The South Africa-based Avalon Group is the country’s oldest independent cinema exhibition, distribution and entertainment business. With 33 screens and more on the way, and around 10% of national box office collections, the 72-year-old Avalon has grown since the mid-1990s after being virtually decimated under the erstwhile apartheid regime. Managing director Aboobaker Moosa, 38, has expanded the group into film and television production, in addition to acquiring content rights for international programs. An ethnic Indian, he has brought Bollywood (Bombay’s Hollywood) to South Africa. He commands more than half the market in this sector. Moosa spoke to India Knowledge at Wharton on the problems the group has faced in the past and the business opportunities in present-day South Africa.
An edited version of the transcript appears below.
India Knowledge at Wharton: You had major problems in the apartheid era because you were in the cinema business. How did the Avalon Group — through its businesses — contribute to the creation of a climate of non-tolerance for racism?
Aboobaker Moosa: During apartheid, the group was almost destroyed through various racist laws including the Group Areas Act, which demarcated white and non-white areas. As a result, the cinemas that were established by my late grandfather, prior to the apartheid laws coming into effect, were expropriated or we were forced to sell. It was a sale by an unwilling seller to a willing buyer who would not pay the real value of the business knowing full well that the group had no choice but to sell.
The group opened its cinemas to all races despite the laws of having separate white and non-white cinemas. While the number of whites that attended our group’s cinemas was very small, those that did come were predominantly mixed marriage couples. This was also forbidden by the racist laws. They were made to feel welcome at our cinemas; they would not be [welcomed] by the white-owned cinema chains that were for white patrons only.
The group was also the first and only supporter of the Durban International Film Festival, now in its 32nd year. The festival screened films on liberation, much to the displeasure of the government. Most of these films would have been banned in the normal course. Under the auspices of the film festival, they slipped through.
My grandfather also allowed anti-apartheid rallies to take place in our cinemas [in the open areas outside the hall.] This led to conflict with the police. My father, Moosa Moosa, was at the forefront of the release of the movie Cry Freedom — the story of Steve Biko [a black activist who died in police custody]. Despite threats, the movie did screen. Non-white patrons attended in defiance of the system.
India Knowledge at Wharton: Do you see a similarity in the situation in the Arab world today and South Africa before 1993? Is the entertainment sector there equally constrained?
Moosa: While there are some parallels, I believe the situations are essentially different. South Africa’s historical challenges were based on a white minority controlling and exploiting a black majority. The Arab world has many other dimensions and, unlike South Africa, leaders or dictators generally of the same ethnic background or race as the majority of the people.
From a media perspective, the advantage that the Arab world has today is that a lot of what is really happening on the ground can be shown to the world through technology platforms such as Facebook, YouTube and Twitter. In addition, there are a larger number of global news networks today.
India Knowledge at Wharton: Would you say China falls in this bucket too?
Moosa: China is very unique and I don’t believe it can fall in the same bucket as any other country or region. The country and its people have excelled and infiltrated the world with a growing influence. In terms of Africa, this influence is growing by the day. The target is the many resources the continent has, which are relevant for China’s continued economic growth.
India Knowledge at Wharton: You attended primary school in North America. Was the return to South Africa a culture shock?
Moosa: I left as a child for Canada with my family, as my father was vocal against the apartheid system and was at risk. [Later,] my father acquired the entire business from my uncles and we had to return. This also coincided with the beginning of the cracks in the apartheid system. It was certainly a culture shock coming from a very open and multicultural society to a very segregated and oppressive country. Things that one took for granted in a country like Canada — basic human dignity and being able to use public facilities like beaches and cinemas — was not possible in South Africa at the time as they were segregated.
India Knowledge at Wharton: Your dissertation for your MBA from Henley Management College, U.K., was on black economic empowerment in South Africa. How do you see progress on that front today?
Moosa: The challenge that South Africa faces is to balance between facilitating black economic empowerment while not fueling a culture of entitlement that will merely lead to poor performance and lack of delivery. The complexity is that the bulk of the economy is still in the hands of the previously advantaged. There are a few black individuals who have amassed huge wealth. But the economic life of the majority has not materially changed.
On the other hand, the black mass appears to have a culture of entitlement. They want all of the benefits without going through the process of learning and understanding so that the country can be truly productive and competitive. If empowerment is not followed by a hard work ethic, it will not be sustainable and can easily slip into an “easy come, easy go” scenario. This is also inimical to developing a larger entrepreneurial class which is pivotal for any country’s economic growth.
India Knowledge at Wharton: The film exhibition business is under pressure all over the world, due to dwindling theatre-going audiences and alternative media such as home entertainment — TV, DVDs, etc. Has this impacted your business?
Moosa: Our group has experienced unprecedented growth in recent years. The reason for this is partly because we started from a low base, having almost lost our entire business [during apartheid].
