A business concept or idea remains just that if it’s not backed up by action. It is therefore advisable for aspiring entrepreneurs to test the viability of their concept against market intelligence, says Terence Leluma, cofounder and managing director of Makhamisa Foods.
One of the country’s young but tenacious entrepreneurs, the formidably hardworking Leluma has set his sights on one goal — to turn an old family recipe into a multi-million rand business. He knew the daunting task that lay ahead; more so, given the fact that South Africa’s food manufacturing industry is dominated by multinational heavyweights with pockets deep enough to sustain a price war in which aspiring entrepreneurs like him often get kicked out of the game.
A report commissioned in 2017 by the Netherlands Enterprise Agency shows that food production in South Africa’s largest manufacturing sector is dominated by a few, very large, diversified, national and multinational food manufacturers. The report concludes that the top 10 players account for about 70% of the industry’s turnover.
Against these odds, why would someone leave the comfort of a cushy job and invest their savings in a business concept that is premised on an untested recipe? Youthful exuberance perhaps? “Makhamisa Foods identified a niche market that is uncontested by the big players, largely because we knew that we couldn’t possibly compete. On the contrary, we exist to complement them,” he says.
So how did it all start for Makhamisa Foods? In 2012, his wife — the other cofounder of the business — invited Leluma for dinner at her father’s house. On offer at the dinner table was a homemade condiment to accompany the main course, a family delicacy that he believed could sell. With absolutely no experience, he jumped at the opportunity to venture into entrepreneurship. What’s remarkable though about Leluma is his acute ability to spot an opportunity and grasp future developments.
To prove viability of concept, he quit his job so he could focus solely on developing his business. In 2015, he began to draw on his savings to test market acceptability of these home-made recipes, albeit on a small scale. Fortunately, some eateries in the informal market took a liking to his offering of condiments, created with his mother-in-law’s formulas. In no time, orders began to roll in.
“I know from experience that every business or product has a downside, but if you believe in your product, be prepared to burn your own cash to prove viability before you can turn to banks for funding — ‘show me the money’, so the saying goes,”.
To augment the growth of the company, he poached a food technologist from a leading sauce manufacturer, before roping in a mechanical engineer to head up the plant, a chartered accountant to manage the company’s finances, and a marketing executive to assist in the distribution and brand visibility of the company’s products.
Leluma and his wife exhausted all their savings attending various food expos and seminars and then turned to the IDC for plant machinery and working capital. In hindsight, the networks created out of these workshops now form the base for Makhamisa’s projected growth run.
With its products fast becoming popular in the local food retail space, Makhamisa caught the attention of a JSE-listed blue-chip food purveyor. This relationship with the JSE company gave him a massive supply opportunity. Thanks in part to IDC funding, his business will be moving from a modest structure to a facility, situated in Sebenza, an industrial park located east of Johannesburg.
“We needed to upscale and move into a bigger and decent structure. The 2 600 square metre facility has been tailor-built for Makhamisa Foods’ business and is fitted with state-of-the-art industrial equipment.” Makhamisa Foods now produces its products from this facility, andLeluma adds that new product developments are also in the pipeline. “This blue-chip company has given us a huge lift-off, but I also need to emphasise the fact that growth hasn’t come on a silver platter. We have had to prove ourselves under the most challenging circumstances.”
There is a wide-spread belief that funding institutions are strangling the growth of small businesses by attaching stringent lending conditions to entrepreneurs. Leluma says it did take a lot of work before he got funding. “They wanted document after another, despite showing them the viability of my business. In fairness, they were justified, given the failure rate for most small businesses in the country.”
The prognosis regarding the future of small, medium and micro enterprises (SMMEs) is not encouraging either, especially because the local economy shed 3.2% GDP in the first quarter of 2019, but Leluma is critical of the state of local entrepreneurship. “Entrepreneurship is about having that steely resolve to succeed against odds. My wife and I lost huge sums of money trying to get this company up and running. The current state of the economy should not be a deterrent to any youth looking for a break. Your belief in your product or business is all that matters.”
Despite Makhamisa Foods’ promising start, Leluma is not resting on his laurels. He is looking to increase the company’s staff headcount from seven to 35 once the new production plant in Sebenza is commissioned in mid-July.
As opposed to offering exorbitant salaries to highly skilled staff, he prefers to incentivise his key staff by providing them with long-term financial security. He emphasises the need for black-owned companies to start preserving generational wealth. “The best way I could attract and reward key, talented and experienced partners who also support my vision and aspirations was to offer them minimum equity in the business. That way, together we are building a sustainable business that will be inherited by future generations.”