ADVANCING SUPPORT FOR BLACK ENTREPRENEURS THROUGH EQUITY FINANCE
Access to equity finance has been identified as a challenge for black entrepreneurs wanting to start or expand their businesses. An optimal capital structure, made up of debt and equity, is required to enable entrepreneurs to bring viable ideas into reality and to embark on larger scale projects. New entrants require substantial investments in order to be efficient producers and usually face challenges in obtaining start-up capital.
These entrepreneurs may not have the capital required for large scale entry and will often be required to provide at least 30% of own equity to get funded. Furthermore, in some cases, entrepreneurs may be required to give up part-ownership of their ideas to get the required investment. Furthermore, applications for financing can be cumbersome and lengthy, with entrants often being assessed against historical performance rather than projections. Whilst it is important to conduct proper due diligence, there is also a need for timely decision-making to enable companies to take advantage of opportunities, especially where a breakthrough may be needed in a short space of time.
Businesses go through several stages in their growth process, all of which require different forms of support; interventions necessary at the ideation stage may not be the same as those required at the stage for scaling up of the business (Bosiu, Nsomba& Vilakazi, 2019). There is therefore a need for interventions to address the different stages and needs of black businesses in terms of capital, particularly the equity gap. Equity financing can be raised through angel investors, crowdfunding platforms, venture capital firms, corporate investors, and ultimately shares can be sold to the public through an Initial Public Offering (IPO).
There are, therefore, two methods of equity financing; private placement of stock with investors and the public stock offering.
Typically, investors focus on the long term without expecting an immediate return on their investment, which allows the company to reinvest the cash flow from its operations to grow the business, instead of focusing on debt repayment. Furthermore, through the investors, equity financing can provide invaluable assistance to the business through providing management expertise, business contacts, and access to other sources of capital. Several initiatives have been introduced in South Africa to meet the different needs of black-owned businesses at different stages, with some encouraging black business participation at a larger scale than the small and micro enterprise. These initiatives have been in the form of financial support, technical support, mentorship and incubation.
There are existing equity funding instruments, but these appear to be limited somewhat. There is a need to build on existing instruments to expand reach across interests in various sectors of the economy and consider further development of equity funding support initiatives for black entrepreneurs, without the risk of losing ownership of ideas in those transactions.
The ECDC, therefore, seeks to host a Symposium on “Advancing Support for Black Entrepreneurs Through Equity Finance” as a platform for engagement on possible interventions for supporting black entrepreneurs across different sectors to bridge the equity gap to advance their interests of starting or growing their businesses. The Symposium will bring together key stakeholders from the public and private sectors to exchange ideas on the challenges, proposed interventions, possible areas of collaboration as well as a proposed action plan.
The objectives of the Symposium are to:
Explore the different equity instruments available for supporting black entrepreneurs.
Identify any gaps within the existing initiatives.
Explore the development of interventions for supporting black entrepreneurs through equity financing across different sectors, as well as opportunities for building into existing initiatives.
Come up with proposals as well as an action plan for supporting black entrepreneurs in bridging the equity gap
meet the speakers
Host: ECDC CEO
PANEL: The challenge of access to equity finance by black entrepreneurs
PANEL: existing equity finance instruments by public institutions
PANEL: existing equity finance instruments by Private institutions
Programme director: Ms Zanele Morrison
09:00 - 09:15 Opening remarks and Setting the Scene: Mr Vuyani Jarana
ECDC Board Chairperson
09:15 - 09:35 Welcome Address: Premier Oscar Mabuyane
Eastern Cape Premier
09:35 - 10:00 The role of Government in Supporting Black Minister Stella Ndabeni- Abrahams
Businesses through Equity Funding Department of Small Business Development
10:00 - 10:30 TEA
10:30 - 10:35 5-Min Video: Access to Equity Finance
10:35 - 10:50 Presentation: Research on Black Entrepreneur Mr Fana Marivite
Equity Funding in SA CEO Bankable Models
10:50 - 11:00 Q & A
Facilitator: Ms Ndzinga Qunta
11:00 - 11:25 The Challenge of Access to Equity Mr. Tshepo Matsaba
Finance by Black Entrepreneurs National Treasurer: National African Federated Chamber of
Commerce and Industry
Ms Lizelle Maurice
Executive Director: Boarder Kei Business Chamber
Mr Langa Madonko
Deputy President: Association of Black Securities
and Investment Professionals
Mr Andile Nomlala
President: Black Management Forum
Mr. Kganki Matabane
CEO: Black Business Council
Mr. Mzingaye Xulu
11:25 - 11:35 Q & A
Facilitator: Mr Khaya Sithole
11:35 - 12:30 Existing Equity Finance Instruments by public institutions Mr Mxolisi Matshamba
Ms Wanda Lunika
Deal Maker: Industrial Development Corporation of SA
Mr Patrick Dlamini
CEO: Development Bank of Southern Africa
Mr George Kararach
Economist: African Development Bank
Mr Mziwabantu Dayimani
General Counsel: National Empowerment Fund
12:30 - 13:00 Q & A
13:00 - 14:00 LUNCH
Facilitator: Mr Xhanti Payi
14:00 - 14:40 Existing Equity Finance Instruments by private institutions Mr Stephen Seaka
Head of Public Sector: ABSA
Mr Ahmed Badrodin
Senior Legal Advisor: FNB
Mr Enrico Cupido
Director: Marathon Group
Mr Sakhile Xulu
Managing Partner: Seed South Capital
14:40 - 15:00 Q & A
15:00 - 15:20 Small Business Finance: A public-private sector Mr Jeremy Lang
partnership approach CIO: Business Partners Limited
15:20 - 16:20 Towards the development of a model for Black Equity Mr. Fana Marivite
Financing in South Africa: CEO: Bankable Models
- Presentation on research & take-aways from the session
- Discussion ALL
16:20 - 16:30 Closure and way forward Mr Ayanda Wakaba