Two new specialist investment funds aimed at boosting the growth of small and medium enterprises announced by Business Partners today.
Business Partners launching an empowerment fund and a tourism fund, now critically Business Partners is in the market as serving smaller and medium enterprises.
The idea is to pump more than R6.5-billion into these sectors over the next five years. Jo' Schwenke is Business Partners MD, joins us on the line from Johannesburg.
Jo' anyone who doesn?t know Business Partners and the work you do, how exactly do you operate, how exactly do you raise the funds you need to put into these SMEs ?
Bruce, we are a specialist fund or specialist firm investing capital skills and knowledge into small and medium businesses. We are 25 years old and have been somewhat successful over the years and have and own capital of R1.6-odd billion.
We will be using that, recycling that, because most of the deals we do have an average duration of three to four years and we have strong cash flows out of this, so we will recycle, in that five year period we think we will get about R3.3-billion out of that.
We will borrow against our balance sheet which will give us about R1.6-billion, that will give us a one to one and then we are very much a venture capital private equity player and part of that industry, so we would then also manage outside funds. We do that presently for the government through their Franchise Youth Fund and we also do it with Kula, we have a joint start up fund which we launched last week.
We were talking to Deloitte about their research into private equity last night and the growth in private equity over the last couple of years has been phenomenal. Are there not easier places to make money than in small and medium enterprises, one would think it was a lot more of a challenging environment to be making money?
Exactly, you are totally right, it is so. When our firm was founded in 1981, Dr. Rupert was our founder, his interests were not entirely to make money.
He wanted us to have a sound business which we are, we do pay income tax we make a R100-million profit a year, but we also care very much about a social dividend. So our shareholders, which include most important corporates in the country, many banks, many insurance companies, Anglo American, Remgro and the government, all have a shareholding and they want a decently well run company but also social dividends. So we are a specialist player in the SME field but you are quite right there are easier ways to make money.
Johann Rupert is your chairman of course, now how long has he been involved?
He has been involved as chairman for the same period as I have as MD 01/01/1996.
The announcement of the two funds today, first the BEE fund, what is the precise aim of that, what are you looking to invest in?
We actually call it an empowerment fund because the interesting thing about this fund is that it empowers the white business owner as opposed to the black guy actually, or it is a joint empowerment if I can put it that way.
What makes this very special, is this is no get rich quick scheme or enrichment scheme as some people cynically call some of these schemes. This is about real empowerment because the black guy has to join the business fulltime and we would actually head hunt someone who will add value to the business.
So there is an assessment there usually is a need for an empowerment partner there is a need to have a skill in the business and we have headhunters who will find that exact person.
Ideally having to take some risk by giving up some corporate job and now entering the realm of real business, small business, which is tough business as a director as an executive and as a shareholder.
I did smile when I read that proviso because you have to be involved in the business fulltime because so many of the big BEE deals have got non-executive directors running around can?t make board meetings, can?t even fulfill the obligations of being part of a big business because they are stretched too far.
This is good to see that this is a proviso, we are running a little short of time Jo', but just to talk briefly about the tourism fund as well, it is supposedly the silver bullet for South Africa?s employment problems and you are looking to put more money in there as well.
A question I was asked today, have we not reached a plateau, we think not. Although we have done fantastically well in these years of democracy in pushing the tourism up. We think there is plenty of growth to go, obviously 2010 is not like a solution to things, but it is a target and anyone going for that market will have to sustain themselves beyond it and our fund will help in that it will help to build capacity and we look to the great tourism countries like France as example.
We believe we can do a lot in a really participative way, in other words not by just putting in money, that is not our way anyway. We invest capital skill and knowledge so we hope to add a lot of value to the tourism industry as a whole.
Jo' Schwenke, thank you very much for talking to us this evening interesting stuff indeed. He is the MD of Business Partners and over the last 25 years they have invested something like R7-billion and they are looking to almost double that within the next five years. Pretty ambitious stuff.