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Anger At The Corporate Slippery Slope

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It was an eventful rainy Thursday afternoon. Workers left their desks to watch the action through their office windows. It was one of the many marches against state capture. On this day, civil society organizations were picketing outside the office of global consultancy McKinsey, right opposite the FORBES AFRICA headquarters in Sandton, South Africa.

McKinsey is one of the many companies, in the country, implicated in alleged corrupt dealings between state-owned power utility Eskom and consultancy firm Trillian. McKinsey and Trillian stood to earn more than $490 million from Eskom.

It has been a year of drama in corporate South Africa. As strange as it may sound, a lot of South Africa’s protests, like this, have one family as the common cause.

Weak-kneed politicians allegedly allowed members of the Indian-born Gupta family to wield undue influence. This influence has gone from meddling with the state’s top jobs to conniving with private and public companies to act in their favor.

Another company in hot water is Bell Pottinger, a British public-relations firm connected to the Guptas by a $130,000-a-month contract. It was stripped of its membership in the Public Relations and Communications Association (PRCA) in the UK, after it was found that the PR agency deliberately fanned racial tensions, with creations like ‘white monopoly capital’, in South Africa, in favor of Zuma, while it worked for the Gupta-owned Oakbay Capital.

“We took this decision because we were not satisfied by the explanations given. We have never passed down such a damning indictment,” says Nicholas Dunn-McAfee, Head of Public Affairs, Policy and Research at PRCA.

READ MORE: South African Billionaire’s Fortune Plunges More Than $2 Billion In A Day Amid Accounting Scandal

It gets worse.

For years KPMG South Africa has said it stands for integrity. Instead, the tax, advisory and auditing firm now stands alleged of giving advice so that money can be taken to Dubai to avoid tax payments. They also turned a blind eye to several conflicts of interest while auditing 36 Gupta-linked companies and compiled the so-called South African Revenue Services (SARS) rogue spy unit report which was used as part of the smear campaign against former Finance Minister, Pravin Gordhan.

There are consequences.

For KPMG, for example, pressure has been piling. The firm withdrew all its findings in the ‘rogue unit’ report; senior executives, including CEO Trevor Hoole, resigned; and it has been dumped by major clients, among them, Sasfin Bank, Sygnia Asset Management, the energy investment company Hulisani, and the University of the Witwatersrand.

Like the protesters in Sandton, Magda Wierzycka, Chief Executive Officer at Sygnia Group, an asset management company, says all involved should be held accountable, stripped of their licenses, fined and even jailed.

“There are no excuses. They did what they did for money. They were not ignorant of what they were doing,” she says.

Opposition political parties, rights groups and private citizens are playing their part to make sure unethical companies are punished. The problem is corporate misgovernance affects the whole country.

Alastair Macduff, the Chairman and Chief Executive Officer of the Turnaround Management Association Southern Africa. (Photo supplied)

South Africa was downgraded to junk status and went into a recession. At the time of writing this article, $1 was equivalent to R14.16 at its worst, it went to about R17 to the dollar. It means business confidence is at an all-time low.

“Businesses are feeling the impact of low investor confidence, weakening exchange rates and high fiscal uncertainty,” says Alastair Macduff, Chairman and Chief Executive Officer of the Turnaround Management Association Southern Africa.

“Restoring investor, business and consumer confidence will require a concerted effort to address these pressing issues – and address them in the best interests of the country as a whole,” he says.

Wierzycka agrees.

“In a funny way, what has happened to KPMG and McKinsey is actually very positive… Positive in terms of waking corporate South Africa to what is happening and to the fact that they can no longer sit on the fence and stay silent,” she says.

According to Wierzycka, South Africa’s corporate sector is suffering from a moral crisis.

“The dilemma is, do you change providers based on the fact of they are implicated in state capture even when it’s inconvenient to do so?”

People protests against corruption outside the McKinsey office in Sandton, Johannesburg. (Photo by Motlabana Monnakgotla)

Wierzycka has lived it. She offered Bianca Goodson, former Trillian CEO turned whistle-blower, a job. This after Goodson’s new employer, Sage, accepted her resignation after she told them she was blowing the whistle on her previous employer. Goodson provided documented evidence that the Gupta-linked firm swindled hundreds of millions from state-owned enterprises Transnet and Eskom. Wierzycka called Goodson, and all whistle-blowers, heroes.

