Community

The need for the development of sustainable local businesses in the areas surrounding AngloGold Ashanti’s mines is very real. Identifying, funding and supporting small businesses, however, remains challenging and complex. High failure rates amongst start-up businesses are common, with a lack of business skills and defaults on loan repayments as contributing factors.

Masakhisane Investments Limited is a South African based small business development and equity fund, established by AngloGold Ashanti in 1999. The Masakhisane mandate is to provide funding to aspiring entrepreneurs who are considered to have sustainable business ideas. During 2008, Masakhisane supported 43 projects, granting loans ranging from as little as R800, up to R246,058. Current initiatives have resulted in 333 jobs being created.

The company’s Community and Social Development Department personnel (Southern Africa Division) facilitate financial and non-financial support to the selected small businesses in the West Wits and Vaal River regions. The fund had a revolving budget for 2008 which was in the region of R10 million, and some examples of the types of small businesses selected include catering, tent hire, beauty salons and garden service companies.

Butiki Loliwe, Manager: Community and Social Development in the Southern Africa Division, explains that Masakhisane offers local entrepreneurs loans to kick-start their businesses, or alternatively secures an equity stake in the business of 10%. Given that the entrepreneurs are usually new to business, the selected businesses generally take a minimum of three years to be able to operate independently, and to settle their outstanding debt or secure full ownership.

“Finding the entrepreneurs is always a challenging task. Not every individual has the entrepreneurial skills or courage to run a business. With the current financial and labour market, caution needs to be exercised in selecting the potential entrepreneurs. We at AngloGold Ashanti need to apply restraint so as to protect individuals from excessive debt and the possible failure of their business.”

The lack of business and management skills is a multifaceted challenge. The pressure on the individual to be an all-in-one in the business, such as being the director, the administrator and sales person can be difficult for an emerging entrepreneur, which can adversely affect the business. Securing and maintaining contracts is also very challenging. The start-ups either secure contracts that are either too large or too small, which negatively affects delivery or their ability to finance some of the business expenses.

Late payments and defaults on loan repayments is a common problem. During 2008, Masakhisane made provision for R921,080 of doubtful debt, which highlights the shortage of financial management skills, such as managing the business cash flow and effective budgeting. While high failure rates are not uncommon in local economic development projects the world over, the numbers serve as a reminder of the complex challenges associated with starting up new businesses.

“It’s an unavoidable reality that Masakhisane is often involved in legal disputes with the owners of the businesses it supports. Late repayments of loans and the liquidation of businesses are both common challenges that all venture capital funds experience,” explains Tebogo Hlapi, Commercial Leader: Enterprise Development: Southern Africa Division.

Despite the difficulties, there are also successes to be celebrated. “Masakhisane prides itself on projects such as the ROEL Eating House, a canteen at the Gateway training centre in Vaal River (which is owned by two former hawkers, who used to sell food outside the training centre) and the Matlhare Garden Services, which maintains the gardens at the Westvaal Hospital in Orkney.” says Kobus van Heerden, Enterprise Development Manager.