‘Eskom – SA’s biggest problem and opportunity’, says Michael Jordaan: Founder & CEO of Montegray Capital
PSG’s Think Big webinar examines the Eskom ‘opportunity’, tips for successful start-ups and the future of SA’s digital banking and telecoms sectors
24 January 2023: The driving force of an entrepreneur lies less in what most people think – making money – and rather in the satisfaction derived from solving real life problems. That makes South Africa an exciting place given the country has lots of problems, with loads of opportunity for businesses to solve them.
This is according to Michael Jordaan, Founder & CEO of Montegray Capital, who has invested in 25 ventures since stepping down as Chief Executive Officer of First National Bank. Jordaan was part of PSG’s first Think Big webinar for 2023, which forms part of a series of dialogues around some of the country’s most pressing issues facilitated by award-winning journalist, Alishia Seckam. The discussion looked at how entrepreneurs can provide solutions for South Africa’s problems, challenges our local start-ups face as well as what the future holds for digital banking and telecoms in SA.
Eskom – SA’s biggest problem that local entrepreneurs can help solve
Acknowledging the role that entrepreneurs and venture capitalists play in identifying and seeing the growth opportunity in solving societal problems, Seckam kicked off the conversation by asking Jordaan for his ideas on how to solve what is arguably South Africa’s largest issue at present, the “crisis” at Eskom.
In the current environment where businesses are experiencing huge obstacles due to disruptive loadshedding as well as being underfinanced to manage the pitfalls, Jordaan says this poses a big challenge, and opportunity, for entrepreneurs.
According to Jordaan, the opportunity presents itself for the rapid deployment of solar energy and it can be done in a sustainable way that ticks all the boxes for a viable business – making it accessible, convenient and affordable. He believes the solar solution is solidly grounded on the basis that it is already cheaper than Eskom power during daytime. “So, the primary motivation is not even ‘green’ but cost efficiency and business continuity. Last year, the amount of solar power installed by the private sector – outside of the IPP programme – equated to one entire level of loadshedding.” Jordaan said he was comfortable to predict that this year it would extend to “multiple levels of loadshedding”.
While a challenge is that large portions of the population cannot afford solar panels, and notwithstanding the scale of the problem, he says that there is no sign that government has comprehended that we are in a full-blown crisis. “It is therefore critical for business to avoid political finger-pointing and rather focus on seeking private-sector solutions wherever possible.”
Jordaan highlighted that the opportunity is viable because banks and other financiers are prepared to provide upfront project capex, at rates which mean it can be recouped by charging electricity prices less than the Eskom rate. Consequently, he says that a viable market solution exists for large users, and as their demand shifts off the grid that improves supply to the rest of the market which cannot afford solar. If rollout continues at this pace, Jordaan asserted there would be a better power scenario in six months – with no reliance on government.
Society is on the last mile to becoming cashless
When asked about the state of Africa’s fintech industry, Jordaan said that while cash still seems prevalent, more than 90% of all transactions globally by volume today are digital. In a country like China, transactions are entirely done not even by card but by swiping a smartphone. “That’s the future for Africa. A smartphone opens one to cheaper, more convenient payment solutions.
Bank Zero, of which Jordaan is a founding member, is focused on the small business sector, which is neglected in South Africa despite its crucial role in job creation. For a small shop, Jordaan says the saving on bank charges can be the difference between profit and loss, with the same applying to other similar expenses such as data costs. “It is up to the SME as much as the individual consumer to look at the solutions available in the market and avail themselves of the cost savings,” says Jordaan. And as technology evolves and causes more disruption and innovation, new ways of doing things will present further opportunity for cost savings. Jordaan pointed to the FSCA announcement around its recognising of cryptocurrency as an asset as a primary example of this.
Internet access is the great divide of our time.
Another opportunity Jordaan highlighted for entrepreneurs is the significant increase in spectrum last year and the ability to bring affordable Internet to many more people in the form of countrywide 4G and 5G packages.
“Providing accessible education across communities is a vital part of growing the skill set of South Africans”, says Jordaan. Codex Academy, of which he is one of the founding members, focuses on bridging the gap between youth unemployment and the corporate skills shortage in software development – giving youngsters from underprivileged communities the opportunity to build a successful career.
Embodying the venture capitalist spirit of opportunity amidst adversity, Jordaan remains positive about the future of the digital banking and telecoms landscape. And he’s placing his bet on the realm of Artificial Intelligence (AI) and energy fusion world-wide.
He concludes that in order to wager on where the opportunities are heading in the future, we need to look at where they are right now and align with that.