“When I heard what Sage did, I was actually breathless. The true heroes of the story of South Africa are the belittled whistle-blowers… Bianca took tremendous risks in disclosing the information she disclosed on Trillian, McKinsey, Eskom and a number of others. It seemed a completely natural thing to reach out to her, if anything else, to reassure her that she is not alone in this fight. When I did, I met a lady who is incredibly competent. So let’s be clear, I gave her a job, not because she is a Trillian whistle-blower but because I encountered a woman of tremendous bravery with a strong moral compass and qualifications that are arms long,” says Wierzycka.

Magda Wierzycka, Chief Executive Officer at Sygnia Group. (Photo supplied)

Goodson has a five-year-old daughter and, according to Wierzycka, she was petrified.

“My biggest concern was her personal safety. If she had died in a random hijacking, no one would think because no one knew her name. So, what I thought was that the most important thing that needed to happen was to get her name out there in the headlines.”

Wierzycka’s good fight doesn’t end there.

Earlier this year, Sygnia started a new money market unit trust and the firm said it will donate 100% of the management fees, earned on the fund, to non-political organizations fighting corruption. Sygnia also fired KPMG when news on state capture allegations broke.

At the end of the day, I think it’s up to each company to make a choice. In the instance of KPMG, their board of directors make up their own minds as to whether what they’re seeing is what they expect to be seeing from their service provider and how serious they view what the company has done. In the instance of McKinsey, do you honestly want to do business with a company that has robbed South African taxpayers while we have a tiny taxpayer base supporting such vast percentages of the South African population which is living in inequality… Are you happy, morally, to do business with a business like that? That’s a question each board of directors has to ask,” says Wierzycka.

Another problem with some corporate companies is that they use denial as a first response when they are embroiled in a crisis. It creates a bigger mess.

KPMG South Africa, as an example, hired Nhlamu Dlomu, previously Head for People and Change, to clean up the mess as their new CEO. She couldn’t answer many questions posed to her, probably because she wasn’t prepared to be the CEO of one of the four top audit companies in the country that was facing its greatest crisis.

Women CEOs in times of corporate crisis may be a global trend.

A PwC report found that 38% of female CEOs are forced out of the office; compared to 27% of male CEOs. Another study, by Utah State University researchers, found boards are more likely to promote women and minorities to top leadership roles when an organization is in crisis.

“To me, that was a typical response of an international company that thinks  putting a fairly attractive female in front of clients is going to solve the problem… I think that the reason they are losing the battle in the court of public opinion is because they’re arrogant,” says Wierzycka.

READ MORE: Give Us Water Not Statues

Before firing KPMG, Wierzycka says she advised the audit firm to withdraw the entire ‘rogue unit’ report and they refused.

“I said, ‘let’s talk about the money then, because we know that this is blood money, whether it’s stolen from taxpayers or the farming community in the Eastern Cape. R63 million ($4.43 million) will go a long way towards fighting corruption. So donate all this money to organizations which are fighting corruption in South African courts. At least try to redeem yourself in the eyes of the South African public.’ I was told no…,” recalls Wierzycka.

KPMG only withdrew sections of the report, under questioning in parliament, admitting that it was wrong about the SARS report and that their conclusions and recommendations were incorrect.

Clearly, it will take more than marches in Sandton to bring about change.

Sylvester Chauke, Founder DNA Brand Architects (Photo supplied)

How To Weather A Corporate Storm

Sylvester Chauke loves to communicate. We meet him in his well-decorated office in Fourways, Johannesburg. As we enter, we are welcomed by multiple awards on the walls behind and in front of his desk. It is like we have entered a trophy factory.

“I don’t know how many awards I have. Not all of them are here but this is all inspiration and it is kudos to the hard work we do,” he says.

This is a world away from where it all started.

At 12 years old he went for a TV commercial audition. He loved it. Since then, he knew he wanted to work in the media industry.

There was research and soul searching. It ushered in a marketing and advertising communications degree, from the University of Johannesburg, and an internship. He never looked back.

Five years ago, he founded DNA Brand Architects; a marketing and brand consultancy company that advises people on how to avoid or deal with corporate crisis. He employs 34 people and counts Vodacom, Edgars, Bonang Matheba, Steers and Wimpy among his clients.

