FINANCE FOR SMMES: THE ROLE OF BANKS (2024)

ABSA Group Limited (Absa) is the holding company of a leading financial services group in South Africa. As at 31 March 2000, the Group had total assets of R177 billion, total liabilities of R166 billion and operated nation-wide through an extensive distribution network with 34313 employees. Through its subsidiaries, the Group engages in a broad range of financial services, including retail and wholesale banking, insurance underwriting and brokering and investment services. The Group's business is conducted mainly within South Africa, although it also has operations in Africa and overseas primarily to meet the needs of its South African clients.

The Group's core business is the provision of banking services, through 783 branches and outlets, to more than 6 million customers, comprising the largest number of individual customers of any bank in South Africa, as well as small and medium-sized businesses.

The Head Office of the Group and its major operating divisions are situated in Johannesburg. The Group's services are provided throughout South Africa via a comprehensive network of Absa Bank branches, Bankfin branches, agency offices, and through a network of Absa Bank regional corporate banking centres. Services are also provided through Absa Bank branches or representatives in Africa, London, Hong Kong, Singapore, Hamburg, New York and the Isle of Man.

South African National Life Assurance Company ("Sanlam") (together with its associates) and Universa (Pty) Limited ("Universa") (together with its shareholders), each holds directly or indirectly, approximately 24% of the issued ordinary share capital of ABSA Group. Sanlam is a major life assurance company, which is constituted as a listed company. Universa is an investment holding company, which is owned by the Rembrandt Group, the Mine Employees Pension Fund, the Mine Officials Pension Fund and the Sage Group.

Ordinary Shares in Issue

As at 31 March 2000, the Company had a total of 700,000,000 ordinary shares authorised for issue, of which 643,029,000 were issued and fully paid-up (held by 71 636 shareholders).

A comprehensive range of retail and commercial banking products and services are offered to customers through a highly representative branch network in South Africa. These products and services include cheque accounts, mortgage and personal loans, deposits, savings and investment accounts and payment products.

Bankfin

Instalment finance is made available to the clients under the Bankfin brand name. Services are provided through the Absa Bank branch network, and on the floors of motor dealerships countrywide. An extensive range of products is offered, including leases, rentals, instalment sales, motor plans, credit line facilities and full maintenance leases.

ABSA Direct

ABSA Direct offers a comprehensive 24-hour-a-day, seven-days-a-week telephone and Internet banking service, a Help Desk service, including stopping of lost cards and telemarketing and the provision of information. It also offers electronic banking solutions for the commercial and corporate markets and the management of the Bankteller ATM’s.

International Representation

Absa's international operations include branches in London, Singapore and wholly owned subsidiaries in Hong Kong, Germany and the Isle of Man and representative offices in Hamburg, New York and Shanghai. Correspondent relationships exist with more than 1 500 banks in 130 countries. ABSA further has a 36.3% interest in Bank Windhoek Holdings Ltd as well as a 26% interest in the Commercial Bank of Zimbabwe Ltd. ABSA Bank recently acquired a 70% interest in the National Bank of Tanzania as a result of the privatisation initiatives of the Tanzanian Government. These interests provide banking and financial services primarily to Absa's South African clients and foreign clients seeking to invest in South Africa.

ABSA Card

ABSA Card division issues a variety of credit and debit cards as well as providing other card-based services for businesses, medical aid societies and affinity groups.

NuBANK

Absa Bank is concerned about the lack of banking facilities in the rural areas and is continuously reviewing its approach against the background of the report by the Strauss Commission on Rural Finance.

During 1996, Absa Bank started a new banking initiative NuBANK. NuBANK was established to cater for the lower end of the market, which has traditionally been denied access to banking facilities. It was established to make banking services available to the unbanked and inappropriately banked markets. In addition to the offering of selected banking products, it attempts to educate its client base with regard to these products and services and also involve communities in the process of establishing a branch. Its activities are therefore twofold, namely business related and community development.

NuBANK focuses on micro-loans to the emerging and informal business markets. Clients can only perform their transactions at the physical or domicile branch. The employer directly debits loan repayments on behalf of NuBANK against the individual borrower’s salary. Staff employed at NuBANK branches and loan offices are recruited from the local communities within which the particular branch/loans office operates.

In addition to its existing banking facilities throughout the Province, Absa is prepared, subject to a mutual feasibility study, to provide mobile banking services to the people in geographical areas not covered by the existing service outlets.

As part of Absa’s strategy for this market segment, 51% of the leading microlending group, Unibank Investment Holdings (Unifer) was acquired in June 1999. The NuBANK division has been incorporated into Unifer and Absa is providing a three-year, R3 billion loan facility to Unifer. Absa currently services 1,9 million customers in this segment and has expertise in a wide range of traditional banking products as well as extensive electronic processing ability.

According to the ABSA Procurement Policy for contracting with SMME’s, a SMME is defined as "the provider of a service or product at a level where no or little infrastructure or capital are available and such provider cannot obtain finance under normal circ*mstances".

