The Absa-backed fund Equity Africa has launched a campaign to raise its capital base to R200-million, to further invest in broad-based operational empowerment businesses.
The fund already enjoys an investment of R21-million, largely from banking group Absa. After a four-year pilot phase, during which solid empowerment assets were created, it is now expanding the fund and is inviting companies to invest.
The fund provides the opportunity to institutions, donor agencies and corporates, to invest a further R180-million to build on its success in new investments.
Established by Absa and Shanti Industries Holdings, Equity Africa is both a fund and a fund management company. It combines Absa’s financial muscle and commitment to black empowerment with Shanti’s fourteen-year track record of empowerment projects, providing a stable yet exciting vehicle for investment.
Equity Africa’s empowerment bottom line says it all. “We have 53 new operational empowerment shareholders; 4 490 jobs have been created or sustained; 690 training interventions have taken place; R85-million in economic activity has been mobilised; and R22-million in business development resources has been raised,” says Kathija Jambela, Financial Director of Equity Africa,
“Equity Africa’s effective active management methodology empowers experienced entrepreneurs to build a business, and sustain it,” says Robert Emslie, Managing Executive: Absa Business Banking Services.
As well as financial assistance, the fund also provides business development resources, including formal business processes, standards of governance, technical assistance, skills development, mentorship, operational support, market access and HIV/Aids awareness.
To date, the fund has supported five successful enterprises, largely but not solely agricultural: Tropical Mushrooms; Singoflora; Colprochem; Greenway Farms; and the Edulis Group. Each has been successful in its own way, although two particularly stand out.
In 1999, Equity Africa invested new capital in Greenway Farms, for a 30% stake. In the middle of this month, it will sell 20% of the total operation to the majority shareholders, enjoying a capital gain of 56%, over four years.
In keeping with its focus on black empowerment, Equity Africa intends to sell its remaining 10% shareholding to the Masibumbaneni Farmworkers’ Trust, a process that is being funded by US Aid.
The Masibumbaneni Farmworkers’ Trust already owns 10% of Greenway Farms as a result of their investment in 1999, which was facilitated by Equity Africa through the land affairs department.
Says Jambela, “This is a very exciting investment, which has made a profit while enabling the Masibumbaneni Farmworkers’ Trust to double their stake in the business.”
The second example is Tropical Mushrooms. Peter Nyathi was a top grower for one of South Africa’s major mushroom companies and studied mushroom production in Holland.
When expected career opportunities did not materialise, Nyathi decided to strike out on his own. However, without any assets to secure a loan, his track record, technical knowledge and management experience counted for little in credit applications, and he struggled to secure finance for his dream of building a mushroom farm.
Equity Africa decided to make the investment based on a sound business plan and his reputation as one of the top mushroom growers in the country. The investment was made in September 1999: today, Tropical Mushrooms is producing an average of four tons of mushrooms a week.
Equity Africa is facilitating the establishment and expansion of staff empowerment trusts in Tropical Mushrooms, Greenway Farms, Edulis Mushrooms and Singoflora.
This support includes training of beneficiaries in trust operation and management, and facilitating the raising of grant funding from the land affairs department, under the Land Redistribution and Agricultural Development grants scheme.
To this end, Equity Africa is working with the South African Privatisation of Agricultural Assets Programme, which is funded by USAid and managed by Deloitte Touche Tohmatsu Emerging Markets Group.
Robert Emslie concludes: “The seed of a powerful idea has been planted and is starting to bear fruit, and Absa is delighted to invite investment from interested parties to contribute to its growth.” — I-Net Bridge