Despite InnoVent‘s rapid growth, you’ve probably never heard of it and you’ve probably never considered tech asset rentals either. “South Africans prefer to buy to own their assets, but this really doesn’t make sense when it comes to tech,” explains Zakhe Khuzwayo, co-founder of one of South Africa’s most impressive businesses, scaling at a time when the SA business sector is struggling.
“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 better sense to rent and upgrade than to own.
“We saw the gap for an IT leasing business. Now, our blue-chip customers lease 1000 plus computers at a time from us, which they refresh after three to four years. They don’t have to worry about capex, insurance, maintenance, warranties or asset management. At the end of life of the equipment, we wipe data, repurpose the machines and re-rent – back to other blue-chip customers, as well as to schools and SME businesses locally and outside of South Africa – at 50% of the cost of a new device. We don’t only rent computers but laptops, desktops, servers and telephony too.”
InnoVent was started with a desk and a phone in 2003 by two CAs, Zakhe Khuzwayo and DJ Kumbula. Now the business has annual revenues north of R150 million and has shown 25% annual growth over the last five years. InnoVent’s formula works so well that the business has expanded to the UK, Zambia, Zimbabwe and Tanzania. “We’re the Avis of IT equipment,” Khuzwayo says, “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 says there’s competition in the primary market, but it dominates the secondary market to the extent that “new players can’t even get in.” InnoVent’s primary 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%. “Before retrenching people, South African organisations should consider all avenues to effect savings, including our offering. Even universities, who are under a lot of financial pressure, should be considering asset rentals.”
How did they manage to pull off a business success like this? “We’re members of Endeavor which is a global organisation that helps high impact entrepreneurs scale their businesses. Endeavor’s mentor network assisted us to think bigger, encouraging us to expand InnoVent’s footprint internationally. This has been critical to establish commercially successful offerings in the primary and secondary tech rental markets. Discovery was our first corporate client and we’ve been working together for sixteen years despite staff changes. Adrian Gore, Discovery’s CEO, is the founding chairman of Endeavor in South Africa.
Alison Collier, MD of Endeavor SA, comments, “In South Africa there is much support for start-ups, but businesses that are scaling with annual revenues of more than R50m and which are significant job creators and growth drivers to our economy are largely ignored. We are proud to be accelerating the best high-impact entrepreneurs in the country. InnoVent is one such business success story that we have been supporting for nine years – a black-owned company with more than 200 staff and well-known clients.”
Earlier this year, InnoVent was selected as one of seven recipients of the SA SME Fund’s CEO Circle Entrepreneurs 2019 Award. The CEO Circle’s mandate is to upscale these businesses with a turnover of R50m or more, into significant companies valued at R500m+ within 3 to 5 years. Endeavor ScaleUp helped run the rigorous selection process.