Opening Quote

[00:00:00] Jesse Naidoo: So this is the difference between a social enterprise and a systems approach relative to a traditional approach. The traditional approach will tell you that you should price it at what market would bear pricing, and you should pick out the high branded items and sell them at a more expensive price.

And my response to that as a social entrepreneur is that if I'm sourcing it, sorting it, and cost me no different, what gives me the right to charge it at a different price? The only reason I would do that is to create a higher level of profitability. And then they said, no, that's great, Jesse. You can make more money and then you can help and feed and help more people.

But I said, if I stick to that system and I fuel that system, that is the reason why most of those people are in poverty, then I'm no better than the system that I am trying to change.

Podcast Intro

[00:00:52] Sanja Gohre: Welcome to the African Optimist Podcast. I'm your host, Sanja Gohre, and here I unearth the wealth of opportunities that exist across the continent and speak to a wide range of guests about what it takes to prosper in Africa, often against great odds.

My guest today is Jesse Naidoo, a passionate, deliberate, and highly skilled social entrepreneur. With an engineer's eye and a head for business systems, Jesse is transforming the recycling space. Whereas many look at the mountains of clothes that are discarded by the fashion industry each year and see an insurmountable problem, Jesse sees the opposite. For the last 12 years, he has been testing, innovating, and taking advantage of what he terms ‘this abundant resource’.

Not only that, he and his business partner, Tammy Greyling, have made it their life's mission to create employment for the most marginalized among us, people with disabilities, and their mothers, who are both shunned by society and left to fend for themselves. The extraordinary stories of these individuals who are now gainfully employed through their business, Clothes to Good, will be covered in detail in a later episode.

For now, though, I focus with Jesse on his unique approach to growing Clothes to Good, their partnerships with big fashion retailers like H&M and Levi's, and - stick around to the end - his thoughts on why the current models of profit-making are not going to survive the changes that are coming.

Interview begins

[00:02:26] Sanja: I think one of the things I was trying to understand when I was going through my notes is how is it that somebody who was an executive in IT, used to boardrooms, used to big money, used to making big decisions… How is it that you move into a process that deals with waste management of textiles?

[00:02:46] Jesse: I think if I knew the answer to that question, I can go back and change it. I think it was time. I think we all go through our journey in life, and I think I was very blessed that I had a career that took me from the lowest engineering level all the way to the top of an organisation in telecoms, which was a phenomenally fantastic experience.

We were the blessed few that were born in the right time. We were born before data as you know it now, and internet as you know it now, and cell phones, as you know it now, happened. So we were very lucky because we were the, in some way, the chosen few that were part of that exponential growth.

I'd never thought after being in a career in telecoms that I would experience that again. The good news is the textile recycling world or the fashion world as such is exactly in the same place; it's the same experience of an exponential growth.

How I got involved in it is that, at the time I was at a point in my career that I felt there was nowhere further to go. I had wonderful experiences being in leadership, in boardrooms, but it's not quite the excitement of engineering and new innovation and things like that. So I was getting a bit frustrated, because it was more a business, leadership job, not necessarily an industry changing, disruptive, innovation-type work that I was used to, because I grew up in the most disruptive part of the change of the world. And I think all of you would agree. What was life before your cell phone and you can't even remember that anymore. And we had that experience since the early ‘90s. I started in 1991.

[00:04:45] Sanja: Before you go on, Jesse. I remember when we spoke, you termed it, I think it was Pretoria's Silicon Valley, was that how you termed it? And I'd never heard of that before and I didn't know that there was an area of concentration.

[00:04:57] Jesse: Not so much Silicon Valley. But a lot of the IT expertise, and a lot of the infrastructure that supports the IT industry, was concentrated in areas like Centurion.

They have one of the most advanced network facilities in the world. It's seven stories deep; it was built to take an attack from a Boeing before 9/11 happened. And its monitoring screens are the size of two soccer fields.

[00:05:28] Sanja: It still exists?

[00:05:29] Jesse: It exists, it was built in 2000. It was built for when 2000 happened, they thought the world's gonna come to an end, and when we get to 2000, because everything's not gonna work. But it was built to monitor the African continent and connect everything together. So we were lucky to be part of that process as young engineers, and experience some of that. A lot of our customers, large banks and the government and so on, were part of that. So it was infrastructure that was built and of course the tech industry is very concentrated around it. So it was, it was a wonderful experience.

[00:06:02] Sanja: What was exciting about it, Jesse? I mean, you were a young man then. [Ja.] What was exciting?

[00:06:07] Jesse: I think we were so privileged in a sense that we actually knew what the power of data was because we had the opportunity to work with some of the leading organisations in the country. And that connectivity to the whole world, and monitoring and keeping an eye on that too so that more people can be included into the space, was very exciting because we knew that this type of leadership or even systems approach to how the network is designed, how people can collaborate, was possible through centres like this.

