The rising of the new economy: are we ready?

The one sure thing in the world’s economies today is that problems are getting broader, deeper, more significant and will become more prevalent. The question is, are we equipped to navigate the new ‘problem driven’ paradigm?

This was asked by entrepreneur and co-founder of the Aurik Business Accelerator, Pavlo Phitidis, speaking at the SBL Alumni AGM earlier this month.

According to Phitidis, a new economy is rising and we need to acknowledge this and be prepared to participate in it.  He says, “Among the world’s most established economies there is a trend towards growing unrest which is leading to different politics.  Tensions are created between those who are holding on to what was, and people who are looking towards a new future.  For example, Nigel Farage in the United Kingdom is part of a growing right-wing nationalist agenda comprising of groupings that push back against a changing economy and balance of power.  Then there are those such as Pete Buttigeig, the Democratic mayor of Indiana in the United States, who is openly gay and fluent in seven languages.  Understanding the needs of discontented societies in the US, he has opened up dialogue about slave reparations in that country.”

In South Africa, says Phitidis, simply doing more of what we have done before is proving ineffectual in driving GDP growth or solving the country’s unemployment challenges.  Yet he believes that we are sitting on gold in this economy.  “South Africa is one of the most industrialised nations in the southern hemisphere.  In fact we are 10% more industrialised than the United Kingdom, the founders of the industrial revolution.  The industrial complex that was laid down in South Africa was an extractive one.  Over the years the economy has doubled down into a consumptive economy.  We’ve never invested in making it a value-add economy.”

Phitidis believes that we have to start doing things differently as our economy systemically cannot change unemployment.  “Currently there is a comfortable balance of power between big business and government.  There are around 600 businesses that generate taxable income above R100 million a year.  Our country’s policies are geared to support and subsidise these big businesses.  Yet statistics indicate that 67% of private sector job creation come from companies who employ 50 or fewer people.

The formal SME sector consists of about 250 000 companies that fight for opportunities to serve the big businesses that dominate South Africa’s economy.  This competition has necessitated SMEs exploring innovative differentiators in the offering and delivery of their products and services.  The result is that many are succeeding despite trying economic challenges.  Phitidis cites his business accelerator’s own portfolio of cross-sector SME businesses: “Last year the South African economy grew at 0.8% but our clients averaged an annual turnover of 28.9% and a job creation growth of 32.5%.

For those inspired to leave their corporate positions behind to explore entrepreneurial opportunities, Phitidis cautions: “Make no mistake, starting and building a business is hell.  The first thing you must acknowledge is that any idea you may have has been done before.  Also, be aware that the corporate world gives you a skewed sense of how business operates.  When you start a business you have to develop 360-degree skills.  For example, you cannot rely on someone else’s marketing or financial talent.  You may find that after a number of years in a corporate environment you have become excellent in an extremely narrow slice.”  Further advice from Phitidis: before embarking on your own business   ensure that you have eradicated all of your debt because it can take as long as seven years to attain a steady income.

A fundamental believer that entrepreneurs are made, not born, Phitidis says, “I have seen some of the most unassuming people doing incredible things if they have been given access to a system of building a business that architects their success.”

South Africa’s sustainability lies in taking bets on the future and not relying on events of the past.   Phitidis says that in life, there are only five truths:  you are born; you will die; you can never change another person; we live in a world of consistent uncertainty; and there is only one thing we can control:  our attitude.  If we are able to adopt an attitude that is flexible, open and curious we will be well prepared to turn problems into opportunities that could have profound effects on our personal lives and business endeavours.