Leadership editor Dr JJ Tabane sat down with the Executive Chairman and GCEO of the 3Sixty Global Solutions Group (3Sixty GSG) for a frank conversation about his business and the economic trajectory of South Africa
The journey of Khandani Msibi and 3Sixty GSG is a fascinating one, worthy of being shared for its basic lessons in business development, growth, and visionary leadership. From a popular funeral business called Doves to a biotech business is a road less travelled. Msibi’s business philosophy is: success in one sector or product segment should be followed by diversification to generate revenue from other sectors of product segments. For Msibi, it was more necessary because of the terminal nature of the funeral business. Msibi and his colleagues first diversified the Group into financial services and then stumbled upon biotech which is an area for exponential growth, often neglected in South Africa—especially by black entrepreneurs. The biotech strategy was born out of Msibi’s encounter with Martin Magwaza, the founder of Tautomer BioSciences. “Martin plays many roles in my life, he is a business partner, a friend and recently my neighbour, says Msibi.”
Msibi joined Brevity Trade, the holding company of the funeral business when it was in liquidation. He was clearly not handed comfortable and free shares, like in a typical BEE transaction, but had to work hard to ensure that they rescue the business and urgently take it off the Court roll. “The only real asset in Brevity was the Doves Group,” recalls Msibi. Doves Group as the only real asset in the Group was the foundation upon which the rest of the new Group was built. “At that time we owed a lot of people a lot of money, some R250 million in liabilities,” Msibi reveals.
“The beauty about Doves Group was that it had a lot of real estate in which value was hidden. The properties owned by Doves Group were scattered throughout the country and this property portfolio afforded us a leverage opportunity to rescue and turn the Group around. When the monster of liquidation was averted, we had to look into the future sustainability of the company, rescue first, turnaround and grow. We decided that a new focus beyond a funeral business was necessary, where economies of scale were possible without the moral hazards of a funeral services business.
“Our first strategic decision was to enter into financial services. We rebranded Brevity Trade into 3Sixty Financial Services Group. We acquired life insurance company Union Life, and rebranded it into 3Sixty Life. We established NUMSA Financial Services (NFS) and 3Sixty Client Solutions as distribution arms of 3Sixty Life. NFS was established to sell funeral policies on behalf of 3Sixty Life amongst NUMSA members, and 3Sixty Client Solutions was focused on the rest of the market outside of NUMSA. We increased equity in UI Play, a novel Information Technology Company that provided our Group with innovative and low-cost IT solutions. In 2014, we acquired Sechaba Medical Solutions which is the administrator of Sizwe Medical Fund—the first black medical aid in the country. Sechaba Medical Solutions has since been rebranded into 3Sixty Health and Sizwe Medical Fund merged with Hosmed Medical Aid Scheme and has been rebranded to Sizwe-Hosmed Medical Fund.”
Msibi reflects that 3Sixty Life is one of two black-owned insurance companies and 3Sixty Health is the only black-owned medical aid administration company. This would ideally mean more business for 3Sixty GSG as there may be less competition in a country seeking to comply with black economic empowerment, but alas, this is not the case to this day.
Being a black business is hard
“Running a black business is not as much of a walk in the park as one would expect given our history of oppression and the generally-accepted need to transform the economy.” Msibi recounts that support by black people, unions and the state for black business is not a given. Msibi operates under no illusion that white business will happily create or help competition for itself as many of our transformative legislations suggest. Msibi believes that to win in business, black business must climb a steeper hill of black skepticism, greater regulatory scrutiny and competitive hostility from white business. “We therefore had to be exceptional in many areas of our operation just to stay in business. Black business needs a lot more resilience and tenacity than just being black.
“You are mistaken if you think through BBBEE enterprise development white business will welcome you with cake and candles into sectors they have dominated for years, they will take you out at the knees,” he says. Msibi continues to say, “Regulatory concessions or mercy for black business does not exist either.”
Msibi reveals that 3Sixty GSG does not rely on the state for business, something that he believes should have been more accessible to black business like 3Sixty.
“3Sixty generated revenues of R1.4-billion for the year 2020, with zero state tenders. 3Sixty Life is one of two wholly-owned black insurance companies and you would think we should be dominating the state and SOE market, but we have no meaningful business in those markets. 3Sixty Health has zero GEMS business despite being the only black-owned administration business in South Africa.” These ironies do not bother him as they have been able to grow organically in the consumer market where influence is not a currency.
As a result of this, Msibi says: “We don’t have sleepless nights over this lack of state business, as we aspire and therefore consider ourselves as less of a South African business, but more of a Continental business with global aspirations.” The challenges of black businesses in South Africa are numerous. Msibi believes getting business from a black government is hard. Getting business from black people is hard. Msibi hastens to add that he is not complaining, because his business is not struggling. He tells me that the business is geared to generate some R1.6-billion in 2021, a 14% growth in revenue.”
