslaught of low-cost imported products.

HILTON TARRANT: Would it be easier today or more difficult to set up something similar where you would need to bring together those four constituents who often don’t work very well together at all?

MARTIN FEINSTEIN: I think it would be enormously difficult to start something like that today, I think the political climate is very different, I think there’s politicisation of everything, so even issues around local content and broad-based black economic empowerment kind of overlap more now than they did then. I think also around that time, 2000, 2001, 2002 there was still a strong kind of – I suppose one could call it – a rainbow nation groundswell, which just in terms of a market context made it easier for the brand to gain traction quite rapidly and there weren’t that many socioeconomic campaigns running. So it was fresh, it was new, the time was right, I think it would be a lot more difficult today.

HILTON TARRANT: If we rewind before that all the way back to where you studied at Rhodes University, that’s my alma mater as well, is there something about Rhodes that you think would set up an individual with that higher education in a perhaps different way to someone who studied somewhere else?

MARTIN FEINSTEIN: I think so, I think Rhodes is one of those university towns where virtually everything revolves around the university and the many churches, as I’m sure you’ll recall, I think Grahamstown per capita has the most churches per head of population in the country. I think that because most…by far the large majority of students at Rhodes are from somewhere else you have a far more heterogeneous student population, so you have a lot more diversity on a whole lot of different levels, everybody is away from home, so everybody is kind of more challenged. So it’s perhaps less competitive in an academic sense than a Wits or a UCT or a Stellenbosch or a University of Johannesburg but I think it makes for- well, it certainly did in the ‘70s – it makes for a more I think intellectually vibrant and socially vibrant student community.

HILTON TARRANT: If we look at your career and you’ve started a number of projects, a number of institutions, things like SABC TV Talk magazine, which a lot of people I guess will remember, Shell Road to Fame, obviously Traction, Blah, Blah, Blah Studios, which we’ll get to, Proudly South African, we’ve spoken about, Enablis. Do you thrive on starting projects like these?

MARTIN FEINSTEIN: Ja, you’re on the button, I’m a three-year guy, I’m good for three years on a project. I really like to create and conceptualise something fresh and big and exciting, I like to get people enthused and to mobilise around it, I like to get out there and persuade people that this is important and it’s good and explain why that is, and I like to build the partnerships that are invariably critical to getting a big programme off the ground and then once that’s the business model and the brand and the basic operational capacities are put in place then things start to become a little bit more administrative and that’s when I need to go off and do something new.

HILTON TARRANT: How did you find that magic kind of three year period?

MARTIN FEINSTEIN: How do you mean how did I find it?

HILTON TARRANT: How did you find that that was the length of time that it kind of took for something to get to a level where you felt it was time to then move on?

MARTIN FEINSTEIN: Well, you get that feeling that it’s not as much fun as it was a couple of years ago. Ja, after two or three projects I realised that I reached a point after about three years where there wasn’t much of a challenge anymore, it was now a management job rather than a startup or a new venture creation kind of environment. I like that startup energy, that startup environment.

HILTON TARRANT: In terms of moving on I’m guessing that it’s not a hard or fast rule either?

MARTIN FEINSTEIN: It’s not and also one can change one’s role in an organisation. So for example with Enablis, which I ran for I think three, three and a half years just to get it going in Africa on behalf of the government of Canada and Microsoft and HP, my role just changed, I moved out of an operational role into more of a trustee role and I’m still involved in that capacity. So it’s not a case of cutting ties and moving on and having nothing to do with what’s been started. Ja, so sometimes a change in the relationship or the role is also a good way to move on.

HILTON TARRANT: Martin, what is Enablis?

MARTIN FEINSTEIN: Enablis is two things really, it was started by a Canadian telecoms very wealthy entrepreneur called Charl Sirois, it’s really a community or a network of entrepreneurs and the organisation supports its network of members through a blend of training and mentorship but it also provides debt and equity funding for businesses which have trouble getting access to normal commercial funding in the open market. So it provides what I would call accessible funding, it’s very often on commercial or close to commercial rates but the way that risk is approached and the tolerance for risk is very different to what you’d find in a more commercial banking environment. So typically Enablis through its funds would put up a 90% cash guarantee with the bank to support an entrepreneur’s funding application and that really de-risks the deal for the bank and makes it more possible for entrepreneurs to get the working capital between the R500 000 and R3m range, which is a very, very difficult range for small business owners to get funding.

HILTON TARRANT: Was your time at Enablis your first kind of venture into this world of supporting small businesses?

MARTIN FEINSTEIN: It actually came before that because at Proudly South African, what happened was that the vast majority of member that we recruited were small businesses, I think about 98% of the membership data base was made up of small businesses. We had a good almost 3000 small business members versus a relative handful of corporates. The corporates were very important because they resourced the campaign, their membership contributions were obviously much higher and they helped to build a much broader brand awareness but the volume of small businesses that came onboard was quite surprising. It was at that time I started talking to the owners of these businesses and I started understanding that to start and run a small business in South Africa you need a lot of guts and a lot of balls, it’s not an easy thing to do…

HILTON TARRANT: Sometimes a lot of luck as well…

MARTIN FEINSTEIN: …and there are enormous challenges, you don’t get a lot of support and a lot of help. I thought entrepreneurs are really, really important to the future of the country and these are guys that are going out there, they’re actually starting and running businesses and putting an enormous amount of energy and resources and taking lots of risks. So I thought this is something that I needed to take a closer look at and I started understanding the strategic importance of small and medium size businesses, and the people that start them and run them, to the future of the country.