Small and micro-sized enterprises are disadvantaged through exclusion from developing productive links with large corporations and the adoption of a procurement policy for outsourcing to previously disenfranchised sectors in South Africa is therefore of strategic importance to the ABSA Group. Absa acknowledges the crucial role that small businesses can play in stimulating economic growth by job creation and satisfying the need for self-sufficiency.

The objective of the procurement policy is to create trading opportunities in those sectors where:

• the emphasis is on service/product providers who do business from a very low infrastructure base and where individual transactions with a maximum of R3000 are the norm (small and micro sized enterprises), and
• the majority of the equity in a medium sized business is owned by a black person or persons and normal procurement practices, standards and quality requirements will apply.

The following principles are applied in the handling and development of small and micro sized enterprises:

• Given the relatively low monetary value of this type of service, the mandated official may, in his/her discretion accept a single quotation. Formal "trade qualifications" of "documentary evidence" of similar products/services delivered should be a recommendation only, and not as a prerequisite to be given the work. Where available, previous references will influence such decisions.
• Interim payments as well as funds for initial material purchases or the procurement of supply of material may be made available to these enterprises in the discretion of the mandated official.
• Typical services falling within the framework of the procurement policy are: painting, minor building works, ("wet trades", carpentry, etc.), cleaning of offices/gardens, replacement of light bulbs and fluorescent tubes, repair of leaking taps and toilet cisterns, removal of waste paper, repairs to and/or cleaning of furniture, as well as procurement of low technology based capital items, stationery-, promotional- and general office supplies.
• Services/products excluded from the policy are computer "clone manufacturing", "mix & match" shops for computer or high technology office equipment, maintenance work on electro/mechanical plant such as revolving security doors, escalators, lifts, electrical cabling, high rise structures, etc.

Standards and quality requirements:

• All work must still comply to appropriate quality levels.
• Applicable statutory requirements, such as the Occupational Health and Safety Act, Statutory requirements laid down by Local Authorities and requirements by a Landlord, must be adhered to.
• The SMME must, before the work is started, be fully aware of what is expected of him, and if required, the necessary coaching/developmental support must be provided.
• A communication platform must be created between Absa and the service provider to ensure that all deviations or unsatisfactory work/performance is attended to immediately and that corrective actions are implemented.

Where procurement of capital- and consumable items are concerned, it is not a requirement that suppliers be subjected to the normal strict screening process. Absa, however, must be satisfied at all times that the quality of the items bought from SMME’s is suitable for the intended use and meets the specified quality standards.

Some of ABSA Procurement’s stationery supplies are provided by SMME’s such as Dupla Printers, Thumb Printers and Van’s Office Supplies.

The successful construction contractor for Absa’s R450m Towers North Project in Johannesburg has been selected by means of a process of competitive tendering. The contractor was also required to implement affirmative sub-contracting and black empowerment drives in the construction.

Absa has rationalised its service providers of banking hall, ATM and security guards to five companies. An important part of the tender process was that all service providers should endeavour to employ people out of the communities where the service is needed and contribute to empowerment by having these people trained to the required levels of competency. Black empowerment is encouraged by Absa through its contractors employing people of colour at all levels of management.

1. SMALL, MEDIUM AND MICRO SIZED ENTERPRISE (SMME’s) INITIATIVES

Absa has for many years financed new and existing small businesses as they are defined in the National Small Business Act, No 102 of 1996. However, following the President's Conference on Small Business, held in Durban in 1995, Absa decided to also consider providing finance to those new and expanding businesses that will operate in the formal sector of the economy, but are unable to meet the normal lending criteria of the bank.

Following the above-mentioned decision, Absa Bank has developed a specialised division referred to as New Enterprise Banking (NEB) within its Commercial Banking Division to address the higher risk aspects of the SMME market.

An office for New Enterprise Banking was established in each of Absa's provincial offices headed by a Provincial New Enterprise Banker tasked to implement the New Enterprise Banking strategy in the respective provinces in relation to the unique characteristics of each province.

The New Enterprise Bankers are trained to research and to ensure:

• that the proposed business is viable;
• that the business will be able to generate the necessary cash flow to meet the financial needs of its owners;
• that the business can service the finance granted by the bank, creditors, suppliers, taxes and levies;
• the amount of finance the business would require to meet these objectives in the first year of operation; and
• the ability of its owners to manage such a business successfully.

The growth of the South African economy is heavily dependent on the extent to which small business enterprises can be established and therefor the commercial banks need to grow their business market asset base over the next five years. The financing of viable new enterprises can make a major contribution to meeting this objective, whilst reducing risk through the Khula Credit Guarantee Scheme. Absa was the first financial institution to sign an agreement with Khula Credit Guarantee Scheme (Khula), which took over the Small Business Credit Guarantee Scheme (SBCGS) from the Small Business Development Corporation (now Business Partners). Of the nine participants in this scheme, Absa is the most active user of the scheme. Of the total applications received by Khula, more than 30% has been conducted by Absa.