In leading the Group, Msibi has to straddle various regulatory bodies. He is gravely concerned about the Council for Medical Schemes (CMS) which has butted heads with Sizwe Medical Fund over its merger with Hosmed Medical Scheme. Msibi believes CMS needs to up its game to lead the industry, especially in these trying times. Msibi was also less complimentary of the experience with the Financial Sector Conduct Authority (FSCA), though he would like to give Unathi Kamlan a chance to find his feet in the new Regulatory seat and expect to see some changes. He was complimentary of the Prudential Authority and SAHPRA, and holds their leadership in high regard. “This is not because these regulators have not ruled against us, they have ruled against us, but we can make sense of the decisions they have made. When the Regulator rules against industry players, the subject should not feel singled out or fail to get the logic and legal standing of the Regulator in his/her conduct.”
Whilst the South African market will continue to be important, and the Group would appreciate some state business, 3Sixty GSG is building a portfolio of businesses and products that will enable it to play on the global stage. The Group already has an envoy in the USA and has multiple partners in a number of geographies for inward product sourcing and outward product placement.
To play in this game as an equal 3Sixty GSG is investing upwards of 30% of its profits on research and development. Msibi is particularly passionate about these expansion plans and shared with me the vast international plans that include disruptive innovations in pharmaceutical and other applications. 3Sixty has mastered the art of building symbiotic relationships with local and international partners—the acceleration in biotechnology innovations is made easy by the ease with which the Group can build relationships of trust with industry players and scientific houses.
Establishing a global biotech business
So, what is the big picture ahead?
“3Sixty is building a biotech business with specific focus on technology platforms for the manufacturing of molecules and isotopes. We have partnered with local and international research institutions for this strategy to take off. Five startup companies were birthed out of this strategy, 3Sixty Biopharmaceuticals; 3Sixty Biomedicine; 3Sixty Nuclear Medicine; 3Sixty Medical Devices, and a specialist Cannabis business which will be incorporated in 2022. On Nuclear Medicine we have an exclusive agreement with Tautomer Biosciences to take over their Oncobeta business—Oncobeta machines were designed for the treatment of non-melanoma skin cancer and can also handle keloids. Our Cannabis business will be incorporated in the USA in the first quarter of 2022 and will leverage a patented technology platform that will enable us to join leaders in this industry. Our work is cut out for us and we have set a target for ourselves to launch into the market, 100 products in 100 months—we are ahead of our target. The Group is handling a lot of products that I am directly involved with, we have a lot of balls in the air but we have the strategic discipline not to drop any.”
Msibi bemoans the fact that SA’s private sector is not research-orientated—SA has great scientific know-how, but very poor entrepreneurial hunger for innovative and breakthrough technologies. “Our scientists are innovative but there is a lack of entrepreneurial partnership, we are amazed at the available technologies ready for commercialisation or last mile development. It takes a lot of discipline for us to focus as often we are like ‘kids in the candy shop’, spoilt for choice. More and more businesses are focused on current markets and don’t adequately cast their eyes beyond a ten-year horizon.” This, he believes, is the downfall of our economy and the stagnation of our economy can be directly attributed to it.
“Many companies are hoarding cash and some declaring fat dividends which are of short-term benefit to shareholders. Privatisation of SOEs is not going to grow the economy, we are merely recycling existing value.”
Msibi believes this economy needs its own Elon Musk, Steve Jobs, Jack Ma and other such entrepreneurs that have shaken established industries and created greater value for shareholders and society.
“How the US pharmaceutical companies like Moderna ballooned out of COVID-19 is the kind of entrepreneurship we lack, that entrepreneurship that captures the opportunity and creates value.
“But equally, Pfizer ceased the moment and provided leadership, and did not leave the newcomers to dictate the game. We lack that kind of ‘value under all conditions’ business people—you hear too many complaints.”
About BEE: No new value created
“The historical criticism against BEE,” says Msibi, “is that I came to understand only lately that our system is not geared towards value creation. BEE in its current form simply shuffles value from one person to another. There is no innovation as the deals don’t lead to a leap forward. The new black shareholders who are often given shares in an existing company for a song (often at the expense of retirement funds), don’t create new value. I understand the need for change in whatever form, and criticism is not to say value transfer should not happen, but when there is zero value creation then we are in a long-term zero-sum game where we are all losers.”
There is sympathy for some money exchange. It’s clear that Msibi does not buy into the model of BEE so far implemented by the new democratic order, since 1994. BBBEE has lacked the element of encouraging and fostering black entrepreneurship. “Those who were given shares in banks still don’t know how to run banks, even after a decade mining shareholders have not established new mines, certainly not at the rate that reflects the BEE schemes of the earlier era. The lack of creation of new enterprises in areas in which black people were BEE shareholders, means that no new jobs were created and no new value was created for the country.”