And it was also showing that many different organisations were collaborating in that space, which meant that there was going to be an exponential move into every industry like it is today - it is the lifeblood of most of the industries, it has a tech level of power. And it also has made it such that more people can participate in things they couldn't participate in. Never would I have known in 1993 when I was testing cell phones that my gardener would have two cell phones. We thought this is going to be technology for rich people, like the car phone was at the time. And how wrong were we?

[00:07:23] Sanja: I actually remember those first adverts, when they would give people anywhere in the streets or in companies they’d give them cell phones, who had never seen cell phones before. And the absolute awe when people heard someone else answer, it was quite an incredible thing to watch. And people don't know about that today.

[00:07:42] Jesse: Yeah. So the whole technology has changed the world. And there's good and bad, but I think in the bigger scheme of things, it's something that had to happen so that more people can be included, because that's what it is, it's included everybody. Many people were very uncomfortable with that initially, and now everybody's completely comfortable with it because that's how it is.

I'm hoping that in the space we are in, it will be the same, that we will make the necessary changes into the system so that we start doing better things with the technology and with the processes so that recycling and trying to reuse what you've created is just how it is.

And it's not something that is an extra expectation or something that - you're special if you're doing it. We don't want that. We want that it is, it is the right thing to do. And if I'm producing an item, be it that I produce it as a little production facility and a seamstress that sits in a community, or be it that I'm a large fashion company, both of us have to have the same value system that whatever we produce can be reused to a certain point.

And when its purpose is finished, that it could be made into something else or brought down responsibly back to soil, back to earth. And if we have that mindset and it becomes as accepted as a cell phone is today. Then I think we've achieved something.

[00:09:16] Sanja: You said back to the earth, I mean, it goes into landfills, so why is it so important that this cycle that you are talking about comes into being?

[00:09:25] Jesse: Yeah. So if it goes into landfill and it's still gonna stay in landfill for a hundred years, then all we are doing is leaving rubbish for future generations for a hundred years in land that could be utilized for other purposes.

And the truth is, is that a responsible thing to do? Why are you making something that might have a useful life - let's take a plastic cup - that you go to an event to, that has a useful life for one day, and then it's okay. So it stays in our earth as rubbish for a hundred years. Why is that okay? It's not.

[00:10:11] Sanja: What is the extent of this problem?

[00:10:13] Jesse: It is confirmed that over a hundred billion items are made every single year. And sadly, more than 85% of it is ending in landfill. Even worse than that, even before it even gets to landfill, while you're still wearing your clothes and washing them in your washing machines, you are at the same time, polluting our water system because most of our clothes are made out of plastic.

60% according to research is polyester, nylon etc. What does that mean? In the last two years, according to that research, scientists have confirmed that they are finding the chemicals from microfibres, phthalates, for example, which is associated with child obesity, cancer, cardiovascular disease, has been found in breast milk.

So if it's found in milk, then that tells me, then it's found its way into our bodies without us intending for it to be there. And that's the reality of microfibre pollution. The fashion industry has gone to the second position now as the biggest polluter because of this issue.

And they have made some commitments, the big fashion brands, that by 2050, they're hoping that they will eliminate the production of plastic in the fashion industry. If those commitments are real, time will tell. But for the organisations we've started working with, it seems it is, that commitment.

It's a tough one because if you bring it down to the cost per kilogram, it seems to be a lot more expensive to use better quality materials like organic cotton and organic wool etc. So the industry is under a lot of pressure to find materials that would be similar in cost level to that of a polyester, nylon, etc., and at the same time have a better social impact, because ultimately the polyester and nylon comes from the petroleum industry, which is the leading polluter according to world standards.

It's a change that's happening right now. So as the change happened when cell phones came in, I'm finding myself in the same situation where there's this huge change that's going to happen because there is a risk to humanity, there's a risk to our health.

I'm sure most of us don't want to be drinking plastic. It's not acceptable for ourselves. Neither is it acceptable for our children and our grandchildren.

So I think it's, it's an issue that no one is excluded from. Sadly, no one is excluded from the fashion industry; even your religious leader's robe is made out of the fashion industry and it's being washed. So what are you making with it? And when you don't need it anymore, where is it going? These are the questions that are being asked, and sadly, the answers that are coming to these questions is ultimately landfill.

[00:13:20] Sanja: Let us look at how you started building systems and how you transitioned, as we were saying at the beginning, how you transitioned from this exec lifestyle and life into starting to recycle clothes. How did that happen?

[00:13:36] Jesse: Okay. My mom still thinks I'm unemployed because I went from running telecoms organisations and now I sell used clothes - and obviously is also very supportive as well. [laughs]

I think it's not as complex as we'd like to think. It seems complex because clearly there are a lot of participants in the process, because something as gigantic as the fashion industry with trillions of dollars are transacted every single day across the world, is, is something not so easy to understand.

