BEE outfit that plugs gaps in NGOs’ funding

JUST over 10 years ago, Ditikeni scraped together R2.8-million from its cash-strapped shareholders. With that seed capital, it pleaded and cajoled its way into all manner of black empowerment transactions.

Ditikeni now not only boasts net asset value of R100-million but is paying out R1.2-million a year in dividends to those same shareholders. Its total distribution to date is R10.5-million, more than three times the original seed capital.

This is not your typical ragsto-riches story, nor yet another story of how some slick new fund manager succeeded in riding an investment wave to generate great returns for wealthy shareholders.

It’s a story of how black economic empowerment regulations have been used to plug critical funding gaps that faced the 18 non-governmental organisations comprising Ditikeni’s shareholder base.

Much of the traditional funding for NGOs dried up after the elections in 1994. (Funds now tend to be accessible project by project, which leaves nothing for rent, staff, bookkeeping or any of the other critical, ongoing costs faced by NGOs.)

The R100-million may not seem a huge amount in the context of the R317-billion worth of value that consultancy Intellidex has estimated has been transferred to black beneficiaries by the top 100 listed companies since 2001. Even compared with the R69-billion (of the R317-billion total) directed to broad-based community schemes, Ditikeni’s R100-million share is not a huge amount. But for the two million-plus lives affected by Ditikeni’s 18 NGO shareholders, it is an amazing achievement.

These two million are some of the country’s poorest and most marginalised citizens; they look to the 18 NGOs for the resources to take part in social and economic life.

Some seek advice and support for ways to make a living in neglected agricultural areas; some look for training that will provide skills to help them break out of the cycle of poverty, unemployment, violence, abuse and apathy.

Among Ditikeni’s shareholders are the Trust for Community Outreach and Education, which focuses on rural development, especially smallholders and small farmers grappling with land issues; the Social Change Assistance Trust, a grant-making body that provides support for about 60 rural, community- based development agencies; the Nonceba Family Counselling Centre, which aims to reduce the level of child sexual abuse in Khayelitsha; the Labour Research Service, which provides research and educational support to many of the largest trade unions; and the Black Sash, which runs seven advice offices providing para-legal and counselling services.

Ditikeni chairwoman Sahra Ryklief has little truck with the view that NGOs are not critical players in the economy and that BEE should be focused only on creating entrepreneurs. She dismisses the blinkered thinking behind this attitude, which assumes government and business are the only economic actors in a society, the only entities responsible for the provision of goods and services.

“The Nordic countries are much more advanced in their thinking on this. In those countries there are several layers of entities, in addition to government and business, that are responsible for the provision of goods and services. This helps to ensure people are much more engaged, and society is more equal and less fragile.”

Ryklief believes a stable society is impossible without such SUPPORT: Ditikeni’s shareholders include the Trust for Community Outreach and Education, which focuses on rural development, especially small farmers struggling with land issues

Ditikeni’s shareholders exert considerable influence on the economy

extra layers.

Inevitably, Ditikeni’s ability to do deals has been affected by perceptions of the government’s shifting BEE emphasis. Between 2007 and 2014, there was a swing to broad-based entities such as Ditikeni and away from high-profile individuals. Earlier this year, the controversial clarification issued by the Department of Trade and Industry (later scrapped) marked a significant shift towards the creation of active black shareholders who could build economies.

As one commentator noted, this approach, supported by the Black Business Council, regarded broad-based ownership as too passive and dispersed to influence the economy or strategic direction of companies.

Ryklief counters that, although broad-based does not involve control, Ditikeni is frequently entitled to appoint a director to its investee companies.

As for influencing the economy, she says that helping to empower two million people means Ditikeni’s shareholders exert considerable influence on the economy.

NGOs are also usually the most cost-effective way of providing services and because their funders are demanding, they have to be able to provide a detailed record of their impact.

Ryklief has little doubt the investee companies that have enabled Ditikeni to create R100million of value are getting big bangs for their bucks.