While entrepreneurs, ex-politicians, activists and formally educated people have been able to benefit from empowerment, there has been a lack of effective broad-based grassroots participation.
Sakhikamva Investments (“We are Building the Future”) was established in 2001 as an investment company that aimed to give marginalised grassroots people access to a fair share of empowerment spoils.
NGOs were identified as the most suitable representatives of the targeted beneficiaries, and hold 71% of the shares. They were selected specifically for their sound management and financial track records, good corporate governance, employment equity and, most importantly, their broad-based beneficiaries.
Each had to serve a large and varied pool of people who benefited directly from their work. The following NGOs invested in Sakhikamva:
l Ikamva Labantu (“The Future of our Nation”) is a non-profit umbrella organisation that works to dev- elop community-based organisations, growing them into autonomous and ultimately independent programmes.Â
l The Big Issue is a non-profit job creation project that publishes and sells its own quality issues-based general interest magazine through socially excluded and unemployed vendors, many of whom are homeless.
The project has provided job opportunities for almost 8 000. Incorporated in the Big Issue project is The Big Step, which provides vocational training, guidance for vendors and develops their skills, aiding them to move back into mainstream society.
l The Black Sash Trust is a non-profit human rights organisation that focuses on advice and advocacy work. Through its advice offices it offers free paralegal assistance concentrating on social-security issues including child support and maintenance, disability, retirement and unemployment grants.
As the empowerment shareholders were not expected to contribute capital or investment expertise to Sakhi-kamva, it was essential to invite strategic investors — who could provide these — to be part of the company. Miombo Capital, a specialist empowerment consultancy, was selected to provide the seed capital for Sakhi-kamva as well as advisory services. Mallinicks, a firm of Cape Town attorneys, was introduced as a shareholder in exchange for legal support.
With its credible NGO shareholders, Sakhikamva would benefit more than 50 000 historically disadvantaged individuals, including significant numbers of youth, rural and physically disabled people.
Many black economic empowerment companies have promised to deliver to a broad base but have not lived up to expectations. To ensure that Sakhikamva did not fall into this trap, two provisions were included in its shareholders’ agreement:
In order to ensure that profits were distributed among a broad spread of beneficiaries, once Sakhi-kamva had achieved a certain level of profits, 50% of all subsequent profits would be distributed to new, additional NGOs.
Second, as the intention of Sakhi-kamva was to provide benefits and services to its target markets, all profits realised would be distributed as dividends to shareholders.
This positioned Sakhikamva as a passive investor, looking to work with the leading entrepreneurial empowerment groups that wanted to involve suitable broad-based groups in their consortiums. Sakhikamva could add value as an empowerment shareholder through its efficient and effective distribution of profits to its beneficiaries.
Unfortunately, the passive stance and lack of capital outweighed the empowerment credentials and Sakhi-kamva was unable to source viable transactions. Good intentions were clearly not enough in the increasingly competitive empowerment space.
Miombo Capital then looked to its consultancy clients for opportunities. In January this year, in a vendor-funded transaction, Sakhikamva was introduced as a 10% shareholder in the Professional Vision Group, a business solutions consultancy focusing on corporate communications.
In February Sakhikamva acquired a percentage of the gross asset management fees earned by Frater Asset Management on its institutional client funds under management, which provided Sakhikamva with a regular monthly income.
True to its empowerment ethos, the Frater cashflows were immediately paid out to its shareholders in an inaugural dividend the following month.
As proof of its commitment to adding value through providing services such as empowerment strategy formulation, Sakhikamva now enters into a detailed consultancy agreement with all partner companies, setting out its expected contribution and penalties for non-performance. This has been well received in the market and business is picking up significantly.
Michael Leeman is managing director of Miombo Capital and founded the Futuregrowth range of portfolios at Southern Life in 1993