The issue of start-up finance just seems to not want to go away. With small business and entrepreneurship offering such huge potential to help solve issues such as job creation, foreign investment and an increase is the national GDP, why don't more big businesses, banks and VC's get involved in solving this ongoing challenge?

Ben
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Siseko Njobeni reports from Johannesburg

OF THE many obstacles aspirant entrepreneurs face, access to finance is sometimes the biggest and most difficult to overcome. This hurdle has dashed many a dream of would-be successful businesses, especially among black entrepreneurs.

Speaking at a recent briefing on the black economic empowerment codes of good practice, Trade and Industry Minister Mandisi Mpahlwa challenged the private sector, saying it could do more to facilitate access to finance for small and medium enterprises.

While government has set up a number of institutions to help small, medium and micro enterprises, there are many who would support Mpahlwa's gentle criticism of the private sector's role in providing finance for black economic empowerment. Few companies have made it their business to provide finance to black entrepreneurs.

Financing of black economic empowerment deals has attracted a fair deal of attention. In the past decade or so empowerment funding models have been bandied about, some more controversial and complicated than others.

Anglo Zimele, Anglo American's enterprise development and empowerment arm, is convinced that its funding model has stood the test of time, having been funding emerging black businesses for nearly 17 years.

"That was long before the days of black economic empowerment," says Anglo Zimele MD Nick van Rensburg.

Van Rensburg says Anglo Zimele's philosophy is to ensure black businesses have access to Anglo American's supply chain. Anglo American SA's spend on black economic empowerment procurement, enterprises and development last year was R8,9bn.

Anglo Zimele is invested in 30 black-owned small and medium enterprises in piping, security, bulk-materials hand-ling, pallet manufacturing, transport and logistics. These investments generated turnover of more than R561m last year, up from R264m in 2004.

"When we started the initiative in 1989, we did a lot of greenfield projects. These ranged from laundry businesses to garden services. Basically, we concentrated on the low-tech areas where the barriers of entry were low but after a while we realised that the low-hanging fruit had been picked," he says. The company has tweaked its approach, and is now funding some hi-tech initiatives.

This month the company announced funding for three empowerment initiatives, one a tyre supplier to the mining and transport industries and the other two companies in engineering and risk management.

The trend now is for Anglo Zimele to offer debt and equity finance to black entrepreneurs who want to acquire stakes in established entities. In addition to providing finance to entrepreneurs, Anglo Zimele takes minority shareholdings in established companies.

Anglo Zimele usually sells its shares to the black economic partners or other empowerment entities as part of an exit strategy agreed on in transactions.

Another touchy empowerment subject is the extent of involvement of black partners in operations of businesses in which they invest. "We believe entrepreneurs should be hands-on. That is why we offer mentorship services as well," Van Rensburg says.
This approach succeeded with Business Partners, another debt and equity investor. As with Anglo Zimele, Business Partners' philosophy is to provide mentorship to beneficiaries of its funding.

Van Rensburg says Anglo Zimele has had a high success rate. "We have had failures, though," he says. When a venture fails, Anglo Zimele loses money.

"That is the risk we take."


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