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Open letter to South African funding houses

Growing up in the dusty roads of Steenberg in Cape Town, I knew nothing about the great big world out there. Later in life my dad told my siblings and I that we could do and become anything we wanted to become because, in 1994 with the so-called “levelling of the playing field”, we were allowed to dream big and feel as unstoppable as a flowing river.

Eighteen months ago I stumbled on to a business opportunity during one of my 60 business trips to Botswana over the past three and a half years. I immediately started to research the opportunity and gather data. I drew up a comprehensive business plan and then started seeking the much-needed funding for the project.

I own a registered company in South Africa and a registered company in Botswana. My first option was to secure the funding in South Africa and only sell 10%-20% of my Botswana company to a local in Botswana. In this way I could secure business from the Botswana government and affiliated agencies. A few months ago I started looking at all the different funding houses in South Africa, to see where I could secure the R29-million needed to launch my project. I approached all the popular small business funding institutions and all of them had the same reasons for not accepting my application: I was taking the funding outside of South Africa; the funding would create employment for Botswana citizens and not South Africans and the Botswana economy would benefit not the South African. 

None of them said your finance total is too small or your financial amount requested is too big. None asked to look at my business plan or projected return on investment.

A few weeks ago I was directed to the Industrial Development Corporation (IDC) as one of their divisions does do cross-border funding. 

But, I have previously had to deal with the IDC… In February 2016 I approached the office in Polokwane for funding to start a stone-crushing operation in Giyani, Limpopo. In February 2017, for those who know the IDC process, I was moved to the “Recommendation” phase, which is the final stage in the funding process. In March 2017 I attended a final meeting at the IDC head office in Sandton, but the process remained stuck on “Basic Assessment”. Eventually my partner decided to walk away, because our application had stood still for 14 months and it was clear that we were not going to be funded.

Because of this experience, I first wanted to confirm the way forward instead of wasting anyone’s time. I secured a telephone call with Dr Tapiwa Dube of the IDC and was very disappointed when he asked me straight away about my equity contribution to the funding request. 

It saddened me that the IDC did not ask me about the project or the potential return on the investment but how much I could contribute.

If I had access to 50% of the funding I would have started a smaller operation and built it up to what I wanted. There are so many people with great business opportunities (and ideas) but we are always asked to contribute equity which we clearly do not have. Where is the funding which was promised to us, to start our own businesses? Where is the support we were promised during the countless election campaigning periods? 

Asking for equity proves this money is only accessible to the rich or established companies with access to surplus funds. How can a funding institution not review the business plan and financial projections or ask for proof of potential clients and sales? There has to be a way of verifying if the opportunity is a good one or not. The funding houses which do fund across the border said that if I did not contribute to the funding then the “risk” would be on them 100%. If they review the case/business plan and make a calculated decision on the viability of the business and the risk aspect, surely there would be no need for equity from the applicant once they approve the application?

Can any of the South African funding houses say they have never funded anyone without equity? It seems we read about young entrepreneurs receiving plenty from them all the time. Where will we, the ones who cannot financially contribute, get the financial support we need? Are we to start small, non-profitable businesses and continue living below the breadline? 

I have identified and researched a very lucrative opportunity but am now forced to apply for funding in Botswana which means I have to sign over 55% of my company to a local citizen. This is sad and unacceptable.

The views expressed are those of the author and do not reflect the official policy or position of the Mail & Guardian.

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Ben Sassman
Ben Sassman is an international trade investment and business development specialist and founder of NCSD/BCSD Consulting

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