There are many other competitive forms of entertainment and socializing, through platforms like Facebook, Twitter and the like. However, human beings are gregarious by nature and going out to the movies is a person-to-person contact social event and experience. Sitting in front of a large-screen cinema with advanced sound and picture quality, and laughing at a comedy with a few hundred other people, is a totally different experience to that of sitting at home and watching the same movie on DVD alone, or with just a few people. Going to the cinema and related activities like dinner or coffee before or after a movie is a social event that will always have a market.
India Knowledge at Wharton: Is success in the cinema business today more about marketing than content?
Moosa: Marketing and content are both important in their own right. Today, we have a far more discerning cinema-going audience whose expectations are high. Content is still very relevant, especially for the new high-tech, instant gratification generation.
Marketing and promotion are just as important to ensure that each movie gets a good start. Using technology [including] websites, movie blogs, movie star tweets, Facebook and other such platforms have proved to be important and valuable marketing tools. In many instances, they help to fuel the awareness and success of a film.
India Knowledge at Wharton: What are the new areas Avalon has diversified into?
Moosa: The group’s diversification has been [focused] on securing more mainstream content, not only for cinema but for other platforms such as TV, DVD and VOD
. We want to build on more production-based projects not confined to movies, but also television commercials and the like.
India Knowledge at Wharton: Your traditional business does not have the prospects of going global. If you don’t, you will sooner or later be gobbled up by multinational players. In most countries, theatres are now part of larger conglomerates. Do you agree with these statements? What are you doing about it?
Moosa: I do not agree with these statements. I believe that there are always opportunities for hands-on businesses, and for small and medium sized businesses to expand both nationally and internationally. As a hands-on business with less bureaucracy than large conglomerates, we can take decisions and respond to market dynamics faster, and be more agile. Being the biggest, or a large conglomerate, does not necessarily mean you’re the best or the most profitable. On the contrary, the recent global economic crisis proved many of the big multinational conglomerates to be “all glitter and no gold”, so to speak.
We are in fact assessing international cinema ventures in collaboration with relevant independent players in other markets.
India Knowledge at Wharton: Yours is a more than seven decades-old, family-managed business. Have you ever thought of going public?
Moosa: We have no desire to go public. We have been fortunate to fund our current and anticipated growth on our own, and believe that part of our group’s success is its ability to be swift and agile in the marketplace without the bureaucracy and time-consuming challenges that would be required of a listed entity.
India Knowledge at Wharton: In the South African context, do you see advantages of being family-managed over being professionally-managed?
Moosa: Being family-managed certainly has benefits and also complexities. A primary benefit is that the passion and commitment of a family member is generally far greater than a professional manager. For me, Avalon goes beyond just being a business. It represents a history and legacy of so many dimensions, including business ethics and survival against the odds. This is something that cannot easily be felt by an outsider.
However, I am the first to acknowledge that in any family business, as in the case with Avalon, a family member should not necessarily head the company because they are family.
India Knowledge at Wharton: If you forget about the continuing effects of apartheid for a moment, what are problems and pleasures of doing business in South Africa? In what areas are foreign money and entrepreneurship welcome?
Moosa: The pleasure of doing business in South Africa is that it is an economy that is very much in the growth phase and a powerhouse to the growth of the African continent. This creates many opportunities. We have many sound economic policies, which have had positive spinoffs. For example, these policies ensured that South African banks were not caught up in the recent global banking crises. A credit act that came into effect before the global crises occurred ensured that consumers did not get overexposed to debt.
The country also has policies that welcome foreign investment and encourage entrepreneurship. Among the problems that we face is that we have many advanced economic policies but not enough skilled and experienced people to promote. We have a mix between first-world policies and third-world implementation.
One of the other challenges facing foreign investment is the onerous labor laws that can be very costly to an organization, especially when compared to equivalent alternative markets.
India Knowledge at Wharton: What are your expansion plans? Where do you see the Avalon Group in next five to 10 years?
Moosa: We will continue to increase the number of cinema sites we have nationally. We will also internationalize not only from a cinema perspective, but also from a content acquisition and distribution perspective.
In managing our expansion, we don’t want to lose our hands-on personal touch, which is one of the key ingredients of our success. We will balance between operating in a fast-paced business world, by being lean, agile and quick to anticipate the changing dynamics in the market, while at the same time applying the old and wise adage, “slow and steady wins the race.”
India Knowledge at Wharton: With your own production house, you must be planning a movie on Avalon itself. You have a long history: When Mahatma Gandhi got thrown out of a train by white co-travelers; he was carrying legal papers of your group.
Moosa: The idea of an Avalon movie certainly sounds enticing and may happen someday. But by tradition we are modest. It would be far more comfortable to have the Avalon story told by someone else.