So if you go walk into your favourite store, there will be hundreds of thousands of items ultimately with materials that have come from the whole world, that have been put together in a value cycle and have been manufactured in 20 different countries, but might have been grown in 20 other different countries. So even if you had to just track the life of your one item, it's mind blowing, the journey. So it's seemingly complex, but there are steps - just like when you build anything.

So similarly, if there's a whole lot of clothes that come from retail stores, there are a whole lot of clothes that come from school projects, there are a whole lot of clothes that come from staff volunteerism projects, and they come to us in tons. But from my background in engineering, one of the most important things in systems thinking is that you break it down to the unit. What is my unit? So different industries have different units.

In a recycling world, the unit would be a kilogram. In the fashion industry, they would talk about an item, apparel or shoe but when we went into the fashion industry and we went into the distribution centre, we said, where are the scales? And they said, what scales? We don't weigh anything.

Well, I said, the system's gonna change, because if you have to be accountable for that kilogram that's going into landfill, then you're gonna have to know how much went there and how much we saved. So we are gonna be putting in scales. So that's the first systems change. So we started weighing everything so that we can then understand what to do with all these kilograms.

So you might be seeing a ton of clothing, and I see 1,000 kilograms, and then as a good systems or engineering process, I would assume, we would then decide how… What would be that journey of those kilograms so that it doesn't end up in landfill, or that when it does eventually end up in landfill, that it ends up in a form that's better for landfill than the one that initially was supposed to go there.

So that was the systems approach - that was the challenge, let's put it that way. That's the start.

[00:16:30] Sanja: Let us walk into an H&M store, which is one of your partners. If you stand at the tills and you're waiting to pay, you can see there's a box on the side, and it is a box where you can bring your old clothes and you pop it in there and - I dunno how regularly it gets taken - but let's say I have put in a pair of pants into this box. What happens with that pair of pants?

[00:16:59] Jesse: Pretty straightforward. It's reverse logistics in a sense, because noting that in a store environment customers do return stuff and sometimes there are seasonal changes, clearly the season will change. So what happens at the store? It would be sent back to the distribution centre in a particular packaging to know that this is actually a used item. It does not belong to the store. It's not the store's stock, let's put it that way. It comes through to a central point, which helps us as recyclers in a huge way.

We now have customers that are coming with us that have 380 stores, and one of them that's coming on, it's 1000 stores; noting if little Clothes to Good had to go to every single store, it won't happen. So them having this massive infrastructure that they do have, where it comes to a central point, is a huge benefit.

Noting that they have to change their system because in the past, a very small trickle, a full truck will go to you to fill up a store, not much comes back. So we had to collaborate with the logistics industry, their suppliers and other logistics companies, because we go to a shopping mall and two different brands have two different logistics companies and both of them are running back empty.

So it would be really, a really good opportunity for all of them to collaborate, because it just makes sense. Because all of them are incurring those costs and we are then ensuring that it comes to a distribution centre, we then collect from the distribution centre in its full form. And then the challenge starts.

We need to see how much of it can be reused, how much of it can be upcycled into some other good that customers might feel is worth buying, and how much of it needs to be downcycled, meaning buttons, zips, elastics might have to be taken out - whatever we can reuse in that process, we will, even laces from shoes.

And then make sure that it's shredded into a certain form that could possibly be used in the production of another product. It seems quite simplistic, but noting the development of those new products sometimes takes up to three to five years because of the technology that has to come into play.

It's wonderfully exciting. And I think the telecoms industry, I was working with engineers, but very specific in electronic engineering and telecoms and IT, but here we are working with engineers from chemical engineers, industrial engineers and different people with different substances. So it's fascinating and exciting and...

[00:19:47] Sanja: Groundbreaking!

[00:19:49] Jesse: ...chaos.

[00:19:51] Sanja: Not the word I was thinking of!

[00:19:53] Jesse: But disruptive innovation in many ways. Because the dream for all of us is that we will be able to extract the useful items to a point that you could reproduce this original product and the ones that is not as useful could be made into other products.

Like in our case, we are making paving blocks with stuff that really can't be used as a shoe anymore or as a clothing item, and we are making fabric tiles. So there are other opportunities, and noting that I'd rather it be for another 50 years as a paving block as opposed to being rubbish for 50 years in landfill. Because the paving block would've had a purpose at least. And the way we are developing with engineers these paving blocks and tiles is in a way that maybe can still become a paving block again, or a tile or something else. So maybe we can still delay it going to landfill, but noting, we are not naive to think that things won't end up in landfill, we just have to see if we can be better at reusing things so they don't have to end up there.

[00:21:04] Sanja: Jesse, take me through the details of each step. If we look at the sourcing, you've pretty much outlined that it comes from schools, from other retail customers like H&M and Levi's. So once you get all of these bags that come in, what happens in the next step? Which I think is sorting…?

[00:21:23] Jesse: Ja, sorting is the most critical step. And sorting is getting more and more exciting in a sense. The realities of sorting is that every single item has to be touched, noting that human beings are touching it.

