Arivia.Kom: briefing

Meeting report

PUBLIC ENTERPRISES PORTFOLIO COMMITTEE
20 August 2003
ARIVIA.KOM: BRIEFING

Chairperson: Mr B Martin (ANC)

Documents handed out:
Arivia.kom Powerpoint Presentation

Arivia.kom website

SUMMARY
The impressive milestones reached by Arivia.kom, a public-owned ICT solutions company, as well as its business strategy, focus and transformation was positively described by its Chief Executive Officer. Thereafter a discussion took place, with topics such as poverty eradication, job opportunities and the brain drain.

MINUTES
Mr Zeth Malele, CEO of Arivia.kom, described Arivia.kom as an Information and Communication Technology (ICT) solutions company. He said that South Africa and the world have been surprised at what their public-owned company had achieved as they are ranked in the top four companies in their sector in South Africa.

Arivia.kom employs technology to enhance governance and business. Mr Malele mentioned the government's commitment to e-governance (electronic governance) and that Arivia.kom can play a role in the building of infrastructure. He commented that Arivia.kom is not inferior because it is from a developing country but that it employs the best technologies and world-wide best practices. He noted some of their customers such as Denel and Eskom.

Arivia.kom's vision
Arivia.kom had crafted a vision to help them take on the big companies in their sector. This is: "To be the dominant ICT solutions company in Africa". Mr Mamela is aware of the 'digital divide' (the unequal distribution of access to ICT). They want to create capacity to address this issue and are working with various government departments. They wish to help ensure the success of the African Union and Nepad and he had recently appointed a full-time executive regarding Nepad issues.

He pointed out that South African companies understand Africa's challenges and they therefore will come up with better solutions than American or European companies. He emphasised that they are using the best technologies to solve our challenges.

Mr Malele said that Arivia.kom is positioned better than their competitors for Africa. He also said that the market has been very welcoming to a state-owned company successfully delivering.

Mr Malele said that Arivia.kom is the only IT-company in South Africa with unions for their employees. They will not retrench anybody for the next three years. He hoped that with sustained growth it would never be necessary for them to retrench their employees, but rather that they would create opportunities.

Milestones
The first milestone included the establishment of the business, the launching of the brand and the structural transition. Mr Malele acknowledged that there have been a lot of challenges and much opposition.

The second milestone involved the commercialisation of the business. Mr Malele mentioned the following aspects, the stabilisation of the business, the integration of people, as well as processes and the acquisition of capability and capacity.

The third milestone is Black Economic Empowerment (BEE) and equity. He noted that 50% of Arivia.kom's workforce are black, and 30% are women, they are also working on equity for people with disabilities. With regards to BEE and equity, Arivia.kom are much better than their competitors. He said that they must now focus on ownership. In the awarding of tenders, black ownership will improve their chances of being successful, in the light of BEE. He noted that they are aware of the lessons from BEE since 1994, regarding funding and access to capital. He urged that BEE be brought into action before it becomes too expensive, since, as the company becomes more successful, its value will rise.

The fourth milestone is the value extraction for shareholders.

Much progress has been made regarding these milestones. They have made a commitment that no jobs would be lost, and there had been no job losses, and they have been profitable at the same time. He said that this proves that state-owned enterprises can be successful.

Business Strategies
Their focus is on the African continent, but also on business abroad. They follow an opportunistic strategy with regard to the international arena, including the USA, Europe and Brazil.

They need to win large contracts to drive profitability and support long-term growth. Arivia.kom also aims to demystify the IT-sector for disadvantaged communities in order to create successful participation.

Another priority area is the packaging of their niche capability. For example, Arivia.kom had developed a traffic management package that has been successfully used on the N3 during Easter. Mr Malele also explained that they have three focus areas: infrastructure business, focused business solutions and niche capability.

Business focus
Mr Malele mentioned that South Africa does not want to be seen as a bully on the African continent. They ensure that their work on the African continent is of a win-win nature by building capacity in Africa.

Arivia.kom had had a successful second year, performing even better. Revenue had increased by 26,4% and their cash had improved by 149, 8%.

The future
Mr Malele said that Arivia.kom will continue to follow an aggressive branding approach and has already established a good brand presence. They also want to diversify their revenue base. He stressed the importance of service delivery and the building of delivery capacity. He again stated their commitment to BEE and supporting government in ensuring Nepad's success. He concluded by saying that technology is not normally associated with developing countries, Africa and previously disadvantaged communities, but that they are successful nonetheless.

Discussion
Mr Kompela (ANC) congratulated Arivia.kom's success and asked what Arivia.kom, as a state-owned enterprise, is doing with regards to state objectives, as well as ANC objectives, namely poverty eradication.

Mr Malele answered that he does not think that the government had said that ICT is a basic service. They are running a commercial enterprise, limited by opportunities from customers, including government. They therefore need customers, since they are confined by commercial processes. What Arivia.kom and the government are doing, has an impact on the ground. He described Arivia.kom's social investment by mentioning their influence on the Black Information Forum and their demystification of the sector. He also mentioned, as an example of direct involvement, a school recently opened by former state president Nelson Mandela, for whom they supplied a computer room. He believes that this ICT will influence people in that community. Mr Mamele believed they are making an impact and will continue to do so.

Mr Kompela asked if Arivia.kom is able to convince ordinary people that they are addressing problems at home.

Mr Malele replied that charity starts at home. They must demonstrate success in South Africa. All the technologies they employ, are employed in South Africa before they are employed elsewhere. South Africa is the basis of their success.

Mr Kompela asked if Arivia.kom is planning any celebrations regarding next year's decade of democracy and Arivia.kom's success.

Mr Malele replied that this is something to celebrate. They are doing so through their own marketing campaign. He mentioned that he had received an award for ICT personality of the year in the company's first year, and that last year he made the list of best entrepreneurs. He said that things are happening in the market.

Mr Theron (DA) also congratulated Mr Malele and asked whether Arivia.kom created new employment opportunities, and if they are able to keep their critical personnel.

Mr Malele replied that an ICT company is not usually associated with the creation of job opportunities. Each country must transform its agricultural or industrial workforce into an information workforce. They must have a mindset that will allow them to take deliberate steps to create jobs. He warned against losing focus of the fact that ICT promotes success in other sectors, leading to more employment opportunities. Regarding the loss of critical employees, Mr Malele said it is important to stem emigration, or the so-called brain drain. Success must be sustainable for competitiveness and that they keep their key skills through human resources practices. The company is run by blacks and that this does not translate into getting rid of whites. Key skills have no colour.

Mr Kompela asked to what extent is the Department of Public Enterprise utilising Arivia.kom's capabilities. He mentioned that there seem to be no inter-departmental collaboration.

Mr Malele replied that they are walking a tightrope in balancing the interests of the government and the private sector. Government must ensure free market competition for success.

In conclusion, the Chair noted that the Committee would need more information and figures for a proper engagement the next time they meet with Mr Malele. He asked for a written document from Mr Malele. He assured him of the Committee's assistance if Arivia.kom should need it. He commented that it is the Committee's responsibility to trumpet the success of units such as Arivia.kom, as they are serving the whole community, not one party.

The meeting was adjourned.