Many years ago Bill Venter, the former patron of Altron, said former President Nelson Mandela frequently phoned prominent entrepreneurs during the late 1990s and asked them to build schools, hospitals and other infrastructure in rural and needy areas.
Apparently, Mandela said the CEOs and their companies owed it to South Africa to contribute more than just tax revenue. Venter noted that even though most CEOs hated these calls and saw it as a form of “goodwill tax”, very few said no.
Unfortunately, during the past two decades and especially the last one, the relationship between the various presidents and top business leaders has deteriorated to such an extent that very few CEOs would commit to financing the construction of public infrastructure. Corruption and state capture have killed much of the magnanimity.
Within this context, when it became evident that Covid-19 will shut thousands of businesses down, the reaction of many of the top entrepreneurial families in the country proves that significant benevolence towards South Africa remains.
These families included the Rupert, Oppenheimer and Motsepe families, while several other corporates such as Naspers and Sanlam also contributed royally to fund the fight against the virus.
Most of the decisions to donate funds to assist SMEs were taken less than two weeks ago, without any predetermined and conceptualised processes and procedures. This delayed information flowing through to SMEs in some cases led to the misinterpretation of the assistance structures.
Moneyweb published an article this week which suggested that the R1-billion donation from the Rupert family was a loan and not a donation. This conclusion, which was not accurate, resulted in significant and unjustified criticism of the family on various media platforms.
The actual structure of the donation is quite simple. It sets out to establish a new financing vehicle that will assist not only many South African SMEs to survive the Covid-19 crisis, but also similar disasters in the future.
Neither the Rupert family nor any of their operations will benefit financially from this new structure.
The R1-billion donation will be housed in an independent trust which Business Partners will administer for free.
Business Partners is one of the country’s long-standing SME financing institutions and was founded by the Rupert family in 1981. It is one of few SA institutions that can establish the administrative infrastructure to allow for the vetting and identification of deserving SMEs and to initiate payouts in such a short period.
The loans will be interest-free for 12-months and recipients will not have any repayment obligations during this period. After 12 months, the loan will become repayable and will incur interest at the prime rate. In essence, the R1 billion is emergency bridging finance for SMEs at considerably less draconian terms and interest rates than typical bridging finance institutions would demand from such businesses.
The objective is to allow SMEs to survive during their darkest Covid-19 hour, but when they are back on their feet, to repay the loans. These repayments will flow back into the trust and will be available to assist other SMEs facing similar challenges in the future. The donation will most definitely make a significant positive contribution to South Africa.
Moneyweb and I apologise to the Rupert family for the embarrassment caused.