So that's a very high labour intensive process, which is wonderful for a country like ours that needs to create jobs, but also difficult because it is also a very expensive resource. And it's evolving every single minute, really, around the world because we are trying to find smarter and better ways to do that sorting.

At the moment we are doing mechanical sorting, meaning that you'd identify an item as a particular type of item and then you would look at the quality of that item. So let's say it's a men's trousers. Is it usable still? In a sense, are the buttons working, the zips working? Is it faded, is it not faded. It goes into a category of men's trousers. And then if it isn't, then we would look to see if it can be used in a toy. It can be used in any other upcycling into another product. So maybe the men's trousers actually becomes something else. It might become some material in some toy, for example, in early childhood development, that'd be great, but a lot of times it doesn't.

So men's trousers is not the material that would be the type of material you find in toys. If it was jeans, maybe, but not as trousers. So then we would say, okay, the buttons, maybe the zips don't work, it has been stained, or it has been damaged. We would cut out the zips. We'd cut out the buttons, we would shred it and it would go to partners that shred to fine fibre, that supports the motor industry or the bed mattress industry, for example.

Some percentage of it would go into fibre that goes into tiles, some would go into paving blocks. So luckily for us, after 12 years of innovation and working with many awesome organisations that have similar dreams that we have, there are opportunities for them to have a different life, to extend their life and purpose.

[00:23:46] Sanja: When you look at um, reuse, what percentage of the incoming clothes get reused and how do you reuse them?

[00:23:54] Jesse: Reuse is the simplest part. So approximately 40%, 30 to 40%, depending on where we are sourcing from, but let's say 40% of the clothes can be reused in its current form.

This was one of our dreams because we have had three dreams. One of them was to create micro businesses. The other one was to create inclusion of people with disabilities. And the third one was to make sure that we are caring for our environment. So in that process, whatever process we're doing, or every step we're doing, we always keep those three things in mind.

In this process, we decided that this is a great opportunity for people to resell. So we wholesale to micro businesses and because we have a deep understanding or link to the inclusion of people with disabilities, and we've understood that mothers of children with disabilities are one of the most marginalised in our country; mostly locked out of work because nobody wants to look after their children or there is some stigma attached to the disability in their communities… So we focused our energies on them with other NGO partners like Afrika Tikkun, who were doing a lot of good work with these mothers in various communities in Gauteng, here, in Johannesburg, in Pretoria.

So, we worked with them and over the 12 years many of them have become extremely successful businesswomen. People are able to have high quality clothes at low prices. So they're providing a very good service. Also, they're able to care for their families better, exiting them from what they deemed poverty. They're owning their own houses, owning their own cars, putting their children through good education. So that's where part of the clothes go.

[00:25:44] Sanja: Do they have to pay you to get the clothes?

[00:25:47] Jesse: Yes, Clothes to Good is both a for-profit and a non-profit because we always intended to be a social enterprise, but South Africa does not have that legal entity. So we have two entities and we have a saying at Clothes to Good that ' free is expensive'. We are in a third world country, we don't have access to hundreds of millions of rands of grant funding; we would be irresponsible to start micro businesses that we cannot sustain. So it costs money to source, it costs money to sort because we are paying real human beings to do that work.

What is different though? We are a social enterprise. So I might have a Levi's jeans that was recycled. I will not sell it at what the market price for Levi's is.

Let me give you another example. Let's take a ladies item, it's a high branded item and we have some percentage of our ladies items that still has the tag on it. So let's say the tag is on it and it's a high brand. I'm not gonna mention any particular brand, but you can just pick anyone that you think is a high branded ladies item. I will not price it at what the price is at the shop. I would still price it at the weight. So we have a set weight price per kilogram and noting that it might be a high branded item, or it might be a low branded item, but its price is exactly the same because the cost of sorting it, the cost of sourcing it and sorting it, was exactly the same for both.

So this is the difference between a social enterprise and a systems approach relative to a traditional approach. The traditional approach will tell you that you should price it at what market would bear pricing, and you should pick out the high branded items and sell them at a more expensive price.

And my response to that as a social entrepreneur is that if I'm sourcing it, sorting it, and it cost me no different, what gives me the right to charge it at a different price? The only reason I would do that is to create a higher level of profitability. And then they said, no, that's great, Jesse. You can make more money and then you can help and feed and help more people.

But I said, if I stick to that system and I fuel that system, that is the reason why most of those people are in poverty, then I'm no better than the system that I am trying to change.

So I'm hoping that this response gives you an example of what the reality of social entrepreneurship is, noting that if everybody had the same values, you would not be paying R20,000 for your cell phone and if the lower branded cell phone, which actually does exactly the same thing most of the time, and why some at a fraction of the price, and both of them go through exactly the same process, you can't justify it. It's branded. So we've created this thing and it's been our worst enemy.