HILTON TARRANT: Your current project, Traction, how does that relate to the space?

MARTIN FEINSTEIN: Well, Traction really designs and implements small business development programmes primarily for government but also for some private sector entities and we work across a whole range of areas. We design and setup and manage incubators, we run various kinds of what I suppose you’d call business plan competitions but things have moved on quite a lot from the basic business plan competition, things are a lot more sophisticated these days.

We’ve run Cape Town Entrepreneurship Week for the past three years, we run a number of startup support programmes in different provinces around the country and in partnership with another company we’re publishing a new national small business newspaper from next month called Small Business Connect, which will be the official DTI small business newspaper for the country.

So there’s a lot of activity in the space, there’s a lot of fragmentation in the space as well but what we’re trying to do is support government in the sense that local and provincial and national government have a small business development mandate but they often lack the capacity and the understanding of that environment to develop and implement effective programmes, so that’s where we try and play a role.

HILTON TARRANT: As far as the landscape is concerned in South Africa, the small business environment, support for entrepreneurs, are we good enough?

MARTIN FEINSTEIN: No. Look, there’s a lot of work that needs to be done, there’s a lot of fragmentation, there are a lot of different entities and agencies operating, there is a lot of overlap, there isn’t a coherent eco-system, there is a big disconnect between the provision of financial and non-financial support services and there are too few people playing a support role who have any real experience-based understanding of what small business is all about. That’s apart from the broader issues around things like the labour law, the labour law framework and so on.

But I think that there’s hope in the sense that the National Development Plan does recognise that there has to be some serious attention paid to the small business sector because 90% of the jobs growth that’s envisaged in the NDP is going to be coming from small businesses. So we can’t just carry on with the current situation where it’s extraordinarily difficult for small businesses to access working capital and investment. The non-financial support institutions are still just too bureaucratic and too unresponsive.

HILTON TARRANT: It’s all very well that the NDP places such a big focus on small businesses and on entrepreneurship, what about today, what do we do to start fixing the problems in the short term?

MARTIN FEINSTEIN: We have to build a culture of entrepreneurship and we have to understand that there are too many people walking around who are calling themselves entrepreneurs who are not really entrepreneurs, they are self-employed or running small survival businesses because they can’t find a job, they’re not really entrepreneurs. We’ve got to stop creating this myth that you can walk into an NYDA or a Seda and get a consultant to write a business plan for you and get a tender and voila I’m an entrepreneur.

Those businesses are just not sustainable businesses. We have to unlock capital, we have to really completely relook at microfinance and the funding products that are needed between R100 000 and R3m to R4m because the commercial institutions are not lending that money to small businesses, it’s virtually impossible to get working capital on loan, the risk tolerance is just ridiculously low, that’s absolutely critical. Small businesses need time to become profitable and they need access to affordable and accessible working capital, that’s really, really important.

We also have to start building entrepreneurship into our education system, which is a big problem because the system at the moment is not able to teach just the basic academic subjects properly. So it’s going to be difficult but we have to start producing matriculants and graduates who understand entrepreneurship and are able to think entrepreneurially. Even if they don’t start their own businesses entrepreneurial thinking is now something that is a requirement for being in business, whether it’s your own business or working in a business.

HILTON TARRANT: Martin, this notion and it’s been mooted by a number of people and from a number of quarters, this idea of a Minister of Small Business or a Department of Small Business, is that something you subscribe to?

MARTIN FEINSTEIN: I did but I don’t anymore. In fact, I wrote a piece calling for it early last year and then I had a complete about-turn and I really don’t think it’s a good idea. I don’t think we need a whole new bureaucratic structure and a new ministry and a new department to do the relatively straight forward things that need to be done. I think they can be done within the current government structures. I think it’s just going to add another layer decision-making and bureaucracy and strategic delay to what is a, as you pointed out, a current and immediate challenge.

HILTON TARRANT: What keeps you awake at night?

MARTIN FEINSTEIN: Well, like every other small business owner because Traction is a small business having to pay salaries at the end of the month and I think the distinct and disturbing lack of visionary and strategically sound leadership in our country. That’s what really keeps me up, the fact that there’s a very palpable leadership vacuum. There just seems to be a lack of decisive leadership and one feels the results of that and the side effects of that in a whole lot of different ways in every sector of society.

HILTON TARRANT: Martin, final question, what motivates you? You’ve started all these businesses, you move on very quickly, relatively speaking, what keeps you motivated?

MARTIN FEINSTEIN: I really enjoy working with young people who are coming into the field that I’m in and helping develop them, helping them see their own potential. I love working with entrepreneurs, I still get goose bumps when I’m working with an entrepreneur who’s really making it, who’s giving it everything they’ve got, it’s a profound experience, it’s a humbling experience when somebody is putting everything they’ve got into their business to make it work. So I really love working in this space.

HILTON TARRANT: Martin Feinstein, the chief executive of Traction, also the founder of Proudly South African amongst a whole host of others.

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