From humble beginnings in a rented house in Bedfordview, Sahara Computers has come a long way since its founding 10 years ago. Starting the business with seed capital of just R1,8-million, group MD Atul Gupta has established Sahara Computers as one of the continent’s largest IT distributors – a company now boasting a turnover of close to R2-billion.
After a two-year stint in India getting Sahara Computer and Electronics Limited (Scel) off the ground, Gupta is now back at the helm of the local operation and is determined to take it to even greater heights.
He spoke to Mark Davison about Sahara’s history in South Africa, dispelled many of the myths and rumours that have been woven around the local operation, and discussed some of his plans and strategies for the future.
How did Sahara start business in South Africa?
Where we come from is quite simple – there is no story about emerging from a converted garage, although we did start the business from a rented house on Van Buren Road in Bedfordview.
When the Italian lady who owned the house didn’t want to renew the lease, we offered to buy the property. It was valued at about R700 000, but she wanted R1,2-million which we agreed to pay.
In those days, around 1993, the company used to advertise mainly in the classifieds and Junk Mail, but we still managed a turnover of about R1,4-million in our first year.
When I arrived in South Africa in 1993 I was only 23 years old. My father was an industrialist dealing mainly in the manufacture of fertiliser and chemicals and also spices, clothing and accessories and it was he who decided I should go to Africa. I had my heart set on going to Canada, but it was my father’s wish to have his headquarters in South Africa and have me head it as a South African.
I learnt some very harsh lessons in those days – like being charged R100 per minute for phone calls home by some unscrupulous people. I’ll also never forget being asked why we were bringing money into South Africa at a time when everyone else was looking to get their money out.
In 1994, unfortunately, my father passed away and it was then that I decided I would make the best success I could of the IT business we had started … that I’d be fully dedicated to it and establish the family headquarters in South Africa as was my father’s wish.
There was initial reluctance among the family about going into IT instead of the traditional family business. IT was a very new business for them, but when it started doing well the family supported it and committed to it.
The week this decision was made, again I’ll never forget, we had just brought in a container of shoes from the Far East – that’s a lot of shoes.
We had a showroom at Killarney Mall, but for this quantity the only other alternative outlet was the Bruma Lake fleamarket. I was literally selling shoes off a stall when the decision to go with IT was made. I still had half a container of shoes which we gave to the Salvation Army. There had been people prepared to buy them, but my mother insisted that they go to charity.
So how did Sahara emerge from those early days?
Saharanpur is our village name in India, where our family comes from and where I was born. There’s also the Sahara in Africa and we felt it would be appropriate with our involvement on the two continents.
It is a hard fact that back then Ajay, our eldest brother, never wanted us to use the name. He said that he wanted us to target revenues of R100-million and then he would consider letting us adopt the Sahara name.
In those days we had access to limited funds for the business – R1,8-million, not much when you consider the exchange rate was about R3,50 to the dollar.
And while I may have had a lot of youthful energy, I had absolutely no financial background. I was a BSc graduate and had no accounting sense. But I had this driving force behind me … how to get to R100-million turnover so that my brother would allow us to use the family name … that Sahara (the village) in India could accept us as a South African arm.
That only happened in 1997 when we reached, collectively, a turnover of R98-million. We had to prove ourselves and the family had to see that we could make the business work.
In 1997 they allowed us to register the name and in 1998 we formally launched the Sahara brand at Computer Faire. In 1999 we recorded turnover of R127-million and we’ve gone from strength to strength since then.
Would you say that the demise of SDD catapulted Sahara into becoming one of the country’s top distributors?
Things had started to happen for Sahara prior to the collapse of SDD. The product set between Sahara and SDD also had very little overlap. Micro-soft had recognised us as a gold partner, AMD had recognised us, and Asus had appointed us as its exclusive distributor. There was a lot of movement overall before SDD’s collapse, things started filtering through in the local purchase of components and AMD was an important distribution in this. We had gone from 4 000 boards a month to 10 000 through AMD.
These were all key players. It wasn’t long before we became a DSP for Microsoft and, after SDD stopped trading, we signed up Samsung. So we had four big eggs in our basket.
Wasn’t it around this time that your COD payment method came under fire?
That was one of the policies that we became very strict about, but it all started from passing on the direct benefits of our weekly shipments to resellers.
What we do is gauge what resellers are buying and give them the current component prices on a Monday, especially on memory which is bought from Singapore, Taiwan and China.
Because business is on a COD basis, we don’t have big overheads and this is one of the benefits passed on directly to them. Dealers started supporting this model because of the direct benefits being passed on to them – something that wasn’t exactly the trend in those days.
People used to say: Why are you doing this? They didn’t like the fact that we were giving better pricing to dealers, but our target was to make the company successful and make a reasonable profit.
We looked at keeping our profit after tax at 5% and above, as long as we made this, there was no reason to increase any prices. It was all very transparent and a lot of people started planning their prices around our Monday price-lists.
After SDD, a lot of companies had to follow the same [COD] route because suddenly there was not a lot of credit available in the channel.
I came in for a lot of criticism from some competitors, but my reaction was: what’s wrong with it? It’s a business model that appealed especially to small resellers and a lot of them have since grown into bigger companies. So in a way, we were promoting small businesses.
There were also a lot of unfounded rumours flying around about Sahara back then – audits, for example?
Any company that experiences rapid growth – and we’ve had some phenomenal growth over the years – is going to find itself becoming the subject of audits.
It comes with the territory for big corporates that are bringing in large quantities of product from overseas to distribute locally.
