Sixteen years ago, two chartered accountants saw the gap to start a specialist IT leasing company. There were no dedicated technology rental companies in SA at the time, and Zakhe Khuzwayo and DJ Kumbula started InnoVent with a desk and a phone. The business now has annual revenue in excess of R150m and has shown 25% annual growth over the past five years.
“We’re the Avis of IT equipment,” says Khuzwayo of the business the two started after leaving work at a company that leased everything from construction equipment to vehicles and movable items. They wanted to start their own business, looked at a few options and identified this gap.
“We refurbish older equipment and get a return in forex. There’s very little available funding to buy assets in Africa. We have created a funding mechanism for organisations to acquire assets using credit because they are renting. Even the banks can’t compete with our rates.”
InnoVent was created in 2003 and was profitable after five years. It has since expanded to the UK, Zimbabwe, Zambia and Tanzania. “We’ve employed people on the ground to run those businesses. Country managers are from here and we generally employ local skills,” Khuzwayo says.
“South Africans prefer to buy to own their assets, but this really doesn’t make sense when it comes to tech. Technology changes so rapidly, it doesn’t help if you’ve paid off all the tech in your business because in another two years you need to buy new equipment with higher specs. Technology is a commodity that depreciates, so it makes more sense to rent and upgrade than to own.”
Blue-chip customers lease more than 1,000 computers at a time, which they upgrade every three to four years. “They don’t have to worry about capex, insurance, maintenance, warranties or asset management.” At the end of the life of the equipment, InnoVent wipes the data, repurposes the machines and re-rents them to other customers, including schools and small businesses locally and outside SA, at half the cost of a new device. It rents laptops, desktops, servers and phones.
InnoVent’s main market is large corporates, which save 15%-20% on hardware costs compared with owning assets. The secondary market takes refurbished machines and saves 40%-50%. InnoVent says it dominates the secondary market.
“Before retrenching people, SA organisations should consider all avenues to effect saving, including our offering,” says Khuzwayo. “Even universities, which are under a lot of financial pressure, should be considering asset rentals.”
InnoVent’s first corporate client was Discovery, and it has been working with the insurance and health-care company for 16 years. What helped that come about is that InnoVent is a member of Endeavor, a global organisation that helps high-impact entrepreneurs scale their business. Discovery CEO Adrian Gore is the founding chair of Endeavor in SA.
InnoVent now employs more than 200 staff and its clients include PwC, EY and Mercedes-Benz. It has R3bn of assets under management, being leased out to companies. It hopes to expand, and is looking at West Africa, possibly Ghana and Nigeria, says Khuzwayo.
“And we’re also looking to crash the US market at some point. It is very competitive but it’s also a vast place.”
The short-term plan is to tap into the CEO Circle (which includes business leaders from some of the largest corporates in SA) and to work to grow the local business to effectively double its size in the next three years.
His biggest lesson? It takes a lot longer than one expects to build a successful business.
“Challenges include getting the right people, and getting people you can rely on and who support your growth ambitions wholeheartedly.”