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Veteran businessman Isaac Shongwe has more than 30 years of corporate experience, having risen through the ranks to become the CEO of Barloworld's Logistics Division. He is currently the chairperson and founder of Letsema Holdings, the oldest black owned consulting firm in South Africa.
Fin24 sat down with Shongwe in this edited interview to discuss the state of the consulting sector which has been battered in recent months by scandals involving some of the world’s leading firms such as McKinsey and Bain & Co.
Letsema, founded in 1996, cut its teeth with contracts from state logistics and freight company Transnet, with the firm becoming an expert in the sector.
Letsema was the local partner with international consulting company McKinsey’s successful 2012 bid with Transnet. The Financial Mail reported that the black-owned firm was frozen out in favour of Regiments Capital, and later replaced by Trillian Capital Partners, majority owned by Gupta associate Salim Essa.
Fin24: How did “state capture” affect you personally?
Isaac Shongwe (IS): After Letsema was iced out of the McKinsey deal at Transnet (in favour of Gupta linked Regiments Capital and later Trillian Capital partners), we had to pivot into the private sector, previously 60% of our business came from the state. A lot of businesses suffered because of corruption, some companies had to close doors.
Fin24: Has Letsema recovered from losing the McKinsey contract?
IS: In the last few months, we have seen significant growth from the state all of a sudden. The new business flowing to Letsema is part of [the] cleaning up ... after 10 years of corruption. You have to improve procurement systems.
Fin24: Is traditional business giving opportunities to black firms?
IS: People tend to do business partly with people they feel comfortable with. It’s not easy but one does get breaks from time to time. Letsema received contracts with FNB and IBM in the early days. You have to fight hard to prove yourself, it’s a catch 22. People want a track record, but how do you get this without being given opportunities? But, eventually you will catch the right bus and you better deliver on it when it comes because that will be your reference.
Fin24: What future do you foresee for the advisory industry amid calls to cut back government spend on consulting?
IS: The consulting industry should introspect following recent scandals, and there has to be lessons learned: What went wrong? How could we have prevented this? Part of the process should see the establishment of a mandatory body regulating the consulting sector (like auditors and lawyers). To say government shouldn’t be using consultants is ridiculous, you need people with certain knowledge, but they should train government so they don’t keep needing to use consultants. We must have a different mindset as consultants and we should be able to leave skills behind. The industry needs to be repositioned and it won’t fall by the wayside.
Fin24: Are the recent commitments by business at the Jobs and Investment summits a positive sign?
IS: Business has come to a realisation that they have to step up and participate in a meaningful way. Business and politics are intertwined. They can no longer see themselves as separate. Business should embrace responsibility to all stakeholders, not just shareholders - this includes how we compensate employees, relate to the communities we operate in and empower small businesses suppliers.
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