Over the years we have had various audits, including independent audits requested by ourselves, and the auditors have always left 100% satisfied.
There has never been a finding against Sahara by any auditor and we have always given them our fullest co-operation.
As Sahara we remain focused on the highest levels of transparency – that is why we have retained one of the big four auditing houses to audit the group’s books annually.
Also, while it is curious that any such rumours were made, I must place on record that at no stage has there ever been any kind of claim against our group.
Then there is the rumour about Sahara owning an airline and using it to bring in product?
I’m very surprised to hear that and would be happy to sit with whoever spread this rumour to discuss it.
The truth is, it [an airline] doesn’t exist. Through our investment company, we have some interests in BA/Comair since July last year and that is the first time we’ve had any association with an airline in our lives.
We have our business jet and our business helicopter which are relatively new, but those were family investments.
Our new Indian partners, Sahara India Pariwar (SIP), had an interest in Sahara Airlines, but they have sold that off. Having said that, this airline had absolutely nothing to do with any African countries. There was only one Indian airline licensed to come here and that was Air India.
We also confirm that all our shipments are brought in through the top three shippers in the world.
Sahara has also been accused of grey marketing, particularly into other African territories like Kenya?
We have operations in East Africa and it’s a channel that we know very well. The only authorised product we sell there is Intel and total sales are really quite meagre. Apart from that, we only promote Sahara brands and we don’t have any restrictions on that. Microsoft is OEMed on these boxes, but it’s all Sahara brand.
I don’t know what to say … can you give me an example of some grey marketing we’re supposed to have done?
In terms of consumables, we’ve always had our own direct supply, but we don’t do consumables in Africa. It’s very focused and specific – we’ve never really played in that bigger space.
Then there is the often-asked question: Are you the sponsors of the Indian cricket team?
No we are not. Our new 50% partners in Sahara Computers and Electronics in India, Sahara India Pariwar (SIP) are the sponsors of the Indian cricket team.
There are two different entities: SIP and Sahara South Africa (SSA) – that’s how we distinguish them. SIP is a very diverse $23-billion asset-based organisation and is our partner in our Indian venture only. It doesn’t have any involvement in our South African operations.
So there’s no conflict of interests regarding your sponsorship of local cricket?
Our sponsorship of local sport shows our commitment to South Africa and it is not just Cricket SA that we have sponsored. We have also invested in SA Rugby and Mamelodi Sundowns Football Club. Our recent strategy also saw us become the official sponsors for the African team in the Afro/Asia Cup, so we have gone beyond South Africa’s borders.
The main reason we have got involved is that sport has become an integral part of South African society and is one of the driving forces behind bringing people together – it has helped create a new society. I think it is the greatest nation-building instrument in the new South Africa and we felt it was the best way to reach people in terms of a brand initiative. It also makes sense when you consider that the brand is moving more towards lifestyle and that sport is a key element of the local lifestyle.
Is Sahara on the acquisition trail?
Yes. We have a strategy of expand and sustain and for the past three years we have been in a phase of sustaining our market, taking the local Sahara IT brand and growing it into other continents through our worldwide associates. Now it is time to acquire and expand. We are busy doing our homework and there will probably be some announcements in the near future.
Is this in reaction to Ingram Micro entering the local channel?
No. It is our own group strategy. We hadn’t made an acquisition for about three years before our Indian joint-venture and now that is over two years down the line, we feel it is time to go into acquisition mode again.
We have had experience competing with Ingram Micro in both India and Dubai, so their presence here will not be something new for us. In fact, I believe it will be very good for the local market and the local channel.
What was your thinking behind Sahara’s recent BEE deal?
Simple: to be a part of my wonderful country and to be a responsible corporate citizen of South Africa.
Sahara wants to be here forever and our BEE deal is in line with government policies and is in line with Sahara’s long-term strategies. The ICT Charter is not the only criterion – we’re a long-term player in this market and it is in line with this strategy.
We believe it is the right step to take in business. Others are talking about employee equity, but what happens when things change in the market as we’re witnessing? Once you have made individual allocations you can’t just take them away when it suits you.
We believe our 12,1% shareholding to AfriPalm, led by Lazarus Zim; the 12,1% to Mvelaphanda under Tokyo Sexwale; and the 2,8% to the Sahara Employees Trust is the right way to go.
As a group, we’re very much involved with our partners – it is not just a token gesture. They offer us a lot of opportunities into markets that we wouldn’t normally be involved in – mining, for example. And let’s not forget that AfriPalm itself has more than 20 000 shareholders.
So what does the future hold for Sahara?
We want Sahara to be the top IT lifestyle solution provider on the African continent in the next three years. That’s where we see ourselves and we’re working through that roadmap to achieve this.
It’s a very bold statement to make.
The timeframe is three to five years, but we believe we can achieve our objective in three with the strong team we have in place and a very consistent, very selective product range.
We’re focused and we know what we’re doing. That’s why we are turning towards lifestyle – it’s the right time and the right decision.
We’re coming in with all kinds of solutions, digital lifestyle solutions, as well as knowledge process outsourcing and business knowledge outsourcing – a lot of resources that we’ve learnt from international markets like China and India. This is what makes us unique.
There are some product gaps – we’re looking for partners in services and solutions, for example, in backup and NAS, in networking devices – but we always want to do business based on Sahara products whereby we are able to retain our position as the Number One South African notebook brand.
Our focus is on quality, on product ranges, on solutions rather than on products alone. And we want our resellers to go the same route so that they can grow at the same pace as we do.
Ultimately, we will distinguish Sahara as a vendor and Annex as a pure distributor.