So, we wholesale to our mothers and our micro businesses at a kilogram price. And one of the things also in our values is that we will take our total cost - and if I had to use an engineer in some of those costs to make a paving block, then that cost will also be in the cost - and I would then only put on a markup of 10% maximum.

And if I was in my corporate boardroom job, I promise you, I would've been fired within the first week if I ever wanted to execute on that type of thing because shareholders expect maximum return. And in Clothes to Good and social enterprises like us, we don't, we follow a New Capitalist Manifesto thinking; we would also look at what the actual cost of things are and then only add on a margin that will help us sustain the ecosystem.

In that way, more people are included. We have empowered over 108 micro businesses through this small facility. Noting, when we switch on the other retailers that have thousands of stores… um, to give you an example: for 40 stores, we would do close to 30 tons a month. One of the retailers have 380 stores, so that would go to about 150 tons a month.

So if I would use exactly the same system I just explained to you, where we source, sort and then we just use the same costing mechanism, the price to the new micro business will be exactly the same. And then we'd have thousands of mothers reselling.

People quickly tell me there'll be an oversupply. And I said, really? We have over 50 million people in the country and many of them are gonna get high quality clothes at reasonable prices. And why shouldn't they wear a Levi's or other product? They bought it. Levi's actually participated in the process that allowed them to have it because they ask their customers to please bring back their old clothes, not only Levi's but any jeans, so that they can actually use it. Everybody's winning in that regard.

And I think it's because we've also decided that we are not accepting the system as it is, that we believe that it's time for change.

[00:31:01] Sanja: Tell me, the women, when you started this whole process, was there an expectation for the clothes to be given for free, and what have you seen with this process going into practice? What has the effect been on the women you have dealt with and the micro businesses that have grown?

[00:31:17] Jesse: So this is a good example. So look with the Afrika Tikkun process, they already had a long relationship with these mothers and the families because the social workers from Afrika Tikkun were working with these mothers.

Let's take Orange Farm for example, which is more on the outskirts of our cities. When we spoke to the mothers, we could easily have given a certain percentage. We do give about 10 large NGOs clothes for free, but they are adding value to it. They're repairing and reusing, and they have a store and we are showing them how to generate funds for their organisation.

So, when we looked at the mothers, we asked them, what do you want? We could give you this for free, but then we won't be able to pay for anybody to get it in the right form to you and the right clothes to you. And then at some point we are going to stop. Because we have run out of money because somebody has to pay. We took them for a walk around the service, and they met the people that sort, they met the people that bring the clothes to us. They met the people that are sewing. They want all those people to also have a living.

And then we asked them, so, should you have this for free? And they said, no. They want to be a businesswoman. They want to hold their heads up high in the community. A lot of times they were hiding their children, they were tired of that. They don't want to be a charity. They wanted to have a business. And they also wanted to have the pride of being able to look after their family. So they understood that. A lot of what happens in Clothes to Good is that our top mothers, mothers that have been with us for a long time, are the ones that take their time to empower the new mothers.

You would feel that they would not do that, feeling that they're gonna create competition, but they're more mature than that. They're more mature than even the best business people in our country, because they understand, it's much bigger than that. This is not about competition. This is about contribution and they're contributing to each other because one strong mother and another strong mother means two strong, happy families in our communities.

So should the clothes be for free? I think if you're finding starving people and their house was burned down and you're going to be giving them clothes, absolutely.

But if you're trying to build something that is gonna be there tomorrow, then no, it shouldn't be for free. Every part of the value cycle or the system should have a way of sustaining itself. So the person who's sorting the clothes, it might be a person with disability, has also got a home to go to, has also got the same needs that the person who is the person buying the clothes has. So should we not show them all the same respect and dignity?

[00:33:58] Sanja: And how are these businesswomen viewed in the communities?

[00:34:01] Jesse: There's a video that H&M made to tell the story eventually, because a lot of customers were asking about where do the clothes go and what does it actually do for South Africa? And so the new country manager, Caroline, decided, okay, let's go find out.

So she was barely in the country. She asked if she could interview the mothers. So we went out and we physically went and met the mothers and they made a video telling the story. And the mothers in that video said, 'I hid my child. The community didn't want to talk to us. I'm a businesswoman. I'm a hero in the community. Other women want to be me.' And that's the type of responses that came in.

They've become heroes in their community. Noting in a country like ours, where the public industry gets paid in the middle of the month and the private industry at the end of the month, there's a lot of free time as well for our mothers. Because they have such grit and determination, they've survived the worst, they didn't have much, and they still survived, they go and look out for other mothers that are in similar situation as them and do what they can do to help. When our mothers visit us once a month, they get trained on stimulating children and early childhood development, finding other mothers and giving them advice on how to look after their kids.

So our mothers become pillars of their community because they are providing a service of course, but they are also helping other people in the community with their free time.

[00:35:30] Sanja: Let us look at the next step, in terms of upcycling. If you've now sorted through all the different clothes, what is the next step? The clothes that can be reused are being sold to the micro businesses and now you move on to the next step...

