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Koos Bekker on competing in a brutal global arena

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Koos Bekker is optimistic about the future
Koos Bekker is optimistic about the future
Clarence Muller

Koos Bekker, former CEO of Naspers, this week returned as non-executive chairman of this JSE-heavyweight company after a year’s sabbatical. Bun Booyens spoke to him

The world is currently somewhat uncertain ­economically. What are your impressions of the bigger picture?

I think the convulsion of 2008 is gradually working itself out of the global economy. It’s nothing unusual; nothing has changed. The economy still works exactly as it worked in 2005 or 1895. There is always a little damage after such a convulsion, and developing countries may have suffered a little more damage than a place like America. The decline in construction means there is a lower demand for steel or vanadium and this has hit countries such as Brazil and ourselves worse.

What is your impression of people’s mood internationally?

People in young countries are more optimistic and more ambitious. They want their children to go further in the world. It’s different in Europe. What always strikes me in France when you talk to students is that, by Wednesday, they are already talking about what they’re going to do on the weekend. Then you get to a group of engineers in India, and at 8pm on Friday they’re still working. This is why India will become rich and Europe poor. There is a fundamental shift of energy and ambition in the world, to the East and to developing countries. I think it’s a trend that will transform us over the next 20 years.

Do you see that energy and ambition in Africa?

Yes. Africa as a whole is typically growing at 3%, 4%, 5%. It is not a growth rate you get in Europe. Africa has its problems – corruption and social institutions that are still weak – but it generally has a faster growth rate than most developing countries. Africa in, let’s say, 50 years, will have a larger population than China and certainly be richer than it is today. I’m pretty optimistic.

What specifically makes you optimistic?

The young people. For example, if you talk to university students in Kenya, you see their ambition levels are high and they work hard. They are not, as it were, paralysed by the burden of centuries of culture. ­

Europe often has a paralysing effect, because the history is so huge.

Now take Britain. You are “smaller” than your grandfather was. In his lifetime, he still saw England dominating a quarter of the earth, and now you are on a small island that may even lose Scotland and may split from Europe. Your experience is: ‘We are becoming smaller.’

But imagine you are an Indian family. Fifty years ago, your grandfather was a subordinate who was ­ordered around by a white bureaucrat. But now you are standing on your own feet. Take cricket: 50% of the world’s income from cricket comes from India. When the cricket bodies of the world meet, it is the Indians who throw their weight around and order ­everyone around, not the British. This translates into self-confidence.

The young people there are saying the world belongs to them and they will do better than their parents and grandparents.

How will this shift turn out in the future?

I think over the next predictable 20 or 30 years, you will see a sharp increase in wealth, especially in India and China, and to some extent in the rest of the developing world, and a pullback in Europe. In your head, you think Europe was always advanced and rich, but that is not the natural state. Before the Renaissance, China was much richer than Europe. Within a few years, that situation will arise again, where India and China are technologically much more advanced, much richer and more powerful than any European country.

During your leave, you visited several universities. Recently, there was an article in The Economist about universities worldwide simply not being able to cope with the approaching influx of students. Where are universities heading?

I think they are heading for a crisis. A situation more or less like the one being experienced by the newspapers now is what universities may face in a few years’ time.

The university model for several generations was that you go to university for three to seven years in your twenties, you learn a lot of stuff and, for the rest of your life – 30, 40 years of work – you use this knowledge. You give it back. That does not work any more, not even in my own lifetime – 98% of our business now consists of technologies that did not exist when I came out of university. The internet was invented when I was in my forties. I could not learn about it at university, because it did not exist.

In the world we are now entering, you have to ­refresh yourself every few years. You will have to ­relearn. The idea that you go to university for a few years and learn everything you will need for the rest of your life does not work any more.

Universities are inherently conservative. They are slow. They come from the monasteries of the Middle Ages. The titles of dean and rector are all monastery titles. Universities are going to struggle. They will have to think innovatively: how can we help a person to reprogramme himself every five or six years in short courses? And that’s not so easy.

This is a headline from last week: ‘Amazon never makes money, but no one cares’. The journalist writes that an oil company makes more money in two weeks than Amazon made in the past 20 years. Where is the crux of the model?

The internet world often offers you something the bricks and mortar world cannot. Your son, say, has a bicycle, and he buys a better bike. Your neighbour has a younger child and he is prepared to buy your son’s bicycle.

What the electronic world is good at is to bring those two together. That bike is cluttering your garage and has no value for you, but the internet tells you: ‘I can get you R200 for it.’ And it tells the other party: ‘You would have paid R1 000 for such a bike, but I can get you one for R200.’ Both sides win.

This is what something like [online advertising platform] OLX does. What makes e-commerce so good is it does what no one else can do for you and gives you a larger offering than you would get otherwise.

And for ordinary wholesale with ordinary products?

You compete with the world. We [Naspers] sell books in competition with Amazon – the biggest in the world – and all British publishers. It is a brutal global environment and you can easily lose money.

