16 October 2008

South African Furniture Maker Grows a Business

USAID Business Linkages program provides path to success

Production on the factory floor of Petite Upholsterers

By Phillip Kurata
Staff Writer

Johannesburg, South Africa — Issy Penniken, a South African who reupholstered sofas and chairs in his parents’ unregistered shop during the apartheid era, today ships his own designer furniture to New York, Los Angeles, London and Dubai.

During the racially charged atmosphere of the apartheid era, Penniken was designated as “colored” and afforded a lower status than white citizens.  In South Africa, the term is still used to refer to a mixed-race group that, for the most part, speaks Afrikaans.

Penniken’s journey toward becoming a successful entrepreneur began when he tagged along with his father to the opulent homes of wealthy South Africans to pick up furniture in need of repair and deliver restored pieces.

“When I saw those beautiful homes, that gave me the ambition to make money,” Penniken said.  Twenty years ago, Penniken went to work in his parents’ shop in a “colored” neighborhood in Johannesburg. He put in 16-hour days, sweeping the shop floor and learning how to strip worn-out fabric and padding from armchairs and sofas and attach new materials.

His father’s clients liked Penniken’s handiwork, and this encouraged him to start making his own furniture. Penniken worked with his father in the struggling business.

“We got an order for 200 chairs and sofas from a hotel.  That was our first big order.  We worked from 7 in the morning to 11 at night, and in the end we made no money.  That was my first taste of working so hard and making no money.  I knew that we were doing something wrong,” Penniken said.

That was in 1998.  On the advice of a friend, Penniken made contact with the U.S. Agency for International Development (USAID), which took him on as a client of its South African International Business Linkages (SAIBL) program.  For the past 10 years, SAIBL and its consultants have guided Penniken as he has taken Petite Upholsterers from a family furniture shop to a thriving international business, displaying its goods in the swankiest showrooms in New York, London and Dubai.

“I told SAIBL that I wanted to get into the furniture export business,” Penniken recalls.  “They told me I didn’t even know how to sell in my own market.  I didn’t like hearing that, but they were right.  From then, each local order I got I worked on as if it was an export order.”

Issy Penniken, director of Petite Upholsterers

The first thing SAIBL did was send Penniken to a furniture show in North Carolina, the major furniture-producing state in the United States.  “That was really an eye-opener,” Penniken said.  “I saw how rudimentary our manufacturing techniques were.”

At the North Carolina fair, Penniken examined a sofa that had been sliced in half to display the workmanship that went into the manufacturing.  There he saw workers make an arm of an upholstered chair in 30 minutes, something that took Penniken’s workers two and a half hours.

SAIBL did a top-to-bottom assessment of Petite Upholsterers and pointed out weaknesses from administration to the factory floor, such as Penniken’s antiquated bookkeeping practices.  “We had an accountant come in once a year and do our audits,” he said.  “Our business was bleeding a lot of money, and we did not realize it.”

In fact, Penniken would have lost his business to a bank foreclosure had not USAID intervened to get more time from his creditor.

“I still remember it clearly 10 years [later].  It was a Thursday and we had to make payroll that day.  The bank called and demanded immediate payment of an overdraft.  I rang up USAID in a panic.  They met me the next morning at the bank and got the bank manager to grant me more time to make my repayment.  If USAID had not done that, Petite Upholsterers would have shut down.  I am forever grateful,” Penniken said.

The then-U.S. ambassador to South Africa, Delano Lewis, arranged for Penniken to meet local bankers and get financial training.

“I used to see banks as my main enemy, whose aim was to squeeze every drop of money out of the struggling little guy.  I learned how bankers think and how they judge companies.  Over time, the banker that almost sank me has become one of my main backers,” Penniken said.

Penniken is not the same businessman he was 10 years ago.  His business volume in 2008 is 10 times bigger than it was in 1998.  Today his employees number 150, compared to six in 1998.

At each stage of Penniken’s business development, SAIBL and its consultants have provided guidance in a formal or informal capacity.  The next challenge that Penniken plans to take on is getting his own furniture label. A SAIBL consultant said he will help Penniken with the branding process.

“That’s where the really big money is, branding.  I recently sold a chair for $500,” Penniken said, pointing to a clear plastic chair. “It was resold by an auction house in New York as the ‘chair of the century’ for $20,000.”