The target market for Absa’s New Enterprise Banking are those entrepreneurs who wish to:

• Start up new businesses
• Expand existing small businesses
• Venture into business for the first time by buying into or taking over existing ventures
• Acquire a franchise approved by Absa Bank in terms of its franchise policy.

5.1Absa Foundation

The world is looking to South Africa, as the powerhouse of Africa, to find new and innovative ways of building prosperity for all its citizens in order that the African Renaissance may take roots throughout the greater African continent. Absa supports this process by nurturing and building sound partnerships between government, business, the community and all other stakeholders.

Structure and functioning of the Absa Foundation

The ABSA Foundation was set up in 1994 (prior to this the social investment programme of ABSA was run through the Golden Heart Trust and the Allied Bursary Fund). The Group contributes 2% of declared dividend on an annual basis to the Foundation for investments in community development programmes. The Foundation operates as a Trust with a Board of Trustees comprising of senior management in the ABSA Group together with the Chairman, Vice Chairman & CEO of the Group.

Since 1994, the Foundation has invested over R40 million in more than 200 community development projects throughout South Africa. As the community development and social investment arm of Absa, the ABSA Foundation's mission is to grow partnerships by providing financial and other resources to disadvantaged communities to ensure the sustainable development of the communities Absa serves. Funding is channelled through non-governmental organisations (NGOs) and community-based organisations (CBOs), and the key focus areas are education, health and job creation.

General information on the Absa Foundation

The Foundation has adopted a focused approach in funding to ensure impact and sustainability in funded projects. The work of the Foundation is based on three tenets:

• A community development approach to the funding of projects as opposed to a cheque writing approach;
• Active involvement of Absa staff in the evaluation of the projects and in project management to build capacity in the projects funded; and
• Adopting a partnership with projects until they are sustainable, thereby ensuring impact and sustainability in the funding of projects.

The Foundation is funded annually by 2% of the Group’s declared dividend. To date the Foundation has made investments of close to R50 million in community development projects nation-wide and over the next financial year 2000/01, approximately R14 million will be disbursed to 120 community projects.

The Absa Foundation has analysed both development and poverty indicators and needs in the country, as well as government priorities and has concentrated funding in three key areas, education, job creation and health. The Foundation adopts very focussed approach to funding in order to create impact on community needs - we realise that "we can not be all things to everyone". Funding is project driven and the Foundation does not run its own projects but enters into partnerships with non-profit organisations to run programmes at a community level. The programmes is national, however, strategically in the next few years, more attention will be focuses on those Provinces (KZN, Northern Province and Eastern Cape) with relatively highest poverty indicators.

In 1999/00, the bulk of the funding was channelled to education projects (55,2%), the second largest spend was in job creation (26,7%) and health received 12,3% of the funding. A small amount of funding (5,8%) was allocated to the Contingency Fund, which is used to make small ad hoc donations to welfare and charity type projects.

In education, the emphasis is on two core programmes, early childhood development and teacher development programmes in mathematics science and technology. A total of R6,2 million was invested in 53 education projects across the country. Research has shown that children, who have access to early childhood development programmes, perform better in the long term in formal schooling and repeater rates are reduced. The focus of the Foundation funding is for training programmes undertaken in partnership with NGO’s for women who run community based day care centres. These centres serve three needs, viz. They operate as day care centres for working mothers, they create jobs for women and thirdly provide education stimulation programmes for young children. Last year 1687 women were trained which has had an impact on close to 14,700 young children.

The largest spend in education from the Foundation is channelled to teacher development programmes. Estimates indicate that one in every four teachers in South Africa is underqualified and this is particularly the case in the disciplines of mathematics, science and technology. The emphasis is on providing in-service training programmes for teachers, which includes classroom facilitation, provision of materials as teaching aids and workshops. A total of 4125 teachers have benefited from such programmes, which has impact on over 200,000 learners.

No responsible corporate in South Africa can ignore the shocking HIV/AIDS problem in South Africa. The incidence is estimated to be as high as 17% with KZN, the Free State and Mpumalanga being particularly hardest hit by the AIDS pandemic. The Health programme of the Foundation is channelled directly at addressing this problem though partnership with NGO's to provide community based programmes. These programmes focus on the training of community members to provide education and awareness, programmes, counselling and support programmes for persons (and their families) with HIV/AIDS, home help programmes to assist families to care for persons with HIV/AIDS and income generation projects for people living with AIDS. Over 70,000 people have benefited from these programmes. In this sector the Foundation funded 21 projects with an investment of R1, 5 million.

Job creation

Absa places great emphasis on job creation through the initiatives of the ABSA Foundation.

