TUMISANG NDLOVU: In this week’s SME Corner with Moneyweb we speak to the founder and group chief executive at the TM Group, Teboho Mafodi. Welcome.
TEBOHO MAFODI: Thank you for having me.
TUMISANG NDLOVU: Tell us about TM Group. What exactly is it that you do?
TEBOHO MAFODI: As the TM Group we are an innovative construction and property development company because we use alternative building technology in the construction space. You know how people will build using old, traditional bricks. We find alternative ways to build without using bricks, sometimes even coming up with innovative structures that are new in the market and others that are not really vested within the construction space.
TUMISANG NDLOVU: How did that come about, using an alternative, and innovating in that particular space? A lot of people are in construction in South Africa, so you have to come up with a bright idea.
TEBOHO MAFODI: Originally I was in IT. I used to run an IT company and I was self-taught. I was discovered by the former president who sent me to school to study information and communications technology. However, I have always been fascinated by buildings and how certain structures are put together, so I wanted to be in a position to take the bull by the horns. But with construction being a difficult industry to get into I decided to say I’m really fascinated by this, it’s something that I want to do and I’m going to do it. I actually tried it with my own house, and when my friends came to see my house they said, “What did you buy?”
I thought I had made the biggest mistake of my life because it had shacks outside and people who were drinking there, so for a young person it wasn’t an ideal first house. You obviously would like a townhouse or something like that. But I managed to turn that house around and sell it a few years later at four times the value I had bought it for. So I realised that I really love this and it’s definitely something that I want to grow into.
TUMISANG NDLOVU: What did it take to start your own company – because you’re not a rookie, you had had an IT company and now you moved into construction? What did it take out of you to start?
TEBOHO MAFODI: It took a lot, a lot of learning, but I’m very passionate about learning and I’m self-taught in most of what I do. So I took it upon myself to be in a position to learn the ins and outs of the industry, what it has to offer and what one needs to do. I even went to the extent of being involved in a learnership that was paying me R1 500 to be in it and to learn the ins and outs of construction. I remember people saying to me why do you want to be in a learnership, what are you going to do with R1 500. But I looked at the bigger picture of what I opted to take out of it other than the monetary aspect, because right now how many times do I multiply that money.
TUMISANG NDLOVU: Now talk to us about how the business has grown from the initial starting phase to where you are now. What gains have you been able to see?
TEBOHO MAFODI: We’ve managed to do amazing stuff with this business, we managed to acquire properties and right now we are in the township development space, where we are buying properties in the township and we’re developing those properties to be in a position to get investment capital and to even improve the economy and the value of properties in the township. We’ve obviously not only looked at township properties, we started off mainly in the townhouse space. But I realised that with buying one townhouse and then renting it out you don’t really make a return, so we’ve made a conscious decision to say that we don’t invest into any property or business that’s not going to give us returns within the first five years. So now we are also being exposed to the industrial aspect of property within the retail aspect of property, and we’re looking after some of the properties for some of the banks. Somebody needs to maintain those properties and we are doing that. In that way as well it’s giving us enough capital to acquire some properties and we are buying distressed properties. These are inner-city buildings that we buy and we pump money into them to convert them into rental properties because obviously at the end of the day we all need a roof over our heads. So that’s the strategy that we have, we’ll never run out of business when it comes to residential property and that’s the space that we focus on as a business.
Barriers to entry
TUMISANG NDLOVU: How then has the business been received so far?
TEBOHO MAFODI: It’s a difficult business to be in, it’s very capital-intensive and one of the things I have realised – without intentionally wanting to make this a racial issue – this system is not designed to benefit a black child. I’ve recently just got back from the SAPOA conference, where you realise that 90% of the attendees there are white people and old people. So, number one, the industry has not transformed and two, the industry does not have young black players in it. Right now there is so much that is happening in this space and sometimes banks won’t finance you but they’ll finance your employee to be in a position to acquire property. So it’s something that I think needs serious transformation.
