The adage of Kodak meeting its end because it failed to adapt to market changes is, by now, something of a cliché.
The 131-year-old company is probably as famous for having its revenue fall from $16 billion in 1996 to $1.2 billion in 2019 as it is for making cameras.
In a more philosophical take, author of the bestselling Sapiens: A Brief History of Humankind, Yuval Noah Harari muses that companies are a fascinating example of the power of man-made myths.
Hariri writes that while companies are not real or do not exist in the sense that people and objects do, they are capable of doing things that no ordinary human being can.
Certainly some, against the odds, outlast the people who established them. South Africa has several fascinating examples of companies that have been around for at least a century and still play a role in the lives of many South Africans.
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But with a technical recession, shrinking GDP growth, stubborn unemployment and the worst global health crisis since the Spanish Flu of 1918, how much longer can these companies keep going – and how do they prepare for changes they cannot anticipate?
Get with the times
Being in business for longer than most people’s lifetime is remarkable, especially when one considers that in 2019, 90% of new South African companies failed within the first five years, according to the Department of Small Business Development and National Treasury.
Can such corporate rarities be toppled by a virus? In a word, yes.
Can such corporate rarities be toppled by a virus? In a word, yes.
Chief economist at the Centre for Risk Analysis Ian Cruickshanks says the fact that so few companies last 100 years or more points to a widespread inability to adjust to rapid change.
“The majority will find this hurdle difficult. It may be the final hurdle that many may not be able to survive. There have been few survivors to this point, and that shows you that there will be even fewer survivors after this is done,” says Cruickshanks.
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For instance, book and stationery store CNA was founded in 1896 as Central News Agency or Consolidated News Agencies, a seller and distributor of newspapers.
But 124 years later – in February this year – Edcon, the embattled parent company of CNA, opted to sell the business to Astoria Investments. The Edcon Group, which is now in business rescue, has had to close under-performing stores of retail outlets such as Jet and Edgars.
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Stores like CNA show companies which rely heavily on brick-and-mortar business operations will continue to face pressure as social movements are limited. E-commerce businesses and those that can allow employees to work from home are better suited to withstand these pressures.
Economist Simon Brown argues that many companies have outlasted their life expectancy not because they have longevity, but because their assets are cheap and they are acquired by a larger company or merged with a peer to consolidate those assets.
Many companies have outlasted their life expectancy not because they have longevity, but because their assets are cheap and they are acquired by a larger company or merged with a peer to consolidate those assets.
Then there are also state-owned businesses, which may survive because they are not subject to the normal competitive economic environment or market discipline.
But it’s also true that in many cases, agility and adaptability are critical, as well continuing to provide a necessary service.
Common among SA’s old-timers are newspapers and media, which have supplemented their offerings with new technology. Naspers, for example, was founded in 1915 as an Afrikaans printer and publisher; 105 years later, it owns e-commerce businesses across multiple continents. Similarly, the Cape Times, established in 1876, the Cape Argus, established in 1857, and The Star, established in 1889, are all complemented by digital offerings.
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The same applies to banks, who have combined a lasting need for financial services with the adoption of new technologies. All major banks in SA have online and mobile banking offerings, which will hold them in good stead, despite the fact that three of those banks are more than a century old.
Old Mutual, for example, was established in 1845. FNB, originally First National Bank, was founded in 1838, with its origins traced back to the Eastern Province Bank in Grahamstown. Standard Bank was established in 1862 as the Standard Bank of South Africa.
Deputy chair of Sasfin Securities David Shapiro says these banks are examples of legacy companies that have not necessarily diversified their operations too far from what they originally did, but rather modernised what they originally did.
That said, notes RECM executive chair Piet Viljoen, while adapting is vital, downturns can take down healthy businesses due to stretched balance sheets, poor management or “just plain bad luck”.
Construction companies tend to fare worse at future-proofing.
Sector rigidity
Outside of the banking sector, a number of heavyweights fall under mining and construction.
Shapiro says while mining companies have transformed considerably in recent years through mechanisation and automation, they still do much of what they used to.
Construction companies tend to fare worse at future-proofing.
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“Construction companies have had the most struggles transforming. Group Five came into difficult times and so did Aveng because of bad decisions and management weaknesses,” says Shapiro.
Shareholders of the 124-year-old Group Five are pushing for the company’s liquidation through the courts, arguing that the decisions management took before it entered business rescue were at odds with the Companies Act.
Aveng, which was founded 140 years ago, saw its share price drop by more than 99% in the past three years and is now considering Covid-19 relief provisions from government as it fights to stay in business.
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Mining companies that have a long history in South Africa include diamond giant De Beers, which was established in 1888, and Anglo American, which was established in 1917. In recent months, Anglo American has been going through the process of exiting the South African market.
Profits today, investments tomorrow
Also key to survival is a forward-looking strategy.
Brown says Exxaro is an example of a company that is stuck in one mode of operation but has the potential to become a legacy company in its own right if it diversifies its green energy offering.
“When our grandchildren are running the country, we won’t be using coal anymore,” says Brown.
Food for thought the next time you sit down to enjoy a cup of 104-year-old Nestlé coffee with 81-year-old Ouma rusks.
* Fin24 is part of News24, a division of Media24, which is a subsidiary of Naspers.