Funding in the area of job creation is focused on the following initiatives:

• skills development programmes focusing on vocational, business and entrepreneurial skills;
• start-up capital and/or equipment for small-scale community based income generation projects;
• micro lending which is done in partnership with NGOs that administer the finance to entrepreneurs with a focus on the youth sector and rural women.

In 199/00, the emphasis was on community based income generation projects which focus on skills training (both vocational and business), start up capital and equipment and after care and support or mentorship programmes for such projects. These projects reach people operating at the lowest end or survivalist level of the economy and particular attention is focussed on marginalised groups in society, viz. rural women, youth and the disabled. Sixty-one such projects were funded nationally, and 3,420 people were assisted in such income generation projects and provided with an opportunity to earn a sustainable income.

Western Cape: Women’s Entrepreneurship Project.

• Focus on rural women in the Western Cape.
• Training covers basic entrepreneurial, business and financial skills.
• Trainees are assisted with developing a business plan and also to gain access to finance through formal finance institutions or informal micro credit financiers.
• To date, the project has been run in areas such as George, Citrusdal, Atlantis, Saldanha and Mitchells Plain.

Eastern Cape: PERSHAD

• Pershad is an acronym for the Port Elizabeth Self-Help and Rehabilitation of the Disabled, and its aim is to empower disabled persons with skills needed for social and economic development to generate their own income and live independently.
• Activities at the Pershad centre include sewing, knitting, leatherwork and carpentry.
• The Pershad project has a contract to supply uniforms and jerseys to local schools.
• ABSA Foundation assisted the Group to purchase industrial sewing and knitting machines.
• Pershad is owned and managed by disabled persons themselves.

Gauteng - Joint Enrichment Project (JEP)

• JEP programmes cover the social, economic and psychological development of youth.
• The ABSA Foundation has partnered a project called the Reach Out Project, which focuses on two groups of youth, the first being young people at risk of becoming involved in crime who are referred to the programme through various agencies working in the inner city. The majority of these young people are virtually "living on the streets". The second group is youth who have already committed crimes and are diverted to the JEP programme as an alternative to imprisonment.
• The programme is intensive and spans one year. The first part of the programme focuses on personal development and the acquisition of life skills, while the second part covers vocational skills.
• Youth are channelled into one of four vocational areas including building skills, catering, sewing and dress design, and motor mechanics. After the programme the youth have the choice of seeking formal employment or creating a small business of their own.

Northern Province - Mangondi Farming Project

• The project is a partnership between the Mangondi Development Committee, the Department of Water Affairs, and the Jewish National Fund of South Africa and Absa.
• The initial project involved water reticulation for the entire community. Out of this project, the Mangondi Project was formed which involved 63 rural women in small-scale farming.
• The local Chief provided 20 hectares of land that was subdivided into individual plots, and the women were given extensive training in small-scale organic farming. In addition, training also included capacity building programmes such as personal development skills, life skills, basic adult education and skills in managing a community project.
• The main aim of the project was to produce food for domestic consumption as well as for sale, the target market for the organic vegetables being the resorts in the Kruger National Park.
• The women work as a co-operative where produce is pooled and sold as a collective. Profits are then distributed between the members.
• The ABSA Foundation assisted the project with the setting up of a reservoir and a drip irrigation system. In addition, kick-start funding was provided for fertiliser and seedlings. The Absa Agribusiness Division has assisted the Group in developing a business plan.

North West

• The ABSA Foundation has partnered the Foundation for Economic and Business Development (FEBDEV) in a project in the North West Province.
• The project has two components. The first is the Community Entrepreneurial Development Programme for new or emerging community based micro entrepreneurs. FEBDEV offer a comprehensive course that gives participants the practical and theoretical skills to start up or run a business. This leg of the project, with Absa funding, aims to reach 50 entrepreneurs in Potchefstroom and surrounding areas. FEBDEV also undertake mentoring and aftercare to trainees.
• The second leg of the programme is aimed at introducing entrepreneurial education at school and at tertiary level. This is a proactive approach to developing entrepreneurs rather than targeting persons only when they are unemployed. In 1999, FEBDEV will run courses at 14 tertiary institutions in the NorthWest and Northern Cape which will reach 7500 students.

Northern Cape

• In the Northern Cape, with assistance from Ntsika, there has been a major drive to establish Local Business Service Centres (LBSCs) to operate as "one-stop" service centres for entrepreneurs.
• These LBSCs will serve as an important resource for entrepreneurs who are far way from the main city of Kimberly. The Centres offer training in entrepreneurship, advise on the legal aspects of registering a business, training on how to tender for government contracts, information on financing options for entrepreneurs and mentorship and support for entrepreneurs.
• The ABSA Foundation has supported four such Centres in the Northern Cape covering the Kimberly Region, Upington, Kalahari Region and Namakwaland Region. The funding from Absa will enable these Centres to target 50 entrepreneurs in each of these regions and services will cover entrepreneurship training, advice and mentorship.

