| |
|
|
GreenMoney Journal - publishing since 1992
Fall 2010 issue
Socially Responsible Investing – Better Companies, Better Communities
|
| |
A Shared Interest in a New South Africa
by Donna Katzin
"Apartheid remains history. It will never be practiced again," remarks Isaac Khoza, Secretary and
Farm Manager of the Siboshwa cooperative in Tonga, South Africa. A wizened man in his 50's with a
contagious smile, Isaac has been an important leader of the coop since it was formed in 2004, when
he was elected farm manager by a secret ballot vote of the organization's 216 members.
For three years, the families have worked diligently to establish a sugar cane cooperative that
will support them, and create jobs and wealth for their children. They have recently planted their
first crop with the help of a bank loan partially guaranteed by Shared Interest, a U.S.
not-for-profit organization that puts its investors' money to work for change in South Africa.
The co-op's history is rooted in the country's past. The traditional community still
resides in South Africa's Nkomazi district (between Swaziland and Mozambique) to which it was
forcibly removed by apartheid authorities in 1954. When Isaac was a small child, he and
approximately 300 other members of his community were taken from the land they had inhabited for
generations. They were "dropped" far away on damp ground, where they spent their first rainy night
with no shelter of any kind. Slowly they built homes and developed survival techniques as a South
African "homeland."
While some families raised fruits, vegetables and a bit of maize,
the community-like so many others-has struggled with extreme poverty for more than half a century.
Some members were able to find jobs at the local sugar mill or as informal traders in town, but the
majority has been forced to export men to the province's mines or factories in Pretoria and
Johannesburg, or to rely on pensions. The local economy has remained completely stagnant.
In 2003, South Africa's democratic government installed water pipes and issued a R7.5 million
grant to the community. The next year, the community formed the cooperative and developed a plan to
cultivate sugarcane commercially. With a guarantee from Shared Interest, the cooperative received a
bank loan for working capital, and began planting cane.
Without the guarantee and
technical support the cooperative would not have gotten a loan. Lacking traditional collateral, a
credit history, and the profile of wealth and whiteness that still enhances access to capital in
South Africa, Siboshwa would have suffered the same fate as most of the country's other black
cooperatives and rural businesses.
The community has also struggled to build its own
technical capacity. "We don't get tired of pushing. We push until we succeed," declares Isaac.
Although Isaac's family did subsistence farming when he was young, he had to leave the destitute
area to support his five children. He spent 28 years working in a Johannesburg chemical factory,
returning once a month to see his family. A trusted community leader, Isaac is still learning how
to run a farm, with agricultural training from the National Development Agency and TechnoServe. He
enthusiastically envisions the project becoming profitable within three to five years. "It will be
completed and we will know where we are," he says. "Then we will be having enough money to support
our families."
Today's Challenges
The social investment
community has joined South Africa in its transformation from apartheid to democracy. This is no
small task, given that when majority rule prevailed in South Africa, only political power changed
hands. Economic power did not. Or, as a South African street vendor put it at the time, "political
freedom without economic freedom is not freedom." At that time, nearly 60 percent of the nation
lived in poverty, only three percent of the country's arable land was held by blacks, and four of
every five South Africans (primarily blacks, who were barred by apartheid from owning or operating
businesses outside designated and impoverished areas) had no access to bank services of any kind.
U.S. individual and institutional investors, many of whom participated in campaigns
ranging from corporate dialogues to divestment during the 1980's and early 1990's, began to seek
ways to reinvest in South Africa's most marginalized communities. In 1994, shortly after the
country elected Nelson Mandela as President, Shared Interest was launched to mobilize resources for
economically disenfranchised communities to sustain themselves and build an equitable nation. The
organization has three major objectives: - To provide access to credit for low-income and
low-wealth communities of color;
- To strengthen the country's community
development financial institutions (CDFIs); and
- To move South Africa's mainstream
financial institutions to lend to the communities they previously considered "unbankable."
Today Shared Interest has built a fund of more than $11 million - a number it is looking to
double the next five years. Eager not to create a "debt trap" by making loans in dollars to be
repaid by entrepreneurs earning in rand, the organization chose not to lend directly to South
Africa. Instead Shared Interest has chosen to use guarantees and technical assistance to mobilize
the country's own tremendous wealth, and channel it to low-income communities.
To move
the banks to lend to these new borrowers, Shared Interest issues letters of credit, backed by its
fund, that provide the security that banks require and CDFIs and cooperatives most often lack when
they seek credit. These institutions, in turn, provide both loans and technical assistance to
low-income individuals to launch small and micro-enterprises, and to build and improve affordable
homes. Should South African borrowers fail to repay, Shared Interest covers part of the bank's
losses. Over time, the banks come to recognize the CDFIs, cooperatives, and ultimately their
beneficiaries as clients worthy of consideration - and credit.