“It is all about taking all these fields of communication, whether it’s broadcasting, advertising, and brand communication, into one space,” says the 36-year-old.

According to Chauke, it is very obvious that there is a corporate communication crisis in South Africa. He says in most businesses, communication is just seen as PR. They send press releases and hope for the best. They don’t plan for a crisis.

“Most businesses don’t think that they have to think and plan for it, they just become overly confident, to some extent quite arrogant, to think that they are such great brands that can sort of overcome anything. We are seeing it right now with the likes of Bell Pottinger, KPMG and McKinsey. It is indicative of that communication is a ‘by the way’ thing,” says Chauke.

It is dangerous. When companies say the wrong thing, they risk losing their clients, or worse, the company. According to Chauke, planning for a crisis isn’t rocket science.

“Most of the time you can anticipate issues. For example, when your financial results come out and they are not good, you should plan what you are going to be saying to the stakeholders about the performance. It is the same if you are going to be retrenching 2,000 people, you need to be prepared.”

Chauke says every business needs a crisis management plan, reviewed annually, for crises they can’t anticipate.

“The biggest challenge that we have is people think because you are a CEO, and you speak to a crowd of 1,000 in a conference, you can handle media. That is so not true. You need an experienced spokesperson to handle that.”

He says Africans should inspire the world.

“I think that if the way that we do business is given a chance and doesn’t get distracted by all the corruption, scandals and corporate blunders, the way we do business would inspire others because we push regardless,” he says.

Maybe this is just the kind of inspiration corporate South Africa needs.

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Lifting The Heavy Veil On Wedding Costs

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With pockets as deep as gold mines, how far are couples willing to go to have the picture-perfect luxe wedding?


The lagoons overlook the snow-white beaches with its swaying coconut trees, embraced by the turquoise waters of the sea in the island nation of Mauritius. It’s a scene straight out of a movie, with a couple cavorting in the distance.

Over 100 guests from South Africa have also gathered on these sands for the weekend wedding of businessman Lebo Gunguluza and his long-term girlfriend Lebo Mokoena. 

The total cost of this union: almost $300,000. 

“I didn’t mind exceeding the budget, because you only do this once,” says new bride Mokoena.

The couple flew over 30 guests and provided them with five-star accommodation at the LUX* Grand Gaube.  Part of the guest contingency included the behind-the-scenes crew for the wedding, as well as the speakers who had to spend four to seven days in Mauritius to prep up.

“We did not want to have a local wedding because we wanted our guests and family to have a different experience. We also wanted our family members who did not have passports and have never flown out of the country to experience a different country,” Gunguluza says.

Snow-white beaches of Mauritius. Picture: Supplied

The weekend celebrations started on a Friday last September with a cocktail meet-and-greet party. Belly dancers who were dressed in floral red and yellow danced the evening away with guests, with a local band taking them to the all-white party on Saturday.

This was just a build-up to the romantic wedding reception with shades of blush, ivory, and gold which was to take place on Sunday at 4PM.

“Every time I think about that day, I want to do it again,” the new bride says.

The couple chose not to have bridesmaids and groomsmen and the guests were encouraged to dress in black and white.

“I didn’t have bridesmaids because it makes you choose between your friends. I felt that if you got an invite to our wedding, you were worthy enough. So, we wanted everyone to be bridesmaids and groomsmen. I think we made it intimate and everybody felt like they were VIPs,” says Mokoena.

Everything fit perfectly as the bride’s two white wedding dresses were designed by Antherline Couture.

For the ceremony, she wore a white ball gown with a diamanté top heavily embellished with beads; while the groom looked dapper in a white tuxedo jacket designed by Master Suit SA.  

The color white was indeed conspicuous.

“I have always felt that white is pure and because I was signing my life away, I felt I needed to be pure, hence I said my husband needed to wear white as well,” she adds.

The lavish white wedding was organized by renowned wedding planner Precious Tumisho Thamaga who ditched her seven-year career in Public Relations & Marketing to become an event planner.

Thamaga organizes events and weddings for affluent clients such as the Gunguluzas.

“They are busy people and they don’t have time to do the administration and the back and forth of vetting in suppliers,” Thamaga says, as she takes over the pain of wedding planning.