KwaZulu-Natal

• The ABSA Foundation has assisted the community represented by the Thuthuka Development Committee to establish an SMME hub called the Thuthuka Centre. This hub consists of 11 mini factories comprising mini enterprises like carpentry, various building trades, a hairdressing salon, bakery, poultry farming, curio arts works etc.
• The Centre creates a micro economy or rural CBD for this area and also houses a pre-school which provides facilities for 32 children. The Absa branch in Pietermaritzburg assisted the community with project management in the building phase of the Centre and also provided the Committee members and entrepreneurs with financial skills.
• The New Enterprise Division of Absa assisted the "owners" of the mini factories to develop business plans and facilitated their access to finance.

Free State

• Education with Enterprise Trust (EWET), an NGO based in Harrismith in the Free State, addresses the problem of making youth job creators rather those job seekers.
• The EWET programme seeks to awaken an entrepreneurial spirit in schoolgoers. Learners in partnership with teachers and business people from the local community set up and run small businesses and through this process youth are taught valuable business skills.
• A competition is run between the various small business projects to incentivise the programme. Absa personnel teach the financial component of the programme. With funding from the ABSA Foundation, EWET has set up the programme in twenty towns in the Free State to reach 600 young people.

Mpumalanga

• To empower unemployed rural women, particularly those with children under five, the ABSA Foundation joined forces with the Mpumalanga Department of Welfare to establish a holistic upliftment programme focusing on job creation, life skills and parenting skills.
• The programme is focused in three rural areas of the province, viz. Driefontein, Nkomazi and Zaaiplaas, and reaches 100 women in each of these areas.
• The project participants went through an extensive facilitation programme covering life skills, parenting skills, skills on managing a community project, vocational skills and business skills. Each group of women was assisted by Absa to set up a Community Trust, which formed a legal entity for the various projects initiated.
• These projects include day care centres, small-scale farming, a bakery, a sewing project and a poultry farm. The women receive extensive support, financially and otherwise, to set up micro business entities in these rural areas.

Nations Trust - Microlending Scheme

The Nations Trust was formed out of partnership between the ABSA Foundation and the Prince's Trust in England, and both provided seed funding for the start-up costs. The patrons of the Trust are Nelson Mandela and Queen Elizabeth II. It was set up in 1994 and aims to empower unemployed and marginalised youth. The target group of the Nations Trust is youth between the ages of 18 to 35 years that are from disadvantaged backgrounds. Youth are empowered at the following three levels:

Extensive training is provided in the area of entrepreneurship and participants are assisted with completing a business plan. The training also focuses on the personal development of the young people.

They are provided with loans as start-up capital or capital to grow their existing businesses. The ceiling for loans is R6000 for individuals or R10000 for partner projects. The programme reaches a marginalised group who would be unable to access credit from formal financial institutions as they have no form of collateral or security.

Ongoing aftercare and mentoring is provided to entrepreneurs after the disbursem*nt of loans. This makes the programme particularly expensive, however, international research on initiating young entrepreneurs has shown that the success rate of a business is directly related to the quality of aftercare and mentorship.

To date the ABSA Foundation has contributed R1,3 million to the Nations Trust and in 1998, 393 loans were disbursed to young entrepreneurs. Two staff members from the ABSA Foundation are actively involved in the management of the Nations Trust. Realising that training is not sufficient as an enabler to promote job creation, the Nations Trust is one initiative, which facilitates access to finance for youth.

No business can survive if the social fabric of society is under threat and through the work of the Foundation, Absa has accepted the challenge as a committed South African corporate to "make a difference".

5.2Equity Africa

In the spirit of our mission to contribute towards growing prosperity for the people of the country, Absa has enhanced even further its involvement in the broad sector of community development.

Equity Africa, a joint venture between Absa and Shanti Industries (Pty) Ltd, was established as a mechanism through which Absa, together with new market companies, grows businesses on a profitable and sustainable basis.

The purpose of this Community Business Development Initiative is to develop business in the new market sector, enabling them to grow and expand, provide job opportunities, generate business for suppliers and facilitate equity investments in new growth companies

As an equity fund, the Resource Initiative Trust has been established to invest up to R5 million per project. One of the most important criteria for the fund’s involvement is the ability of the business to contribute to economic development and growth in the new market. Although the fund has strong developmental objectives, it is nonetheless a commercial venture, which seeks to purchase minority equity stakes in new market companies with significant growth potential.

Through this initiative, Absa wants to achieve the enablement of businesses through the provision not only of venture capital finance, but of resources on a partnership basis, including financial, management and development inputs. A mechanism has been created that is mobilising and gearing both international and local resources. A coalition approach has been built through a range of strategic alliances.

5.3Black Economic Empowerment

During the previous and current financial year, Absa Group was engaged in enhancing black economic empowerment through partnerships and financing. Black economic empowerment projects supported include:

SAB Owner Driver Scheme - Bankfin provides drivers of distribution trucks with instalment finance to acquire their own transport for the distribution of SAB products. In addition, it assists in the provision of management expertise and ongoing business training, thereby helping them set up successful businesses. Bankfin is involved in this innovative scheme with South African Breweries.

