ANGLO FEATURE

A N G L O

A M E R I C A N

Z I M E L E

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legacy

A l as t i n g

Conceived long before Black Economic Empowerment (BEE) became fashionable, Anglo American Zimele has created numerous sustainable commercially viable enterprises and empowered entrepreneurs to operate in the mainstream economy of South Africa, as Ian Armitage discovers.

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Anglo American Zimele FEATURE

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he small and medium-sized business sector makes a vital contribution to the economy. It is often said that SMEs play a hugely important role and may even help to tackle budget deficits in places like the UK. Closer to home, in a country with a high unemployment rate - officially at 25.2 percent, but unofficially a lot higher - and with a high poverty factor, with a third of the population on social grants, the importance of small business development and job creation cannot be over-emphasised.

But just what is big business doing to help small business? Anglo American, one of the world’s largest mining companies, with 83,000 permanent employees in South Africa, is showing the way with its enterprise development fund, Anglo American Zimele.

“The current economic downturn and lack of job opportunities has further highlighted the importance of nurturing Small and Medium Enterprises (SMEs) as a means of bolstering this relatively underdeveloped sector of the South African economy,” says Nick van Rensburg, Anglo American Zimele, managing director. “Many entrepreneurs still find it hard to acquire the financing they need, as aspiring business owners in townships, peri-urban mining communities and rural-areas are not always considered bankable, owing to a lack of assets or equity.

Therefore, the risk profile for most of these entrepreneurs is much higher than someone who can pledge, for example, their house against a loan. Subsequently, they are at a major disadvantage.

“We bridge the gap by providing financial security to entrepreneurs that they otherwise would not have received,” continues van Rensburg. Zimele puts up money for start-up ventures and for the expansion of existing ones.

“The fund was not created as a reaction to empowerment legislation or the economic downturn, but was set up as part of the Group’s commitment to development in

South Africa, and it has evolved to where it is today over time,” says Lia Vangelatos, chief investment manager of Anglo American Zimele, who has been employed at Anglo American since 1979 and has filled various corporate finance, management accounting, treasury and business development positions.

Indeed, Zimele was established before it was certain South Africa would even make the transition to a democracy. The company had the foresight to decide that when SA did make a turn for the better, it would need a black entrepreneurial class to sustain economic growth.

“Zimele was developed as a way to foster economic growth by having big businesses help in developing small up-andcoming enterprises,” says Vangelatos.

The first route that Anglo American decided to take was by changing the nature of the companies that supplied it, through starting the Supply Chain Fund. Today the Anglo American Group’s procurement from blackempowered suppliers in South Africa stands at around 40 percent of discretionary spend.

“Over the past 21 years three more funds have been added, namely the Anglo American Khula Mining Fund, the Community Fund and the Olwazini Fund. Collectively, Zimele supports almost 800 businesses, which provide 12,950 jobs and collectively contribute billions to the economy,” says Vangelatos. “As we speak R397 million of Anglo American’s money has gone to support SMEs. It is not about corporate social responsibility anymore in terms of donating money. It is basically helping others to break the poverty barrier and linking them into your business.

They are no longer just suppliers or customers – they are part of you. You are building these businesses into your value chain and cost model. www.southafricamag.com

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Anglo American Zimele FEATURE

“Zimele is a success and its success, and successful evolution, can be attributed to its holistic incubator approach of combined funding with hands-on support, which, over a predetermined time, allows the investee company to ‘stand on its own feet’, and is essential to long-term economic development,” she continues.

“Over the years, Zimele has learnt valuable lessons, achieved successes and witnessed failures long before anyone followed suit, which makes Anglo American a leader in this field.”

Entrepreneurs wanting assistance can expect to get around-the-clock support in all areas related to business, from human resources to corporate governance, from occupational safety advice to basic managerial guidance, Vangelatos says. “This relationship that Zimele shares with its investee businesses means we have a good overview of the business and can advise on what necessary actions should be implemented to avoid pitfalls.”

Besides providing funding and assistance, when necessary, Zimele also takes a seat on the board and a minority holding in the businesses it gets involved with.

“In a situation where we are a member of the board we ensure that when we eventually exit a business, that it is sustainable and that a clear exit strategy is defined in all shareholder agreements with the investee firms,” explains Vangelatos.

Zimele’s performance is impressive by any measure. ”With a loan repayment rate of 90 percent, I believe that we have several advantages over other funding institutions when it comes to funding start-up businesses, even though we invest in those often considered unbankable.

“One major benefit is that we can move quickly if a project appeals to us and meets our evaluation criteria,” Vangelatos says.

“Unlike other funding institutions that have to go through several decision making levels and system processes to get approval, we 4

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need only two or three board members to approve funding.”

She says that the market has to realise that SMEs do need funding. “If an SME gets awarded a tender or if they win a contract they need working capital to be able to service that contract as they only get paid at the end on delivery.

“Once entrepreneurs’ businesses are up and running, other funding institutions are more willing to invest in them, owing to a steady cash flow,” she adds.

“The main goal of Zimele is to generate more jobs, support entrepreneurship and strengthen local economies in South Africa.

The commitment is proven through Anglo American’s pledge to Business Call to Action, a global initiative that challenges companies to tackle poverty and promote growth as part of the Millennium Development Goals.

“Our aim is to create 25,000 new jobs in up to 1,500 businesses over the next seven years.

To ensure that we reach that goal we will have established 12 new enterprise-development hubs in addition to the existing 12, in areas of high unemployment by end of December 2010,” she continues. “During difficult times, such as those that we have seen recently, it is tempting for companies to trim the sustainable development agenda, but this is not a responsible approach to operating and growing a business.”

While many companies are currently providing support with regards to SMEs, not many are providing adequate long-term support together with funding. Zimele is encouraging other companies to employ the same best practice model that it has used successfully to encourage the development of SMEs and ultimately the development of a prosperous South Africa.

“Zimele would be nowhere near as successful as it is if it were not for the people driving it,” Vangelatos concludes. END

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IF YOU CAN PUT RESPONSIBILITY OVER RISK AND RESPECT BEFORE REWARD. IF YOU CAN THINK FORWARD, BY LEARNING FROM THE PAST AND CAN KEEP TRUST ON THE SAME PEDESTAL AS PROFIT. IF YOU CAN ADMIRE FOUNDATIONS AS MUCH AS WHAT’S BUILT UPON THEM. IF YOU SEEK THE BIGGER PICTURE, BY EXAMINING EVERY DETAIL. IF YOU CAN DREAM BIG AND KEEP YOUR EGO SMALL. IF YOU HAVE THE COURAGE TO QUESTION WHAT YOU THINK IS NOT RIGHT, AND CHAMPION WHAT IS. THEN YOU UNDERSTAND WHAT IT TAKES TO WORK FOR ANGLO AMERICAN.

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Anglo American Zimele Ltd PO Box 61587 Marshalltown 2107 South Africa Telephone: +27 (0)11 638 4172 Fax: +27 (0)11 638 5321 Email: zimele@angloamerican.co.za

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