INTERVIEW MASISIZANE FUND Phelela Mlilo BIOGRAPHY Phelela started her career in 1999 as a Trust Officer setting up trusts and managing trust funds. She gained valuable experience in retail banking and later financial planning working at Standard Bank. After a couple of year with Ithala Development Finance Corporation Phelela started her own successful business before joining Masisizane in January 2015. Support for SMMEs and micro enterprises BUILDING SUSTAINABLE BUSINESSES THROUGH SUCCESSFUL PARTNERSHIPS Phelela Mlilo is the Provincial Manager, Eastern Cape, of the Masisizane Fund, an initiative of the Old Mutual Group. What is the Masisizane Fund? The Masisizane Fund is an Old Mutual initiative that was established in 2007 following the closure of the Unclaimed Share Schemes Trust in consultation with the National Treasury of South Africa. Masisizane, was established as a non-profit funding company to provide loan financing and support to small, medium and micro enterprises (SMMEs). How do you assist clients? The Masisizane Fund (NPC), is an initiative Unlike traditional of Old Mutual institutions South Africa, who established provide loans, we don’t penalize Masisizane our opera in 2007 following the closure of the Unclaimed clients Shares on the Trust. basis This of was their done risk profile. in consultation Instead of focusing on nationally traditional with it with the National Treasury of South Africa. The mandate of the Fund at inception was security instruments our focus is on cash flows, which means in whether Gauteng and r and remains to contribute meaningfully to employment creation, poverty eradication there is enough cash to fund and service our client’s commitments. offices We in KwaZu and reduction of inequality, economic growth and the attraction of investment. This is are also aware of the constraints some clients may face, hence Limpopo, in the Eastern done mainly through promotion of entrepreneurship, enterprise finance and support to instance when clients are unable to repay their loans; we give Western them small, micro and medium enterprises (SMME’s). Cape. moratoriums on repayments. We also have preferential interest rates of The process to follow when apply prime minus two to prime minus four to ease the client’s financial burden. The target market is enterprises that are 51% or more owned by the previously disadvantaged individual(s) giving priority to rural and peri-urban/township areas. Masisizane funding is biased towards 51% plus owned women, youth and people with disabilities. Masisizane will target productive and labour absorbing sectors as approved by the Board of Directors from time to time. The Fund’s success is driven through a focused approach on high impact industry sectors, coupled with a comprehensive SMME finance solution that includes business support. The Fund provides loan finance in the following sectors: • Agriculture What • Manufacturing sort of trends are you seeing in terms of SMMEs? • Supply Chain Generally speaking it’s been quite a difficult period. What I’ve noticed projections; is • Franchising that • most Commercial SMMEs Enterprise have been reliant on contracts or sub-contracts from the private sector, while in terms of government work there has also Non-financial value adding services include capacity been a decline in the opportunities available. Another problem SMMEs development, business management and technical support, have financial been education, experiencing market is development that many and of product/ them are overwhelmed by the increase service in quality administrative standards and prices compliance. that are A Business filtering through to their businesses. I’m referring to things such as electricity and water costs, these costs are unfortunately beyond their immediate control as they come from the likes of either Eskom or their local municipality. Such costs have put a tremendous pressure on the profit margins of our clients’ small and micro businesses. It has also been challenging for us as a provider of enterprise development finance since we are limited by the market in our quest to finance more opportunities. What makes a successful SMME? I think the level of commitment demonstrated by an entrepreneur is a Acceleration Program has been e clients receive training and suppo eligible to receive financial suppo The growth of the Masisizane Fu inception. Although the initial foc the fund has gradually grown to b fund with the vision of being able as a sustainable entity and thereb for many years to come. The fu R1b and it plans to invest R420 SMME’s by the end of 2017. The development of agri-clusters Masisizane Fund’s approach in entail the clustering of small sca the farmers benefit from economi on value chain financing, agro-p partnerships. In 2013 the Fund initiated a p Harry Gwala municipalities co trading in grain and dairy prod focused on development of value mechanization, storage and micro partnerships with Omnia, Gra Association and municipalities, th their planting significantly in 2014 channeled towards Grain Co as from the Masisizane Fund is: Submit the following documents fo relevant provincial office: • Comprehensive business plan • For established businesses – three years) and the latest man • For start-up businesses – financ • Tax clearance certificate; • Off take agreements and/or l • Signed consent for a credit ch EASTERN CAPE BUSINESS 2016 34
Acceleration Program has been established where potential clients receive training and support to grow into a business eligible to receive financial support. Once the initial screening has been completed, a full due diligence exercise, including a site visit will follow. INTERVIEW FOCUS The growth of the Masisizane Fund has been steady since inception. Although the initial focus was very philanthropic, the fund has gradually grown to becoming a self-sustainable fund with the vision of being able to serve the core mandate as a sustainable entity and thereby having impact on society for many years to come. The fund has a capital base of R1b and it plans to invest R420 million to deserving viable SMME’s by the end of 2017. The development of agri-clusters is the cornerstone to the Masisizane Fund’s approach in agriculture. Agri-clusters entail the clustering of small scale farmers to ensure that the farmers benefit from economies of scale with the focus on value chain financing, agro-processing and leveraging partnerships. In 2013 the Fund initiated a project in Alfred Nzo and Harry Gwala municipalities comprising of 15 farmers trading in grain and dairy products. Funding in 2014 focused on development of value adding activities such as mechanization, storage and micro mills and through strategic partnerships with Omnia, Grain Farmers Development Association and municipalities, the farmers have increased their planting significantly in 2014. Additional funding was channeled towards Grain Co as a result of this success. Masisizane operates key factor for us to determine the potential of a SMMEs success. When we conduct due diligence on a prospective client we are able to gauge nationally one’s commitment with to the its transaction. head office This is definitely an important in Gauteng benchmark for us and when we regional decide funding for a SMME. Other factors offices we analyse, in is KwaZulu whether the SMME Natal, is operating in a secure, reliable and established market. We also look at the financial statements of the SMME Limpopo, as well as payments Eastern they have Cape made in and order to determine if they are Western able to make Cape. payments on time. We consider all these benchmarks as crucial factors in assisting us to proceed with the transaction. The process to follow when applying for financial assistance from the Any Masisizane recent interesting Fund is: case studies of people you have helped? Submit the following documents for an initial screening by the There are quite a number of them. We have just worked with a manufacturing entity which is importing pine and distributing it for manufactur- relevant provincial office: • Comprehensive business plan with market analysis and ing purposes across a range of suppliers in Africa. We provided them receive financial support. projections; For more information and where to find us visit: the working capital facilities so that they could procure more products. • For established businesses – past financials (preferably www.masisizane.co.za We could assist the new owner to penetrate his market and receive three years) and the latest management accounts; co-funding from the Eastern Cape Development Corporation and as • For start-up businesses – financial projections; a result, save the business and see tremendous • Tax clearance certificate; growth in a short period of time. We could also • Off help take the agreements owner to and/or manage letters staff of intent; relationships An initiative of the • Signed better, consent which for resulted a credit in check. a significant drop in staff turnover and a much smoother overall operation. In another example, one ladyhad been supplying a middle man, so we helped her to gain certification in order to directly supply SPAR as well as Pick n Pay. The Masisizane Fund provides loan financing in the agribusiness, franchising and supply chain operations. A Business Accelerator Programme has been established where potential clients receive targeted skills training and support to grow into a business eligible to For more information and where to find us, visit www.masisizane.co.za Group 35 EASTERN CAPE BUSINESS 2016
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