We are definitely creating trends in this space because right now we are going to be launching our own development that we are going to be doing in the township but instead of going the old traditional way we are using shipping containers to build this development. It’s called iKhasi Urban Lifestyle. So we’re all about introducing lifestyle into the township because lifestyle is big business in the township. When you look at all these restaurants and nightclubs that are in the township, there are so many millions rotating there and all these people need a place to sleep. Young professionals, whether they are bankers or broadcasters and people like that, who are earning R7 000 or R8 000 and cannot afford to go and get a townhouse, but at the same time don’t want to stay home with mommy but want a decent place where they could have friends over and it still looks nice. So that’s the market we are definitely looking after at this point in time.
TUMISANG NDLOVU: What challenges have you faced in this journey?
TEBOHO MAFODI: Capital is definitely one of the major challenges that we face and also more than anything land ownership. You find that some of the properties that we want to acquire are actually white-owned, some people are sitting in the United States somewhere and own this building or this land, and when you want to buy that land they are willing to give it to you but you’ve got your white friend making that phone call wanting to buy that property. Transformation and capital are the key challenges playing a major role in this industry.
TUMISANG NDLOVU: What are your views on the current SME space in South Africa, the pace at which it’s moving? Do entrepreneurs have enough support or is there more that still needs to be done?
TEBOHO MAFODI: There’s still so much that needs to take place in the SME space in South Africa. Market access is a huge opportunity but it is failing entrepreneurs. Right now you’ll find that most of we SMEs are struggling with market access. There are SMEs out there with brilliant ideas and concepts but the market is not open for them. To some extent we like discrediting government, but we must give government credit to some extent because they’re the biggest procurer – and not only the biggest procurer, but government is more likely to give you an opportunity than the private sector.
With the private sector it will be individuals, but when it comes to corporate South Africa that’s where small businesses are struggling to get in, and obviously you need the BBBE codes that are there to transform the industry. But if you don’t have a certain person endorsing or recommending you, then from there it really becomes a challenge. I think once the market access is sorted then the issue of open access to capital is one of the things we definitely need to look at, as far as the South African SME space is concerned.
Another thing is we don’t trade with each other, we see each other as competition. I don’t know if it’s a culture thing or what, but we like holding on to information – and I love opening up information. I love sharing information. I think I’m one of the most open people as far as information is concerned. I’ll tell you where the opportunities are, I’ll tell you where the money’s at and I’ll tell you what you require. I always say treat people the way you want to be treated. I’m open about it because I want people to be open with me, but you find that some people want to hold on to an opportunity that will not even benefit them.
So once those things are sorted I think we’ve got potential as South African SMEs to actually grow and play on a global scale, because we don’t like playing on a global scale, we like playing locally. So, as small as we are, we have managed to create a business in Africa and we have even managed to set up offices in California. Last year I spent eight months in the United States. We are busy sorting those things out because right now there is so much of a market that is open for us out there, and sometimes it just takes you to be the middle person and for us we don’t know those things, we don’t take advantage of it. We like complaining that there is no money and there are no opportunities, but if you don’t knock on doors and actually ask what you can offer me that I can’t do for myself.
No matter the magnitude of the business, just start
TUMISANG NDLOVU: As a parting shot, how would you advise anyone wanting to start a business? It is a serious jump, something in South Africa that we are not taught how to do; you have to be self-taught like yourself. How would you advise someone in that position?
TEBOHO MAFODI: My advice would be to just start. It doesn’t matter what you want to do, it doesn’t matter the magnitude, just start. The problem is we worry about money. I always say worry about ideas, and money follows ideas. If you work on that idea and you work on that business model, then money will chase it. I’ve done things that I had to do for the very first time and I managed to turn them into gold because I go the extra mile to find out how something is done. You have to start to learn, you have to start to open that door, you have to start to actually make a success out of something small.
TUMISANG NDLOVU: Great advice, thank you so much for your time.
TEBOHO MAFODI: Thank you.
TUMISANG NDLOVU: That was the founder and group chief executive at the TM Group, Teboho Mafodi, in this week’s SME Corner right here on Moneyweb.