Lebo Mokoena and Lebo Gunguluza (middle) with wedding guests in Mauritius. Picture: Supplied

While working in the corporate world, she had attended many weddings that she felt were put together in a way that created a disconnect between the guests and the wedding couple.

“So I saw an opportunity in the fact that there were not a lot of wedding planners that were black,”  Thamaga says. 

She decided to focus on corporate clients in order to turn her passion into a profitable business.

“A lot of people did not expect a black person to be professional and take the business seriously.

“It was not just a hobby or someone helping out a family. It was an actual business and I made sure that I got taken seriously from the onset,” Thamaga says.

In order for Precious Celebrations (the name of her company) to prosper, she had to have a business strategy in place.

“I made sure that I put a lot of time and effort and strategized properly what it was that I wanted to actually focus on, and find a niche [in]. I believed that would separate me from somebody that was already in the industry,” Thamaga says.

However, her job is not always alluring.


Lebo Mokoena and Lebo Gunguluza’s wedding in Mauritius. Picture: Supplied

“When I started in the industry there weren’t so many wedding planners and now it is a different story and everyone thinks it is easy-peasy and it is glamorous,” she says. 

Planning a luxurious wedding takes eight to 12 months and can cost anywhere between R300,000 ($20,813) to R4.5 million ($312,203).

The most expensive wedding Thamaga planned was for a public figure she cannot disclose the name of. 

“It was a destination wedding and the experience from when the guests arrived to the wedding day was memorable. When they arrived, we had a cocktail party and we had activities like canoeing and on Sunday we had an all-white party. [This is] so that people don’t depart on Sunday and may leave on Monday.” 

Only the affluent sign up.

“The smallest wedding that I have had to plan had 80 people and it cost R2 million ($138,000),”  Thamaga says.

She has turned away some clients in the past because their budget was insufficient for the type of wedding they envisioned. 

Thamaga organizes 26 weddings, on average, annually, from countries such as Mauritius, Zimbabwe, Swaziland, Botswana and now she plans on taking her bespoke company global.

One of the unique aspects of her business is that she has maintained a good relationship with the suppliers she has in each country, and has kept her expenses to a minimum.

“The wedding planning-event planning industry is quite lucrative if you do it right. I am not the type that would have too much inventory because I want to feel like the inventory belongs to me; that would limit my creativity,” she says.

“I make sure that I don’t have a lot of expenses, I have coordinators that I have worked with for years and they have full-time jobs.”

Thamaga’s greatest challenge so far was whether or not to outsource other wedding planners when her business was increasing.

“It can be a bit daunting to realize that your business is growing,” she says.

But she opted to remain boutique.

“I had to decide that it is not about the money. I am building an empire where I want a legacy and an ongoing relationship with my clients.” 

She involves her clients every step of the way to bring their vision to an unforgettable reality, and believes that weddings are expensive because of the growing aspirations of the young.

“It is not just in South Africa, it is worldwide,” she says.

Despite the tangible costs of conducting these dream events, the wedding industry in South Africa is largely unregistered as it is a fluid market where services and costs are difficult to track and document accurately.

Fred Elu Eboka, a Nigerian designer who dresses delegates as well as the rich and famous. Picture: Supplied

Africans, no doubt, spend millions per year on costs associated with marital ceremonies. This is the reality of the unregistered wedding industry. Despite the recession and slow economic growth, the wedding industry continues to attract many entrepreneurs to its lucrative opportunities.

As, people never stop getting married.

The Marriages and Divorces report released by Statistics South Africa last May shows an upward trend in civil marriages. Civil marriages increased by 0.6%, from 138,627 marriages registered in 2015 to 139,512 in 2016.

A wedding dress is an important part of a celebration and the bridal couture market continues to show growth.

Wise Guy Reports Database Global Wedding Dress Market Insights, forecast to 2025, states: “The wedding market demand grows continually, and the wedding garments market has notable increase every year. In this case, the competition is also very intense among companies. The involved companies should seize the opportunities to expand the gold mine.”

A previous client of Thamaga’s has spent R200,000 ($13,876) on two wedding dresses and this is nothing for Fred Elu Eboka, a Nigerian designer who dresses delegates as well as the rich and famous. 

He moved to South Africa in 1992 at a time when African designs were not being celebrated globally. 