[00:35:46] Jesse: Okay, so it's sorted. So of course, 14 of the 28 categories go into our bailing system. So of course mothers are buying it at wholesale and reselling it, it's a pretty straightforward system.

If there's anything that they found that by mistake has gone through them, the system is that they can return it to us and it'll be swapped for a similar weight item. When we did say that in the beginning, everyone laughed at us and said, 'Oh, these people are going to take advantage of it and they're going to really milk that system.' It's never happened in 12 years. So I think, there's a human spirit about what we're doing.

Then the rest of the items go into other categories that determine if they could be upcycled. So denim, for example, goes into a category of many upcycling categories because denim is a pretty versatile material that could be used in very different applications. One of the applications for us is creating weighted products for children with autism, ADHD and anxiety, which we call Nim Nims, denims. So a very useful item. This is why it's called upcycling. So it used to be your jeans, now it happens to be a device for a child with autism. I would argue that is upcycling.

Downcycling on the other hand, about 40 to 50% of our clothes would be downcycled. That is a lot more expensive, because you'd have to cut out buttons, cut out zips, cut out elastics, transport it to a facility. We work with an organisation called Konika that shred the clothes into fine fibre. So a robot in a manufacturing facility will stop working if the fibre content is not perfect for stuffing dashboards or car seats... So there are 12 categories that we sort and 11 of those go into that industry. And then there's a category that goes into the bed mattress industry, it's the fibre that's inside your mattresses. So it's quite exciting but also quite challenging because noting when you're selling at wholesale to mothers that are reselling, your revenue per kilogram is much higher. Your cost per kilogram is the lowest.

[00:38:00] Sanja: Why?

[00:38:01] Jesse: Because you're doing nothing with it. All you did is you sorted it and put it into a bail. With everything else I spoke about in upcycling and downcycling, you're putting a lot more effort into it. That means there's a lot more human time into it and technology into it, so it's actually more expensive.

For a good systems process, you track your unit. We agreed in the beginning, that other unit is a kilogram. Now you're gonna have to put a cost to each kilogram. So the more you touch it, the more you process it, you've just increased the cost of it, and that's what increases the price of the ultimate product.

And now we're talking about products like paving blocks and tiles that you would assume would also be cheaper, not more expensive. So we are always challenged to make sure that it is still affordable products and that the way they are actually made is allowing people to create micro businesses. In our country, it's quite challenging, because you want to go for single phase power or very low power type production.

You also want a person with not a very high skill who is able to do it. So that paving block or that tile, does it need to go into a complicated oven? Can it be sun dried for two days and still be the same strength and quality to one that went through the other process and - crazy but exciting - yes, it can be done. It's just speaking to the right engineers, going through the right processes. This particular process took about three years, but we figured yes, it can be done. We found ways and it's been a wonderful journey. The challenge is to make sure that we still do this in a way that we can sustain it.

So we have had to be smarter in the process, on how it moves, how it's cut, how it's processed, what it’s ultimately gonna be sold at when it's the product, and how can the person who created the resource and the person who's selling the tile, for example, work together so that they can sustain the whole process.

And an upcycled tile that's had inclusion of people with disabilities, is sometimes a higher value product, especially when it's being sold at a similar price to the others. And actually, engineering proved to be actually a stronger product, because of the mix. So, it's taken a long time to get there, but it's also proven that this is possible and it can be sustainable, noting that it's not easy.

If you are decided that you're going to take on the whole value cycle, that means - as much as you might be making a good return on wholesaling - you at the same time would have a tough return on downcycling, for example. So you'd have to find out at what point do you stop subsidizing, so that downcycling actually looks after itself, because that's the ultimate goal.

So that's the challenge of businesses like this. And when you don't have access to grant funding and you don't have access to loans from banks because they have no clue what you're talking about, because this is not built on shareholder value and you're refusing to make market-based prices on things, then it's tough to generate investment

[00:41:19] Sanja: How did you do it? How did you crack this particular challenge?

[00:41:23] Jesse: Well, I'm a lot poorer than I used to be when I was ahead of my corporate life, let's put it that way, I'm surprised I'm still in private banking, but I guess I'm in there, so they let me stay. You use a lot of those, um, private funds. I use my private status to be honest. And access to personal funds, personal credit, personal assets to fund this organisation.

It's not the life of a corporate executive flying across the world, staying in first class hotels, it's definitely not that. It could be that, I guess, as well, as these businesses grow. But it depends also what's your personal motivation. And maybe for people like me who've had those things because we were blessed that we were born at the right time in the early ‘90s, we also realised what is the true value of those experiences. It was wonderful. It was great. Is it making me happy to have it all the time? Maybe not. I think working with the type of people I'm working with now, people who care for the planet, who are willing to stand up and change a system because the system is not working, is more fulfilling.

[00:42:36] Sanja: I'm just thinking of young people listening to you and I think you would've had them enthralled when you looked at all the processes, the innovative part of it, being part of something disruptive.

