Cadiz Asset Management is one of three investment agents to put their money behind JP Morgan’s South African development programme for small and medium enterprises. The programme has seen an overall average increase of 43% in revenue of participating SME’s and a 19% increase in permanent employees over the first year.
JP Morgan’s Catalyst for Growth Programme (C4G), in which the group has invested $1million, has been running since 2012. According to John Coulter, head of JP Morgan in sub-Saharan Africa, the partnerships with JSE listed Cadiz; GroFin, an SME financier active in 12 countries with $320million in committed funds and funds under management; and Imprint Capital, a US advisory firm with $360million in assets under advisement will allow further scale to the programme.
Measured success of the 20 entrepreneurs on the programme includes an improvement in financial compliance from 50% to 80%, and better financial planning and budgeting.
Human resource development in the enterprises has improved with 85% of SMEs offering their employees formal training, as opposed to 45% before the intervention.
65% of SME’s have shown improvement in the speed with which they are able to collect receivables. On average the time to collect improved from 132 days to 38 days.
For SME’s participating in the programme this means easier access to investors, while the investors will have access to a pipeline of high-performing SME’s looking for finance. Transaction cost will be limited, because the necessary information will already have been collated by the business development support providers. Pavlo Phitidis’s Aurik and Allon Raiz’s Raizcorp have been contracted as service providers, after assessing 35 providers.
In the process JP Morgan has realised that while the SME support sector is well developed in the country, the quality of support varies significantly among service providers.
The organisation has decided to address this by developing a rating platform for service providers, based on the assessment of SME’s that have received support, explains Rafia Qureshi, Vice President Philanthropy for Europe, Middle East and Africa at JP Morgan. This will be the first of its kind in the world, she says and should be ready in a years’ time.
Titus Makoro, an experienced hospitality professional who established Destiny Cuisine in 2007, says if the intervention of Aurik as part of the C4G programme had come nine months later, his business would not have survived. “As an entrepreneur you enjoy what you do so much, that you don’t even realise that you are losing money.”
He says Aurik assisted him to unpack his business and understand it better. “I thought I had to grow the business by being out on the street, doing marketing. Now I know that I can manage it better and run a more profitable business by being in the office and exercising better controls.”
His stock inventory dropped by 40% on the same revenue once he realised that “money needs to be in the bank, rather than on the shelf” and overflowing shelves pose a bigger risk of theft.
He says as an entrepreneur one works extremely hard and expects others to do the same, even if it isn’t sustainable. “Before (the intervention) we used intimidation to manage staff. Now we know how to maintain human dignity while exercising proper controls.”