Msibi continues his critique in pointing out that if there is no creation of new demand, companies become stagnant. Msibi believes that the state has presided over a lot of value transfer instead of value creation, and that strategy is not sustainable in the long run. “This culture is everywhere, from BBBEE to social grants, to RDP houses. These interventions were supposed to be a stopgap for mergers that buy us time to sort out the ownership and participation in the economy and land redistribution.” Msibi contrasts SA’s story with US companies such as Moderna that moved from obscurity to being a multi-billion Dollar business. “In South Africa, support for innovation is in short supply, money is being poured readily into infrastructure and not innovative products.” The JSE appreciates in value, yet more people are unemployed and more are losing jobs. The JSE is driven by Naspers or a commodity circle, and both are driven by exogenous influences with Naspers—deriving most of its value out of South Africa. The US stock exchanges are driven by US jobs growth and our stock market is jobs indifferent.”
Msibi bemoans the fact that there is nothing of that kind in South Africa. “It has been a long time since we created big companies like we did in telecommunications and entertainment, but even then, they were not black business. How can the economy grow when 90% of the population expects employment from 10%, we know where this came from but we are not making meaningful progress to break it so we can start reducing state dependence.”
Msibi feels very strongly about the lack of economic growth and believes that we need to work doubly hard to change the country’s trajectory. He chuckles that while the US has quarterly job statistics, we focus on quarterly unemployment statistics. “The pressure in the USA is: how many jobs have you created? Here at home we are going backwards and there is no investment in innovations that will shift us forward. We focus on mourning the terrible state of our economy. The paradigm has to shift,” he insists.
How has COVID impacted 3Sixty GSG?
COVID caught a lot of businesses unprepared, there isn’t a risk management process or tool that could have prepared any business for what was coming. As a highly diversified business, our subsidiaries were affected in different ways and we shall elaborate on this. We consider ourselves to be that business that was in the eye of the storm. Through Doves Group and ICSA we saw an escalation of funeral cremation services which were conducted under very trying circumstances. The worst impacted business is 3Sixty Life, which experienced excessive claims as high as 140% of premiums. Other businesses, like NFS had to stop servicing members as employers denied our service teams access to their workplaces. 3Sixty Health and Salt continued to service members, with employees working from home.
“Our positive impact came from our biotech businesses, 3Sixty Biopharmaceutical and 3Sixty Biomedicine. On 5 March 2020, Martin Magwaza insisted on seeing me at 22h00 at home. He informed me that he has been applying his mind to how COVID infects the lungs and how it can be treated. We used a white board for him to explain the concept, but we didn’t have a whiteboard marker so we used my wife’s lipstick, I can’t forget this. At that time, we were working with the CSIR on the reformulation of Malaria and Tuberculosis drugs. We informed the CSIR that we would like to repurpose our work to develop COVID therapeutics. We established a team that has been meeting with the CSIR weekly since March 2020. The outcome of this work is that we have reformulated several antiviral drugs to develop COVID therapeutics and prophylaxis. We have even developed a product we believe is a good candidate for the treatment of long COVID, we plan to take it for clinical trials soon.
“During this period, we also invested in three COVID-19 vaccine candidates—one of which is in animal trials to test for immunogenicity and if successful, will enter human clinical trials.” Msibi believes that we will have to learn to live with the virus as he believes that whilst vaccines have a role to play, prophylactic drugs, post-exposure therapeutics and air purifications will play a crucial role in stabilising the world, and these are the areas that 3Sixty GSG is investing heavily in. “We are currently concluding the final stages of pre-clinical trials with our therapeutics at the Colorado State University, USA.”
“Our botanical medicines company, 3Sixty Biomedicine formulated an alcohol-based and one alcohol-free hand sanitiser, and launched uMhlonyane (Artemisia Afra tonic). We have since taken that tonic through a dosage study and optimisation with the CSIR and we have also developed capsule formulations. A scientific paper that details the work we have done with uMhlonyane is being prepared for publication in peer reviewed journals where the researchers will demonstrate invitro activity against SARS-CoV-2.
“Our pharmaceutical company, 3Sixty Biopharmaceutical was appointed by Jubilant as the South African distributor of their COVID treatment drug, Remdesivir. The company was also appointed by Applied UV to distribute Airocide. Applied UV is a Nasdaq-listed company and Airocide is a device invented by NASA for air purification against pathogens, including COVID. Airocide is FDA-cleared and SAHPRA-listed as a medical device.
“Our business will never be the same as a result of COVID—both positive and negative. The positive side is that COVID has led us to invest in innovations that have resulted in a lot of accidental inventions, it will be years before we exhaust the opportunities that this investment has created. On the negative side, the insurance business was so severely impacted we had to take very large premium increases due to the impact of waves and a new mortality base. We also had to recapitalise 3Sixty Life as shareholders, however, we are a fully invested business, and this necessitated that we relook at our strategy. We were operating four clusters of businesses and the Board accepted our proposal to dispose of the retirement fund and investment cluster, and exit the energy and telecommunication business. This left us with the funeral services and insurance, as well healthcare and biotech clusters.
We are in the process of a new corporate structure which will result in remaining clusters being restructured into separate groups. The former will be called Doves Group Holdings and the latter will inherit the name 3Sixty Global Solutions Group and some of the strategy elements.” ▲
Leadership editor Dr JJ Tabane