‘Disrupt – the future of franchising’ was the focus of the fifth annual FNB Franchise Leadership Summit hosted in conjunction with Franchising Plus.

Finding the silver lining on a dark cloud was the task of FNB Chief Economist Sizwe Nxedlana. “While longer term prospects remain positive, before we get there we are going to have to endure some arduous times.” As to how bad things are at the moment, Nxedlana showed a graph demonstrating that according to FNB’s projections for the current five-year period, it would be the second-worst five-year period of average GDP (Gross Domestic Product) growth of the South African economy since the Second World War. It is surpassed only by the sanctions period of the late-80s and early-90s.

“The national psyche is on a downward trend. The silver lining is that while the South African economy is weak, some of our peer group are much worse. Brazil and Russia have been in deep recession, while sub-Saharan Africa in 2015 experienced it’s worst year of GDP growth in 15 years, with 2016 likely to be worse,” said Nxedlana. The factor common to all these countries is that they are emerging market commodity producers.

“The price of many commodities has halved, but it is impossible for governments to commensurately reduce expenditure to balance income – hence the recession.”

The other silver lining is that the pain is fairly concentrated. Defensive sectors of the economy – essential consumer goods, such as food – have proven resilient with the brunt being borne on discretionary spending involving durable goods such as new cars and furniture. “Higher income groups remain relatively optimistic about the longer-term future because they have reduced their debt levels. It is low income groups feeling the brunt of the pain, as are the unemployed,” he said. Businesses targeting higher income groups would consequently do better.

In this tough environment, one in which consumers are desperate for value for money, companies have realised that the only way to grow or even retain market share is through innovation and disruption.

In this vein, the keynote address was delivered by Uber’s sub-Saharan Africa MD Alon Lits, with Uber being the decade’s most defining example of disruption. Lits explained how the process of disruption was still in its infancy. Uber was likely to lead the way into the driverless car concept over the coming years. On-demand use was in the process of becoming the accepted ideology of the IT and telecommunications industries, but was now about to mirror that trend among many consumer assets, starting with car ownership.

The ripple effect of fewer people owning cars would be enormous in future, and any business therefore needed to bear in mind that such disruptive technologies could affect their businesses. He described a world in which on-demand goods and services would increasingly disrupt entire industries and how participants in the value chain of any industry needed to position themselves for nimbleness.

In line with this theme, some other highlights included:

The impact of the entry of Starbuck’s to the South African market was likely to be slow at first, but ultimately would change the competitive environment in such a manner as to be disruptive, as its stores came to be seen as the third place, the place ‘between a home and an office’.

Justice Malala, SA political commentator, newspaper columnist and author delivered his views on the political future of South Africa, one where the past year had seen the centre of power in the country splintering, not just in favour of the post-election DA and EFF, but to civil society groups such as business and tertiary students. Both these latter groups had successfully challenged the ANC hegemony (in #FeesMustFall, and the reappointment of finance minister Pravin Gordhan) and were likely to be emboldened to continue to do so. This would result in a more accountable government, albeit still headed by an ANC which Malala expected to win the 2019 national elections. This meant pressure on business to transform, and for land restitution, would most likely increase until at least 2024.

The irreverent Toby Shapshak, publisher and editor of Stuff magazine, challenged businesspeople to ditch their nostalgic view of the past and embrace new technologies. “My extensive evaluation of many different technologies has led me to the conviction that any one is no better than another – they’re just different. The on-demand business model is arguably the greatest disruptor since the development of franchising 50 years ago. It is a model attuned to the needs of Africa, and I expect many more great innovations to come from this continent.”

Mike Sharman, founder of RetroViral, urged small business owners to overcome the economic slowdown by “engaging with customers by delivering ‘remarkable content’ to the right community of consumers”.

“This is especially needed in sectors, like many franchises, which operate on super-low margins. If you cannot compete on price you have to engage with customers on an emotional level via Facebook, emails, texts. That’s what leads to business success in this environment,” said Sharman.

This is the fifth year that Franchising Plus has co-hosted the FNB Franchise Leadership Summit. It has grown to become the leading conference of the industry with insights from some of the industry’s top franchises and thought leaders, as well as networking opportunities with the most respected franchising systems in the country. With over 200 delegates attending, the dedication of industry stalwarts and FNB’s continued commitment to South African franchising, the FNB Franchise Leadership Summit is set to remain a fixture on the annual industry calendar.

Franchising Plus