I recently spoke about the taxi driver mentality with regards to small business outsourcing and I want to expand on that. South Africa has a lot of problems, in my opinion, the main thing preventing an economic miracle is the mindsets of South Africans. Yes, we have some structural problems but mindset and mentality are big ones and I think school or courses should have a program to deal with these psychological barriers that are keeping people poor. But back to the taxi driver mentality.
Traditionally most minibus taxis were not owned by the driver. The owner of the taxi owned the vehicle and the permit for the route and they would tell the driver “look just bring me, let’s say a R1000 a day. You (the driver) pay for the petrol and you pay for the conductor (ghaartjie, sliding door operator). and you keep the rest” (which is the driver’s salary). Now as simple as this seems this is very similar to many contracting arrangements. The owner pays the finance, maintenance and insurance on the vehicle and the contractor, the driver in this case has to pay for the labour and fuel. But the taxi drivers in a godless scramble to make as much money as possible threw caution to the wind and created what is today the biggest threat on South African roads by far. They jump red robots, they climb pavements, they overload their taxi to over the legal limit while speeding and they will murder anybody that stands in their way. Now, this is an extreme example of the mentality of small business contracting in South Africa but we see it everywhere, in the building industry especially. But what causes this behaviour? Who is to blame? And how can we avoid this?
For the taxi driver, the interest on the vehicle finance can be high, we know the insurance is sky-high. He has to pay for the permit. On the other hand, the driver is limited as well, the fee he can charge is regulated. So when the driver first started out he noticed money of the first ten trips goes to the owner, the next five trips goes to the fuel, now its late afternoon and he hasn’t even paid the ghaartjie yet. Is the owner right and the driver wrong or vice versa or are they both wrong because they both greedy? Or are they both blameless but a victim of circumstance?
Within contracting, there are two players, the contractee and the contractor. And sometimes both are in bad situations. South Africa has a very poor macro operating environment for business. And the contractee is also often in a place of desperation.
Whenever there more than one party involved whether in contracting, partnerships, joint ventures etc. it is almost always human nature that unravels it. The biggest problem in South Africa is the quick buck mentality. This is more prevalent in small business and lower-income people than what it is in big business and high-income earners. (I will delve deeper into the quick buck mentality in detail later).
A lot of problems in business can be solved by good faith (honesty or sincerity of intention) on both parts. Something that is often absent in small business in SA, where both parties seem to want to make as much money as theoretically possible and end up screwing each other over in the process. This can be due to greed but also because people that have operated in good faith before got their fingers burnt and are often cynical.
You will often see long term partnerships that have been profitable for both sides, the reason this is often they know each other, even friends. We have also seen such relationships among certain races and religions.
Find a network of like-minded people
When I do business I often try to leave as much meat on the bone as possible for the people after me in the supply or value chain. And often people before me (in the chain) do the same for me.
* Use common sense
Be realistic with profit expectations
Any job and I mean any job (except for corrupt government tenders) is only ever going to be so lucrative, there is a finite amount of money to be made. You cannot expect to cut corners and then not end up doing a shoddy job.
Don’t take on work that you know is not lucrative enough (for you)
If we assume that the contractee is the bad guy and is lowballing, then no matter how desperate you are don’t take on the work. This is easier said than done. But if we look at the South African small business landscape, people who have a low cost of living are often able to do low-cost work. Why do you think so many foreigners are doing a lot of the work? Because they live thin; ten people in a house and buy R5 electricity at a time.
Don’t take on work or sub-contract work you are not familiar with
This is one of the most common things in SA, people taking on work which they are not going to do themselves and try to middleman it, only to find out all the competent subcontractors charge so high that there is no meat on the bone for them. Leading them to use anybody or pick up people on the side of the road to do the job for them. Leading to the taxi driver mentality.
* I still have a lot to say on the subject but will edit later on to add more.
Image credit: Matti Blume