Phutuma Share Investment Scheme - Absa's wholesale banking division was involved in devising, structuring and funding the highly successful Phutuma Share Investment Scheme, which afforded disadvantaged South Africans an opportunity of acquiring shares in M-Net. This model was subsequently utilised in various other empowerment initiatives.

National Economic Empowerment Corporation Limited - The Shareholders of this company consist of various different black businesses and individuals. Finance of R50 million has been provided for the acquisition of an equity stake in Johnnies Industrial Corporation Limited (Johnnic).

Trade Unions Investment Company Limited - The shareholders of this company consist of various trade unions, such as SACCAWU, NUMSA and PAWU. Finance of R50 million has been provided for the acquisition of an equity stake in Johnnic, and guarantees have been provided by New Africa Investments Limited (NAIL).

Real Africa Holdings Limited ((RAIL) - Finance of R58 million has been provided to enable RAIL to follow its rights offer in African Life.

Petka Investment (Pty) Limited - The shareholder of this company is Don Ncube and finance of R10 million has been provided to enable Petka Investments (Pty) Limited to follow its rights offer in RAIL. Guarantees have been provided by Southern Life.

Naledi Petroleum Limited - The shareholders of this company include various black businesses and individuals, as well as Sasol Oil (Pty) Limited. Finance of R5 million has been provided, with a further R40 million available, to cover the operating costs of the company. The company has recently won a few tenders for the provision of fuel to various locations.

Joint Finance Company - Absa Bank established a joint finance company with the Northern Province Development Corporation to facilitate development within the Northern Province and Absa Bank has committed R50 million to this project. The joint venture's main purpose is to provide finance for housing and small business ventures to people that wouldn’t normally qualify for finance given the standard credit criteria applied by banks.

Fasic Investments Corp Limited - Absa invested R1m into this company, with an option of investing a further R6 million. The company's directors are made up of Asians and Blacks.

Ukukhanya Technologies is 51% owned by management and 49% by Stairway Information Structures, a black investment fund backed by ABSA Corporate Bank. Stairway consists of black business people, educationalists and community leaders, mostly women. The group offers hardware supply and maintenance, electronic commerce skills, networking, wireless connectivity and training. An education division will serve previously disadvantaged students, and a finance unit will provide financing and leasing deals for technology purchase.

Kgwerano Investment Holdings, a youth empowerment group of black graduates, has acquired two franchises from Nizamo chains of convenience stores. The group was formed to make economic empowerment more accessible to young aspirant entrepreneurs, and is a partnership between youth and experienced investors and facilitators, the empowered and previously disenfranchised. Finance was raised from Khula Enterprises, Absa and Technikon North West.

Multiserv believes that its franchise concept is ideal for emerging entrepreneurs. 80% of their franchises are from the previously disadvantaged sector. A "buy back" agreement has been formalised with Absa whereby Multiserv gives guarantees on assets, fixtures and fittings, thereby assisting with bank financing.

Moribo Leisure’s (a black economic empowerment group) advertising agency Gitam/BBDO Johannesburg has been appointed to handle the Absa advertising account.

Zader, a predominantly black-owned and managed firm will make shares such as Microsoft, General Motors, ICI, Royal Dutch Shell, BMW and Toyota available to SA investors. Absa acquired 20% in Zader Investment Corporation, the Investment Company of related Zader Financial Services. ZFS, through its consulting roles, encounters a large amount of potential investments. ZIC was created as a vehicle for these investments.

Pamodzi Auctioneers – Absa funded Pamodzi Investment Holdings to acquire a 50% interest in Pamodzi Auctioneers for R8 million.

Safika Technologies Holdings are actively involved in the IT, telecommunications and related industries. Absa invested R6m for a 20% equity stake.

Labat Africa is a black-owned business solutions company, listed on the JSE. Labat African started business as a consulting company operating mainly in the public sector. Included in the projects completed are the successful transformation of the Department of Public Works, the Department of Land Affairs, transformation for the IDT, data collection for the Department of Public Works’ fixed assets register and many other.

From this consulting base Labat has built a business solutions company which includes training services, information technology and financial services. This has been done by using the third generation empowerment model. Part of this company is being built by acquisition and part by means of a joint venture with established companies who wish to use the Labat model as a transformation exercise for their companies as well as their staff.

This Joint Venture between ABSA Consultants and Actuaries and Labat Africa is an expression of intent by ABSA Consultants and Actuaries to open the high barriers of entry to the employee benefits industry. The joint venture will launch a new employee benefits company, Labat Africa Employee Benefits Consulting (Pty) Ltd. Labat Africa and employees from a previously disadvantaged background will hold 60% of the shares in this company, the balance of shares being held by ABSA Consultants and Actuaries (Pty) Ltd.