Twenty years ago, Eboka sold wedding dresses for R15,000 ($1,041) a piece, and now sells for R250,000 ($17,344) a piece, depending on the design. 

“A designer of my caliber in South Africa is undersold because there are people in the United States selling wedding gowns for $250 and I am here selling them for maybe $80, it just doesn’t make sense. It shows that our economy is really bad because a designer of my caliber should be operating on the same level as them, or very close,” Eboka says.

He is a luxury designer. 

“When you think of luxury, it is not just the product, it is not just the textile – it is the whole experience from when you drive in, to when you sit down and have the designer talk to you and learn about your life. The whole artistic process contributes to the cost value of the gown.”

He says that the reason wedding gowns are expensive is because they are meant to be timeless pieces.

“Traditionally, wedding gowns are classical couture. It is not like the normal evening dress that you wear to look beautiful on one night. A wedding dress is like training for the Olympics. You train for them for the rest of your life,” he says.

Eboka also says when designing a wedding gown, you need to take time to know the client, family and their fancies in order to meet the clients’ need.

The material of the wedding gown is usually expensive because he sources the textiles from across the world, and he takes two to three months to create a gown, depending on the embellishments.

Fred Elu Eboka, a Nigerian designer who dresses delegates as well as the rich and famous. Picture: Supplied 

“My designs have a lot of artistry,” he says.

Eboka is a wealthy man but he still believes that the industry is not as lucrative as it could be.

“But we do well, without being arrogant about it… You have to be fully aware of the industry and have the intellectual capacity to understand the potential of the market,” he says.

Pictures are an important element of a wedding because they capture the moment for life.

International award-winning photographer Daniel West meets his clients in a restaurant so he can get to know them better and learn the history of their relationship.

“We, as photographers, need to click with each couple, it is actually vital because we are going to be in their space from the beginning to end.

“So, when we do not gel, we are going to find ourselves in an awkward situation on the day because we, as photographers, are also problem-solvers. We don’t just take pictures on the day,” West says.

His packages start from R18,000 ($1,248) to R60,000 ($4,163) and he says it is because the couple is paying for the quality of the work. His packages include waterproof genuine leather-bound photo albums that he says last a lifetime, as well as 500 images that are both edited and unedited. He also arranges the location for the photoshoots.

“It is more than about taking pictures on the day, anybody can take pictures but the work that I do has more of a boutique feel,” he says.

“You pay to have something like this on the table that will last you a lifetime,” West says.

He does not only take pictures on the day but the photoshoots can take up to three months.

“Each couple that I take pictures of has a different story and that is where I draw my inspiration.”

West says that it takes a while for the business to get to a point that is profitable because photographic equipment is expensive.

“In the beginning, it is unfortunately not lucrative because you have to look into getting the equipment that is up to standard, however, it took me about seven years where I could get to a point that I could make a business out of it,” West says.

International award-winning photographer Daniel West with his clients. Picture: Supplied

His annual turnover before expenses is R800,000 ($55,502) and he has about 25 clients a year.

He believes that the industry is regarded as valuable in South Africa and it is growing because people are becoming more enlightened about the photography industry. And social media has become an important motivator driving this industry.

“It is vital to have a good photographer for your wedding, because you as a bride are not quite educated of what is out there and what is not [in terms of photography].”

A good photographer needs to have foresight.

“The quality and charisma of your photographer is really one of the most important things you pay for because if something were to go wrong on your wedding, like rain, what does your photographer do? Do they stand back or make a plan?” he says.

Other luxe services associated with weddings include limos and chauffeur services, and florists, live music bands and gourmet caterers flown from around the world. The more money you are willing to throw, the more sparkling the champagne, crystal and caviar on the beach

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Why Science Matters So Much In The Era Of Fake News And Fallacies

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Democracy and social progress die without science and fact-based knowledge. Science and facts are the foundational basis for rational and logical disputation and the possibility of reaching some truths.

Fake news, on the other hand, is a calculated assault on democratic freedoms.

The power of the notion of fake news and of its practitioners is demonstrated by how we have all quickly come to accept that there is a category of news called fake news. By doing so, we are running the real risk of being complicit in its legitimisation. My point is: if it’s fake then it’s not news. There is news, and then there is fake stuff, dodgy facts, distortions and lies.

So what’s the connection between science, knowledge and facts?

