Doing Business in South Africa: One CEO’s Formula

Detroit native Christopher Whitfield shares key challenges for entrepreneurs

Batswadi Pharmaceuticals CEO Christoper Whitfield (Photo by Lonnie C. Major)

Detroit native Christopher Whitfield’s typical day is not unlike any other entrepreneur. He gets up for work early every day, battles traffic during the morning commute and looks for new business opportunities and ways to grow his company while struggling to maintain a work-life balance that will enable him to take his children on an occasional weekend camping trip.

Sound familiar? Of course. But what sets Whitfield apart from most African American entrepreneurs is that he and his company are located in Bryanston,  South Africa. The CEO of Batswadi Pharmaceuticals (www.batswadi.com)  also has interests in a biotechnology firm and a clinical research company, African Clinical Research Organization (ACRO) (www.acro.co.za).  When I got to meet the Duke University graduate in Johannesburg, my first question was simple, “Why start a business in South Africa?” After all, before he started the company, he was CEO of pharmaceutical giant Eli Lilly’s Southern Africa business. He was in charge of 22 sub-Saharan countries, his family was comfortable and he was entrenched in an emerging market.

His response was profound, yet simple. “I always wanted to come up with my own business. Quite frankly, I was limited within the Lilly framework in terms of making significant change. I wanted to find a way to find ways to allow innovative products that we knew could save lives – allow them to come here and to be used by South Africans regardless of their socio-economic status.  So we started Batswadi.”

Starting a business here is not without challenges. Whitfield broke down two issues an African American entrepreneur should be aware of before doing business in South Africa:

Lack of access to capital. This one sounds familiar to all of us, but remember that in the US there are options, even if they’re not necessarily available to you.  A biotech company in the US can list on the Nasdaq and generate interest from venture capitalists. That VC environment simply doesn’t exist in South Africa. While the government works to seed fund certain projects, they can only seed them to a certain point. Beyond that, you have to find commercial support – a loan or some friends and family love. Bank loans (if you can get one) carry a degree of risk. Case in point, Whitfield’s first venture, needed 40 million rand (roughly $5.5 million) loan. When the credit crunch hit, that loan became unaffordable because the interest rates climbed. So Batswadi had to rely on organic growth as opposed to venture capital.

Access to technology. Whitfield says South Africans have incredible technology, but it’s just a matter of finding ways of getting that tech from the lab to implementation.

But there are benefits too. The pharmaceutical market in South Africa is $3.5 billion, says Whitfield. And the landscape isn’t nearly as cluttered as in more developed countries. He also feels that the clinical business can capture a significant chunk of that billion dollar industry.  Of the 49 million people in South Africa, the middle class totals 3-3.5 million. Only 10 million people contribute to the country’s GDP. This can be vied as a half-full scenario since that means there significant room for middle class growth – which grows the economy.

In addition to importing biotech products like surgical equipment for sale in South Africa, the company identifies generic versions of needed medicines for sale in the country and conducts clinical research for such companies as AstraZeneca International, Pfizer Inc. and Amgen. All told the combined companies generate the equivalent of $10-$15 million – a sum Whitfield expects to double within the next 3-5 years. Not bad for a guy a long way from Motown.

Alan Hughes is an editorial director of Black Enterprise.

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