5.4.NewFarmers Development Company Ltd

Absa AgriBusiness specialises in agricultural finance and renders support and advice to clients through a full range of products and services, including the following:

• Risk analysis and strategic planning
• Feasibility studies
• Cash flow planning and profit management
• Agricultural seminars
• Estate planning

Absa is the only bank in the country, which is a founding shareholder of the NewFarmers Development Corporation Limited (NFDC). NewFarmers was established in 1995 and has invested R85m into a variety of black empowerment-type projects through share equity participation schemes, leveraging loan capital.

The mission of NewFarmers is "to create opportunities for viable farming enterprises, focusing on developing communities, through project development, loan finance and equity participation".

In the Western Cape, for example, workers and managers have an opportunity to obtain shares in one of South Africa’s largest table olive production units. The workers will undergo intensive training to equip them to take decisions regarding the acquisition of shares. Absa has a 10% shareholding and is also on the board of NFDC.

Absa participates in the Land Reform Credit Facility, which was created by the Department of Land Affairs to assist the establishment of commercially viable land reform projects. Participating institutions assume a 100% risk for their investment decisions.

Recently, Absa made a R6 million available for the Development of Erfdeel Farming Trust for emerging farmers in Piketberg, Western Cape.

Through its partnership with Equity Africa, Absa helped with the establishment of Tropical Mushrooms, the first black-owned mushroom farm in South Africa.

5.5Khula Credit Guarantee Scheme

Absa is the major participant of the Khula Scheme by actively, and more importantly, constantly, participating in the Khula Scheme. The current active facilities amount to R120 million comprising 573 business applications. In total, 812 applications for SMME’s have been processed with a facility value of R243 million of which only 20 applications have resulted in claims being lodged with the Khula Scheme.

The current average loan transaction is R209 000 declining from R275 000 at the end of 1999. The interest rate levied is on average Prime + 3%. Most transactions are linked to additional non-interest bearing products such as a loan redemption plan. Products used include cheque account overdrafts, guarantees, asset financing (Bankfin) and term loans.

Absa proactively support the Khula Thuso Mentorship Program, which addresses the lack of business management skills of the entrepreneur. This lack of skills is a major contributing fact to the failure of 80% of small businesses in the first three years. Absa is one of four shareholders in the Sizabantu Credit Guarantee Scheme which was implemented on 12 June 2000 which focuses on the Micro, Small Enterprise (MSE) sector. Absa proactively encouraged the development of SMME via business plan competitions in conjunction with Delloitte & Touche for the Entrepreneur of the Year, National Business Initiative (NBI) for Enterprise Business Plan Competition, Rapport newspaper's Top Entrepreneur for High School and Students.

Absa annually conducts national BIZ Entrepreneurial Workshops for SMME business management development. Absa has formed strong alliance with the Institute of Business Advisors SA (IBA) for accreditation of acceptable standards for the finance industry mentors (a necessity in terms of The Code of Banking Practice).

Synergy is being created between Business Skills of SA (BSSA) to enhance the aftercare mentoring and value adding for SMME client development. Interrelationships have been encouraged for Joint Venture partnerships for the alternative access to funds for SMME’s by DANIDA, Equity Africa and the Sweden and UK Business to Business Programs.

5.6Sizanani & Sizabantu

Absa, together with the other leading banks in South Africa played a major role in establishing a joint venture with the Banking Council of SA to form a finance scheme to meet the needs of micro and small enterprises. Absa, as one of the four participating banks has made an interest-free loan of R500 000 available to help get the scheme under way.

Two NGO’s have been established, the Sizabantu Guarantee which provides a guarantee for loans provided by the banks, and Sizanani Advisory Services which will play a mentoring role.

Sizabantu is supported by indemnities from the Khula Credit Guarantee. The scheme will enable loans of between R10 000 and R50 000 to be made by the banks to entrepreneurs, backed by a strong mentorial component.

Sizanani, acting as mentor, will provide continuing after-care and help to ensure that the entrepreneur’s business is conducted on a sound business footing and will support those entrepreneurs qualifying for a bank loan.

The mentoring process will assist entrepreneurs from the initial stages of ascertaining whether their business concept is viable through to assistance in preparing a business plan and in raising bank finance.

This scheme has been launched on the 12^th June 2000.

5.7National African Farmers Union

Absa sponsors the Absa/NAFU (National African Farmers Union) farmer of the year competition to encourage commercial farming among black farmers.

Absa also sponsors the Woman Farmer of the Year Competition.

5.8Entrepreneurial Development Programmes

The Absa Group contributes to the creation of a culture of entrepreneurship by its involvement in a number of events that promote an entrepreneurial spirit such as the Business Woman of the Year and the National Franchise EXPO.

The Business Trust was formed by the National Business Initiative (NBI) as a partnership between government and the private sector. It has adopted a two-pronged approach to job creation – boosting tourism and promoting basic education programmes. It seeks to stimulate marketing, promote training and support enterprise development in the tourism industry as well as to increase efficiency in schools by reducing the repeater rate and enhancing the quality of school management.