What makes good science

Science is one important means of producing knowledge and getting to what approximates the truth. Good science results from rigorous processes. Part of the rigour in science and knowledge creation is the peer review process, which is a means of ensuring not only the correctness of facts, but also transparency.

Science must generally also meet the test of replicability. These days data used in scientific experiments often also has to be preserved so it can be assessed or analysed if results are disputed. Ethical norms also govern scientific experiments to prevent harm.

Science is not the absolute truth. Scientific findings are the beginning, not the end, of the quest for truth. Empirical data used in science that can be verified forms a sound basis for robust discussion, debate and decision-making. Science brings a degree of rationality that creates a higher probability that the best interest of society or the public interest will be taken into account in, for example, decision-making.

Science, then, is the habit of exercising the mind to help think through especially difficult and complex phenomena.

This makes science important in the exercise of democracy. This isn’t possible without facts and information that enable – or aid – voters to make an informed choice in elections, for example, or help the making of sound policies that best promote the public interest. Science also enables discerning members of the public to make sense of their worlds and the world.

So-called fake news

Fake news, on other hand, is a set of at worst, manufactured or concocted facts that are a perversion of reality. It is the direct antithesis of science.

But fake news isn’t new. It’s as old as news itself and has a variety of aims, including propaganda and spin doctoring. It can be argued that the growth of spin doctoring in the 1990s is the precursor to the exponential growth of fakery. It has also been enabled by the decline of content that enriches public discourse in the context of commercialisation and concentration of media since the 1980s.

These developments led to a decline in the influence of public interest media or media that strikes the balance between commercial enterprise and the public good. And this has led to the reduction in the kind of news and media content that focuses on science.

Science journalism and investigative journalism, in particular, have seriously declined. This has meant that the ability to shine a light on the dark areas of lack of knowledge, superstition, and myths has seriously been diminished.

Specialist reporting is now confined to the content-rich ghettos of those who are highly educated or interested.

Another reason for the growth of fake news and its increasing influence is the loss of confidence in public institutions, including media institutions and the profession of journalism. Fakery has risen to fill the vacuum, driven by individuals and political organisations who position themselves as messiahs with instant solutions to multiple social crises. In their discourse knowledge institutions, science, facts, evidence, experts and reason or rationality are thrown out of the window as the sophistry of the elite.

The role of social media

Digital technologies and social media have made it much easier to produce and disseminate fake news. It is a paradox: unprecedented scientific advances and technologies are enabling us to transcend traditional constraints of distribution and literally place information at people’s fingertips. Yet these same technologies seem to facilitate more fake news and information that doesn’t necessarily advance the public good.

In addition, social media largely exists outside the professional norms of fact checking and the use of evidence to support assertions, arguments and positions taken in relation to social phenomena.

Fact checking and peer review are more important than ever because of the reality that false information now flows freely. This can be extremely harmful, particularly in public health campaigns.

The attraction of fake news is its apparent simplicity. It has a ring of truth around its claims, even when these are outlandish, and its ability to seem to resonate with what people think are their life-worlds or everyday life. Its ability to reinforce stereotypes, including prejudices, makes a bad situation even worse.

Science, facts and knowledge will save humanity

Science journalism and investigative journalism which seek to pursue the truth rather than just the reporting of events, are critically important in this age of fake news and fallacies.

It is not an exaggeration to say that the sustainability of the idea of humanity and the environment in the broadest sense of the word depends on science – or the respect for facts, evidence and experts.

Science that allows the public to have a nuanced understanding of life is important to building inclusive, open societies that enable public participation in decision making and progressive social agendas. Science disseminated in ways that are understood by the public and resonate with their life-worlds is important for building trust in reformed institutions and creating new forms of social cohesion in diverse societies.

Tawana Kupe; Vice-Chancellor and Principal of the University, University of Pretoria

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Entrepreneurship Funds In Africa: Distinguishing The Good From The Bad

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Entrepreneurs have a pivotal role to play in Africa’s unemployment crisis. Today over a third of the continent’s young workforce (those aged 15-35) are unemployed. Another third are in vulnerable employment. By 2035, Africa will contribute more people to the workforce each year than the rest of the world combined. By 2050 it will be home to 1.25 billion people working aged.

