Aug 21

21 August 2004

Ditikeni model provides ‘package deal BEE’ for smaller companies to lean on

A structured BEE model is providing a solution to South Africa ‘s smaller businesses who battle to find appropriate funding partners to qualify them as black-empowerment enterprises.

Many small companies simply lack the security required by banks for funding purposes nor have adequate track records. Requests are also turned down because many funding entities in South Africa will not consider any deal of less than R10m.

Helping small companies overcome these obstacles is non-profit funding vehicle, Ditikeni Investment Company, a leader in broad-based empowerment that has successfully implemented a funding model which has been taken up by 23 non-government organizations to assist their future financial sustainability.

The Ditikeni concept – ditikeni is the Venda word for “something to lean on” or sustainability – is available to its partners and other companies considered to have bright futures. It involves a package deal in which corporate structure and legal frameworks are in place and there is no such thing as a minimum size deal.

Ditikeni makes no charge for its package – a reasonable legal fee is the only cost.

According to Gordon Young, financial adviser to Ditikeni, there are major obstacles for individual small companies trying to raise capital for empowerment deals.

“Three crucial problems make third party funding untenable: most funding entities will not look at anything under R10m, many smaller companies have short profit-making track records and most financiers and banks require security which is simply not available. This is a very real issue for small companies.” The Ditikeni package has however been applied successfully in just such instances.

He said that Ditikeni was unlike many BEE companies in wanting to do business with smaller companies. “If a company has great potential, we are very happy to look at it.”

Ditikeni recently announced a 1.625% stake in Stanlib, housed in a trust formed for broad-based entities, a 2% interest in Medikredit and a 30% holding in Avis Van Rentals ( Eastern Cape ). Among other investments made on behalf of its shareholding NGOs is a 1% beneficial interest in Caltex Oil of South Africa .

“What is key to most of the companies Ditikeni assists is that our directors work on a voluntary basis and there are no big fees to be paid to outsiders,” said Young. “We supply the structuring as part of the deal – it works out a lot cheaper when you don’t have to re-invent the wheel.”

Ditikeni represents credible BEE shareholders with strong links to government and broad-based economic empowerment through the work of the NGOs at 109 locations around the country. They include The Association for Rural Advancement, Trust for Community Outreach and Education, The Black Sash Trust, Social Change Assistance Trust (SCAT), Labour Research Service and the South African Council of Churches.

Issued by HWB Communications
Contact: Caroline Swift
Tel: 021 462 0416
Cell: 084 303 6777

On behalf of Ditikeni Investment Company
Contact: Gordon Young, Investment Adviser
Tel: 082 928 0028