And maybe you lost them when you started talking about having to invest your own money. What would you say to somebody sitting opposite you who is young, who didn't have the taste of the corporate experience, what would your advice be in terms of startups in South Africa or on the African continent?

[00:43:05] Jesse: Okay. The good news is that some of us had to go through certain pains to change the system or try and change the system. Because the system is changing, we have a lot of young people working with us, people that just came straight out of school, really, but are working with us, because we've now changed a system that they are also able to participate in, because…

Give you an example, a person who wants to come up with a range of denim outfits. In the past they would have to try and beg and go to charity stores and ask their family to give up their denim, old denim stuff, and hopefully come up with an item or two. Now young design students come to us and there's a thousand of the same items, and they buy it at a set price.

And because we are changing the system and we understand that they don't have, and their parents don't have, the money, we say, okay, are you serious? What are you producing? Okay, I'll let you have it for these 2000 pairs of jeans. And you can promise to pay me, when you make, when you return it. Do you know that all of our young people pay us, because it's an ecosystem and they understand they have a role to play in it, and we show them how they're upcycling and how they're changing the world. And they want to continue doing that, and they wanna continue having access to that resource. So they also play the game. They didn't have to have any money to start, other than their skill. And we have been privileged because we've taken the necessary risks at the time that we needed to, that we can now enable them.

Because we, Tammy Greyling and myself, who are the ones that drive the organisation, the executive directors, we've decided that all the things we do now is for people 35 years and under. And many of the people that are working with us are in the age groups of 23, 24, 25, young people that have, you know, been through some sort of training or education and now want to do something exciting. So very young people are engaged with us and, South Africa is a very young population anyway, most of our population is under 35. So by default it's, it's just happening anyway, it's not even a choice. And across Africa it's the same.

And the good news is, waste is in abundance. So if you're gonna take something in abundance and you take people with passion and skills, it's a good equation. We are just enabling that, that's all we are doing. And they are making it into something fabulous that you're going to want. And they're also gonna benefit.

[00:45:49] Sanja: Two weeks ago they brought out the astonishing statistics of youth unemployment, I think between 65 to 75% of South Africa's population - that must have just solidified your intention and your mission to focus on young people.

[00:46:03] Jesse: Ja, formal employment is what they were talking about. And when I walk in some of these communities and I meet these young designers and young people, they might not be formally employed, but they're doing stuff. So I think that there is a potential here that we can swing that around. I think if we follow traditional systems of traditional understanding of what formal employment is, a system that we want everybody to participate in the same way, then we have a problem. I think we have to try and think about the system differently and break it so that more of them are included.

This is the issue. If you are pricing on what market would bear pricing, you are ensuring that only a certain percentage of the population can have an iPhone or a Samsung or whatever's supposed to be sexy in telecoms. And you are making sure that the others are excluded.

The system we are talking about is yes, pay people for what they do, produce what they need to produce, but don't take it out of the reach of others because you need to create value for a few owners, a few shareholders. So if we consistently feel that we can condone that system and that is the right system, then we are the worst problem. We are the ones that are ensuring that it survives. We are ensuring their sustainability.

It's time to say no, because I don't see what they can't do. I don't see people that are unemployed. I see people that have assets and I'm only interested in what they can do. And that's what Tammy often says when we work with people with disabilities - but sorry, that applies to all people. We are not interested in what they can't do and what the situation is. The system that we are talking about is a system of collaboration, is a system of using an abundant resource that is available.

[00:47:59] Sanja: I just wanna read something in terms of this 'shareholder value'. Cause you keep on talking about the system. And I think what you are referring to is that shareholder value. And I want to read where this shareholder value comes from because it was an eyeopener for me.

And basically in 1970, the American economist, Milton Friedman, wrote a New York Times essay, titled by his own name, ' A Friedman Doctrine. The Social Responsibility of Business is to increase its Profits.' And it basically argues that the main responsibility of a business is to maximize their revenue and increase returns to shareholders.

Now, what I find so funny about this is that it says the social responsibility of business, but what's social about that setup? And what is the alternative that we now are beginning to see emerge Jesse?

[00:48:46] Jesse: I think that people that are in the financial world or in the managerial financial world will argue that there is not a scarcity of money. There isn't a scarcity of anything actually. So if you had to take one of those businesses, and if you look at the actual money that's in the business and where is it going, you would realise that the decisions or rules that they made on how the money flows is the reason why few people are being enriched and the rest of the people that are actually producing the product and service are being kept at the same level.

And that's because they've decided that it is okay that a few people earn R2 million a month. 2 million a year or a month. And you have the majority of your production team at minimum wage or just above it, in 1000s of rands, let's say hypothetically say it's under R5,000, but then you have other people that are earning so much more, and why is that a choice that was made? How is that socially acceptable?