To absorb these new entrants, Africa needs to create over 18 million new jobs each year. Governments need to put in place policies that drive economic growth and competitiveness. These in turn, will enable the growth of small and medium-sized enterprises (SMEs). This is important because they currently play a significant role in low-income countries, representing nearly 80% of jobs. They are also responsible for 90% of new ones created each year.

The challenge for countries is how to support the growth of SMEs. Various African governments have experimented with ways to help address the US$140 billion funding gap for startups and SMEs. For example, one approach has been to set up entrepreneurship funds.

Based on my experience of watching their performance over the past 18 years, I would issue some words of caution. Some entrepreneurship support models work better than others. And how they are set up – particularly the governance structures put in place to manage them – is key to their success, or failure.

Funding gap

Access to financing is consistently listed as the biggest obstacle to business for SME’s in African countries. They often face double digit interest rates from local banks. And venture capital penetration is still extremely low. Top end 2018 estimates put it at about $725 million for the whole continent.

To tackle the problem, African countries continue to start new entrepreneurship funds. In July 2017 Ghana launched the National Entrepreneurship and Innovation Plan. The aim is to provide integrated national support for start-ups and small businesses.

Almost a year later, Rwanda secured a $30 million loan from the African Development Bank for the establishment of the Rwandan Innovation Fund. This will focus on investments in tech-enabled SMEs.

As new funds are started, African countries must look to the successes and failures of both global and regional funds to replicate best practices and avoid common pitfalls. African governments should explore replicating models similar to Small Enterprise Assistance Funds and the USAID backed enterprise funds. Both include robust investment selection criteria for funds.

In doing so, African government-backed entrepreneurship funds would operate as fund-of-funds – where a fund invests in another private equity or venture fund rather than directly in businesses themselves – as do many development finance institutions globally such as the UK’s CDC or FMO of the Netherlands.

The what and the how

The fund of funds structure creates an arm’s length relationship between the government agency that houses the entrepreneurship fund and the businesses that eventually receive investment. In between, sits a professional fund manager that earns the majority of its income from making good investments, growing companies and exiting them after a period of five to seven years. In this way, there are natural disincentives for corruption and market-based selection criteria for the entrepreneurs who receive investment.

How the fund managers are selected also matters. To ensure true investment independence from the government, fund managers and board members must be chosen in a transparent and competitive process. And once selected, representatives of the government entrepreneurship fund agency can sit on the investment committee for oversight purposes but should respect the fund managers’ independent decision-making.

There are examples of funds being set up without the necessary independent, accountable fund managers. One is the YouWin program in Nigeria. Created in 2016, it was set up to help youth entrepreneurs grow businesses. But senior civil servants handed out awards to friends and relatives.

Government supported fund managers through the FoF model can also catalyse additional investment. By operating in markets and sectors often ignored by traditional private equity funds, Small Enterprise Assistance Funds and enterprise funds have mobilized additional capital for investment-starved companies. African government-backed entrepreneurship funds could do the same by participating in blended finance deals with development finance institutions, social-impact investment funds, local banks and other market players to back growing firms.

Measuring success

While not actively managing the funds’ portfolio investments, governments have a key role to play in guiding the funds priorities. Priorities may vary by country and given Africa’s growing rates of unemployment, funds should prioritise job creation by evaluating investment on key performance indicators. These would include the number of jobs created per dollar invested, indirect jobs created per dollar invested, and average salary of job. In addition to job creation, governments can direct funds to focus on specific sectors either in need of increased capital or high-growth areas in local economies.

Beyond establishing investment criteria, government-backed funds should prioritise rigorous measurement of investment results and long-term data tracking to inform future investment decisions. The UK British Bank regional growth fund found the cost per job created varied considerably by project from £4,000 to over £200,000. It concluded that a better allocation of funds could have led to thousands more jobs created for the same resources.

Data driven investments can not only lead to a better results, but further curtail issues around potential mismanagement of funds.

Tackling Africa’s job creation challenge requires innovative thinking and initiatives that support private sector-led growth. Looking to the model of Small Enterprise Assistance Funds and enterprise funds, African governments can spur local ecosystems and drive new private capital to regions today seen as unfriendly or too risky to outside investors.

Properly structured investments today could yield much larger dividends tomorrow.

-Aubrey Hruby; Senior Fellow, Africa Center, Georgetown University

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