Absa has committed itself to the Business Trust’s job creation project by donating an amount of R26, 1 m in 1999, the first of five yearly contributions. Absa fully support their mission to "accelerate the creation of jobs and the development of human capacity in South Africa, while building productive relationships between business and government and demonstrating the commitment of the business community to South Africa’s success".

Enterprise Business Plan Competition "Making your idea your business"

Along with the competition a booklet is distributed which explains how to produce a professional business plan, capable of turning a business idea into a fast-growing and profitable enterprise.

South Africa’s Best Entrepreneur Award

The International Entrepreneur of the Year Award originated in the States, Milwaukee to be specific, in 1986. The idea belonged to Ernst & Young’s US practice, who set out to find and acknowledge the country’s most talented entrepreneurs. The award quickly grew into an international programme, which now recognises entrepreneurs in Canada, the US, Mexico, the Caribbean, Spain, France, Belgium and South Africa. The span of the event is growing continually.

The national winner of South Africa’s Best Entrepreneur will be a guest at the International ‘Best Entrepreneurs under the Sun’ annual awards ceremony in Palm Springs, California.

BIZ Entrepreneurial Workshop

The Absa Entrepreneurial Workshops present in-depth knowledge about key issues relating to starting and expanding a business and are presented by some of the most accomplished and respected professionals in the field of entrepreneurship.

5.9Small Business Toolkit

Absa New Enterprise Banking’s mission is to provide finance to those new businesses that apply for finance for the first time, and are found to be viable and display the potential to be taken on in the client base of the bank once new enterprise banking have researched its potential for sustainability and are satisfied that the Owner/Partners/Members/Shareholders have the necessary attributes to manage the business successfully.

Absa has developed a total package of advisory products that are available to potential new businesses. These products are developed in line with the knowledge of what the SMME market requires and is more than just financial support. These products include the following:

• Toolbox

To help entrepreneurs’ plan and manage their business better, Absa has developed a Toolbox, which contains 13 booklets, written by experts on related business topics from writing a business plan, labour law, and legal issues to franchising and international trade. The Toolbox can be ordered at any Absa Branch.

• Absa Cash-flow Programme

A practical cash-flow programme was developed by Absa to render assistance to clients to draw up their own cash-flow projections. These are available and included in the Toolbox.

• Mentoring programmes

Clients who require assistance at the pre-loan stage for compiling a business plan are referred to skilled and accredited mentors to facilitate easier access to the loan application process. These mentors will also assist during the post loan stage to provide aftercare services.

• Conferences

Absa was also a major sponsor of the Presidents Conference on Small Business held in Durban in 1995 and has since continued its support thereof by sponsoring the Second National Conference on Small Business, which was, held in November 1997. Another Provincial conference on small and medium business sponsored by Absa took place in March 1999 to provide support and feedback. Absa has been a partner and role player throughout the industry by providing support and financial aid to local authority initiatives such as G.A.L.A.

5.10Franchising

Absa is a patron member of the Franchise Association of South Africa (FASA) and offers a unique service that will help the new franchisee, franchisor and the Bank to provide a safe, supportive approach.

Absa’s main objectives when assessing a prospective franchisee are:

• to align itself with franchisees by using a pro-active approach;
• to develop a financing package to meet the specific needs of these franchisees;
• to identify and develop franchise schemes accessible to the emerging markets.

Approving and funding franchises enlarges Absa's client base and projects it as one of the leading financial services institutions.

A franchise desk has been set up to co-ordinate negotiations with franchisors and franchisees to ensure that a seamless financial service between Absa Bank, Bankfin, Card and Electronic Banking divisions is rendered.

5.11Grant Schemes

ALLPAY is Absa's mobile payment system, specifically designed to service the elderly and communities receiving social grants from National Government. The system uses advanced multi-media systems, biometric fingerprint and smartcard technologies mounted in highly mobile, secure and rugged vehicles and where required, portable or static payment units could be deployed.

ALLPAY is currently providing Pension Payment Services in the Free State Province. During 1998, the Free State Department of Social Welfare received an invitation from the Commonwealth Association of Public Administration and Management (CAPAM), soliciting inputs on innovative initiatives embarked upon by its members for submission to the inaugural CAPAM International Innovations Award conference. The Free State Pension Delivery System in conjunction with ALLPAY, was put forward for consideration by the Free State Social Security Department. Submissions from 24 Commonwealth countries were received and the South African entry was subsequently awarded a silver medal.

ALLPAY is also currently implementing its payment system of social grants in the Western Cape.

5.12Economic department publications

Various brochures are published occasionally on topics such as Franchise Services, New Enterprise Banking and Your Banking Relationship as well as publications from the economic department. These brochures and publications contain comprehensive information on the particular topics and are available at Absa branches.