I do agree though, if you are a phenomenal engineer and you've invested millions of rands in your education, that you can sell your service at a certain price right? And then we might be paying you more per hour than we'd be paying a person who was was sweeping the floor, right?

But even if we were paying that person at the price, how do we justify giving the owner thousands of percent more than what you paying that engineer. For the fact that they just, what, started the business and the only reason they exist is because thousands of people are buying their product.

So I think mathematically, and I challenge people to take me on on that, take any business, go back to the actual cost of production, add on 10% margin to every point - we can add on maximum 10% value - then I can take the labour cost for putting it together and I'll add 10% and I'll carry on doing that right through the different steps of actual cost. And then I can add 10%. I would guarantee you that more people would be earning a decent amount of money and that the product would be affordable to the consumer.

And I challenge anybody to go and do the mathematical equation, and they will see. Because when they do the mathematical equation to any of those listed companies, they would realize there is a fair amount of that money that actually wasn't in part of the production or service process, was actually just being kept by the owners or shareholders. And if they asked what are they doing with that money, I think it would be shocking.

[00:51:45] Sanja: But what is the alternative to this shareholder value?

[00:51:48] Jesse: Is to follow a new system where it's fair, this tracking of, production costs and paying people fairly for that, for their activity and making sure that we are responsible in the profit.

[00:52:03] Sanja: Why hasn't anyone come up with a different doctrine?

[00:52:07] Jesse: They have. I think in 2011 I read from Harvard Business Review, the New Capitalist Manifesto, which was a paradigm shift to this model, noting that it also comes back to my world, the recycling world. So if you were dumping 200 tons of post laminate waste plastic and paper stuck together into landfill every single month, and you were not taking accountability for it because you're paying your rates and taxes, then this business model also requires that. It would require you to be accountable for the kilogram, even till the point it gets to landfill.

Noting then a lot of the products that you are currently consuming - in this scenario, the taxpayer - you might have a profitable fashion magazine that's dumped 200 tons a month into landfill. They've made profits and their shareholders made millions and millions of rands every year. And guess who was paying for the waste that ended up in landfill? It was the taxpayer, the public. Why is it okay for those shareholders to have millions and millions of rands of profit when they should have taken some of those millions and put it back into the post laminate waste that shouldn't have gone to landfill and did something with that too. That would make it a fairer system. And I'm sorry, as taxpayer, it was my responsibility to deal with fashion magazine waste?

[00:53:31] Sanja: And tell me, the New Capitalist Manifesto, did that inform a new paradigm called Shared Value if I'm correct?

[00:53:38] Jesse: Yes. So I think Michael Porter then was the one who tabled 'Shared Value'. He also took responsibility for the fact that he was part of shareholder value. And I think there was a level of apology there that it's time for change because we could argue that shareholder value, and I'd like people to challenge me on this, but shareholder value has created advanced poverty, because we've kept the abundant resource of money in the hands of few.

And there are people in the world that are adding value that barely, some of them, barely getting a minimum wage. And I think that unlike the tech industry, which is a very new industry in many ways, didn't have those kind of evils thrown at it as much, but the fashion industry did. Noting there are literally millions and millions of people that produce clothing that were below what was regarded as an acceptable wage. So I think somehow the universe put me at this point that really is gonna challenge my words regarding the New Capitalist Manifesto and this type of shared value, because I'm gonna be challenged: ‘Well, that's fine, in the recycling space, you also have to make sure that they're above minimum wage. You also have to make sure that what you produce is not trying to just create shareholder value and…’

[00:55:03] Sanja: But Jesse, let's face it, all change is difficult. How are these massive companies that are involved in this huge fashion chain, how are they ever going to change?

[00:55:13] Jesse: Ja, so I think they are very aware of that. I think the people that I've been meeting are ultimately human beings. They're ultimately parents like you and me, and they are ultimately people that are also employees of their companies, ultimately, that also want to do the right thing and be able to look at themselves in the mirror every day saying that I'm doing the right thing.

So there is a drive for that. From the different country managers and CEOs I've met, we've had very frank discussions and the frank discussion is, without collaborating, we can't do this, because we've created this, but we have a responsibility now to collaborate so that we can responsibly change.

Them just stop doing what they're doing is not responsible either, because in some of these companies, we're talking about hundreds of thousands of people will lose their jobs. And is that also responsible? So we have to be realistic that change is a process and we have to go through that process.

Will I see the day that everything I buy in the fashion industry is made out of organic substances? Maybe not in my lifetime, but I'm hoping it will be. So I'm doing my best to try and get it there. But it will be for the future generations because it's a choice that we have to make now because what we currently doing is not sustainable. Shareholder value is not sustainable. Shared value is going to be sustainable. And that's the reality.

Podcast close

[00:56:50] Sanja: For this episode's show notes, transcript, and to sign up for our free newsletter, visit africanoptimist.blog. For regular updates, follow @african_optimist on Instagram or the African Optimist on the usual podcast platforms. All episodes are also available on our website. Thank-you for listening.

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