With conventional wholesale, you drive to the store. The travel cost is for your pocket. E-commerce still needs bricks and mortar for storerooms and the products must still be delivered. Which products will be profitable in such an environment?

In the longer term, most products will make money some way or other [via e-commerce]. Take the rental car industry. Five years ago, I would have said it’s not the kind of industry that lends itself to the internet, because, after all, you have to transport someone physically with his luggage from the airport to the hotel, and how do you do that on the internet? Then Uber came – and of course the taxi services in which we have a share in China – where we make the connection.

You have a pool of people with cars in the city and there’s a client at the airport who wants to be transported. I’m going to make the connection. It is a socially useful transaction that saves the customer money and brings the car owner an income – and I’m going to make money from making the connection.

But not everything can shift entirely to e-commerce...

A large proportion of retail will in fact move over – let’s say, 20% or 30%. I suspect all the shoe stores in the country will disappear. I would be very surprised if there is a single shoe store left in South Africa in 20 years. On the other hand, with a hairdresser, I can see that the internet can handle the booking, but you will still have to sit in the chair and someone is going to cut your hair and you will have that personal relationship. You go and have a cup of tea. That part will remain in the brick and mortar world.

Your restaurant must also still exist in the physical world. You have to sit at a table and have a meal. You cannot replace that. But we have a fairly good business in Brazil, for example, that delivers food to homes, so we are replacing the ordering phase and are replacing the serving, because we deliver it to your door. So you no longer need the restaurant, only the food-preparation process.

I suspect the internet will infiltrate the economy and affect a lot of things that we do not even realise yet, and you will be able to classify that as e-commerce.

My children refuse to wait for something on television. They download the latest TV series somewhere, presumably without paying. Given that, where is pay TV’s business model heading?

It is completely under siege. In South Africa, many people, including our regulator [Icasa], think the battle is between MultiChoice and some local group that wants to show movies on television. But that’s the old world. It’s over. MultiChoice’s real rivals are now ­Amazon, Google, Netflix and so on. It’s a global ­dogfight. And South Africa might have one player in the battle. MultiChoice could compete in 48 African countries with these players, the biggest in the world.

It will be a very tough and global battle. Your competitors are no longer someone from Johannesburg. Your competitor is now someone in Silicon Valley, California, and that means you have to raise the quality of your people and services – your engineering capacity and management capacity – to that level.

It’s a big ­challenge, because you are suddenly up against the best in the world.

The print media’s problems are well known. Did you see anything in the traditional print media during your sabbatical that gave you hope?

Unfortunately, the trend is a gradual slide downward. The average newspaper’s circulation is decreasing by 1% or 2% a year. I do not see that changing.

There are one or two important things. In almost every country, the most important conversations – where the community talks to itself – take place in the newspapers. You come to New York and it’s a place with 100% broadband and excellent Wi-Fi, and you think this place must work electronically. But that’s not true for public discourse. The most important ­discussions still take place in The New York Times, The Wall Street Journal and so on.

Newspapers play a remarkably important role in a community talking to itself. Take corruption. Worldwide corruption is exposed primarily in newspapers, not on TV. TV is highly regulated. You’re afraid of ­making your minister angry. Occasionally, the TV will chirp a little, but newspapers are an excellent medium for analysis, discussion and subtle distinctions. The place where you will find the most intelligent discussion is in a newspaper, not often in other media, least of all on the internet.

So if you weaken a community’s newspapers, it is a huge loss. I suspect in many countries people see this problem today, but they do not see the solution.

Who do you think will last the longest in the print media?

What is undoubtedly true is that quality newspapers survive better than tabloids. There is definitely a trend that the “quality” of your newspaper reader is much better than that of a TV viewer when it comes to income, interests and level of education. Undoubtedly.

As for magazines, it’s much the same. Magazines that struggle the most are the ones that are actually semi-TV, dealing with film stars and gossip. Men’s magazines – magazines like Playboy and our own Scope of years ago – are being completely destroyed. They are closing down worldwide. It’s a battlefield.

The magazines that do best are those dealing with slightly older women’s profiles. A good woman’s magazine, a Vogue or an Elle, is surviving fairly well, and this is also for a very high-quality reader.

I feel that, in South Africa, magazines that are a bit more serious, that have a bit more depth or are a little more inclined to fashion, will last a little longer than the ­popular, more TV-oriented tabloids. It’s a trend that could appear here too.

You are now the nonexecutive chair of Naspers. However, people did not know you as a nonexecutive person...

I think it’s a different role. The chief executive, the chap who has to lead the ship, must constantly make a lot of decisions. It is, especially in our industry, a very hard, fast and brutal life. The chair’s role is different, isn’t it? You stand back and try to look at the strategy. We’ll see how it works out in the future. I’m looking forward to it.

This interview was conducted in a closed period leading up to Naspers’ half-year results and could not deal with subjects that directly affect the company’s share price. City Press is in the Media24 stable, a subsidiary of Naspers

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