Putting his trust in South Africa’s small businesses
Tough times bring out the best in entrepreneurs, forcing them to cut costs and employ innovative solutions, says Mohlolo Selala, senior manager at Kagiso Enterprises Rural Private Equity Fund
WHY did Kagiso Trust, through the Kagiso Enterprises Rural Private Equity Fund programme, decide to fund rural and small businesses, and how does Kerpef differ from government development finance institutions that fund entrepreneurs?
Globally, there is a consensus that small businesses are the heartbeat of economic growth and development. Currently in the country, it is estimated that about 60% of jobs are created by small businesses. To help curb unemployment, inequality and poverty, Kerpef seeks to invest in and promote black and rural businesses. Government is to create an enabling environment for small businesses to thrive — however, given the magnitude of the challenges faced by the country, a combination of different solutions, in addition to development finance institutions, is required.
What are the three factors that determine economic sustainability or development?
Development of human capital through appropriate education and skills is critical as this allows for the creation and exploitation of opportunities. Second, an entrepreneurship culture allows for innovation in different spheres of the economy, and, third, social capital is important in keeping together the fundamental economic activities across different levels of society.
How can the development and support of small businesses contribute towards economic growth and job creation?
Support of small businesses contributes towards economic growth. Small businesses exist to take advantage of opportunities to solve problems, which results in economic activity.
To date, how much has Kerpef invested, and how many decent jobs have been created or supported?
Kerpef has invested more than R50-million in the creation and support of small businesses and has, from 2014, created more than 130 jobs.
What advice do you have for entrepreneurs during these challenging economic times?
The present economic environment negatively affects business, especially small businesses. However, hard economic times, although not palatable, force entrepreneurs to come up with lasting and efficient solutions. During this time of squeezed margins, entrepreneurs must single out costs and control them to balance the negative impact of exogenous costs.
How is Kerpef contributing towards the empowerment of women entrepreneurs?
Lack of women’s participation in the economy is blamed on “double-barrel” exclusion in that women have been marginalised by political systems and market forces, and, in addition, discriminated against based on gender. We seek to invest in businesses with a bias towards female ownership and employment.
Does Kerpef fund social entrepreneurship?
As a subsidiary of Kagiso Trust, Kerpef finances forprofit businesses. However, Kagiso Trust looks to promote initiatives which attend to solutions sustainably.
Since Kerpef’s inception, which sectors of its investment portfolio have seen significant growth with regards to black ownership?
Investments have been across economic sectors in the country. Although there are pockets of excellence, there is still a long way to go in realising meaningful black participation in the economy. Our role, although small, is to contribute to this end by maintaining a balanced portfolio.
Why is the National Development Plan such an important document to achieve the country’s Vision 2030? And how can the private sector, government, civil society and labour work together to achieve the vision and begin to address unemployment, poverty and inequality?
The NDP, as a vision for South Africa, focuses efforts and forms the base for strategic initiatives by all stakeholders in addressing the triple curse of unemployment, poverty and inequality. However, its success depends on a co-ordinated relationship between the government, the private sector and civil society — from policy formation to implementation. A lack of co-ordination and defined roles leads to duplication, which steals from already limited resources.
Tell us about Kerpef’s partnership with SA Franchise Warehouse, and its progress.
Kerpef partnered with SA Franchise Warehouse to help identify potential black franchisees for funding in the franchise sector. The partnership allows first-time entrepreneurs a soft landing in the franchise sector. To date, Kerpef has invested R11.5-million in funding and supporting franchise opportunities for black entrepreneurs. SA Franchise Warehouse and its networks provide support to the franchisees in order to maximise their chances of success. Franchisees going through the SA Franchise Warehouse training programme are protected from illegitimate franchisors. Given the difficult economic environment, SA Franchise Warehouse is a link between the franchisors and franchisees, and when problems arise in the business, franchisees and franchisors are drawn to find
Small businesses exist to take advantage of opportunities to solve problems, which results in economic activity
solutions beneficial to all parties.
Although the franchise model is a proven one, running the actual business requires dedication and hard work. As such, businesses of those who are not putting in effort face more challenges. As the partnership with SA Franchise Warehouse is maturing, Kerpef is gathering lessons on how best to increase black participation in the franchise sector.
Which Kerpef beneficiary stands out for you?
Thembeka Sales and Logistics. Thirty jobs have been created since the start-up was established in 2012 and to date turnover has grown 30%. The target is 50% growth in turnover by 2017. There has been growing interest from other manufacturers that are approaching Thembeka with a view to it distributing their products. At the beginning of the year, Kerpef helped the business install a shelving system, which helped maximise storage space and make the warehouse presentable.
This is one of a series of monthly articles sponsored by Kagiso Trust in celebration of its 30th anniversary