In 1996, recognizing that
the job could not be done from the U.S. alone, Shared Interest helped to create the Thembani
International Guarantee Fund, which is its not-for-profit partner in South Africa. Thembani
identifies the CDFIs and potential bank lenders, and provides the technical assistance both parties
require to learn to work with each other. It helps to structure the loan agreements, with the help
of Shared Interest's guarantees, and monitors the ongoing risk of the projects once the loans are
issued. Thembani's quarterly risk ratings enable Shared Interest to set aside sufficient reserves
to cover possible calls on any of its outstanding guarantees.
Today Shared Interest's
guarantees continue to unlock credit for micro-finance institutions, enabling thousands of
low-income women in remote rural areas to start businesses, create jobs and build housing - as well
as enabling a growing range of cooperatives and rural community businesses that produce pigs,
chickens, trout, sugarcane, dried fruits and vegetables, and mushrooms.
Results
To date, Shared Interest has helped low-income South Africans
create more than 50,000 new businesses, 160,000 jobs and 65,000 affordable homes. As South African
banks have experienced the pressure of the country's Financial Sector Charter, they have
increasingly turned to Thembani for assistance. In December 2005, Thembani signed a memorandum of
understanding with South Africa's largest bank, ABSA, to guarantee loans that met Thembani's and
Shared Interest's performance and impact requirements. This agreement has enabled Thembani to
accelerate its guarantee placement. In the past 12 months, Shared Interest has benefited more
people than during the previous 12 years. As of December 2006, the number of beneficiaries (75
percent of them women) had risen to 975,000 low-income black South Africans.
Investors are
also pleased. For every $1 that Shared Interest has placed in guarantees, more than $10 has been
lent to low-income South Africans. To date, no investor has lost interest or principal.
The demand for Shared Interest's guarantees and Thembani's technical assistance continues to
escalate. It is fueled by the government's restoration of land to communities uprooted during
apartheid, encouragement of cooperatives like Siboshwa, and support for small and micro-enterprise
development. Its primary driver, however, is the initiative and sheer determination of South
Africa's majority population seeking to make a daily reality of the economic and social rights
enshrined in the nation's constitution.
"Opportunities Have Come To Us"
The results and potential of this work are most vividly portrayed - not by numbers - but
by accounts of beneficiaries like Pildah Modjadji, in Mpumalanga Province between Johannesburg and
Mozambique. Mrs. Modjaji is one of the directors of Diretsogetse Pankop (Pty) Ltd. (Named by the
community's youth, Diretsogetse means "opportunities have come to us.") She says, "My grandchildren
tell me you must build an office. This house is not big enough! When I go home now there will be a
message someone has left under my avocado tree. Other communities want to know how we got started."
The mother of eight children and grandmother of 11, Mrs. Modjadji is one of the
community's most dynamic organizers. She worked with her neighbors to launch the Pankop Women
Farmers Forum in collaboration with the tribal chiefs and the councilors and executive of the
municipality. Their primary objective was helping the community's youth by alleviating poverty and
creating job opportunities. Mrs. Modjadji explains, "It is so pathetic to look at a young person,
and see someone so brilliant not working."
In 2003, the community recognized that the
government grant had generated fewer jobs for their youth than they had expected. Together they
explored the possibility of supplementing their incomes and diets, and paying for school and
electricity fees by raising fruit. Since some families had no such previous experience, Mrs.
Modjadji and her sister organizers began to speak to their neighbors. "We are teaching them that
the richness comes from the soil," she says. To date they have organized 300 out of the community's
2,400 families to participate in the project.
The women then joined forces with the Tribal
Council to launch a holding company, the Diretsogetse Pankop Fruit Holding (Pty) Ltd., with two
related sister subsidiaries. One is organizing 100 of the 300 participating families to plant fruit
trees in their yards, and to grow paprika in "net houses" they have constructed to filter water and
light. The second group is expanding and will operate a fruit and vegetable processing plant to
dehydrate the fruit and vegetables produced for local and overseas markets. Shared Interest has
assisted the project by providing two guarantees - one for working capital to plant the paprika
crop, the other to expand the processing plant facilities. Thembani has worked closely with the
community to engineer the financing and insure that the proper technical assistance is in place.
"Now we are seeing the light at the end of the tunnel," concludes Mrs. Modjadji. "When God
calls me, I will know that I have helped the young people of this community to eat and drink and
dress and receive an education."
In today's South Africa, Diretsogetse is one of many
innovative and successful initiatives based on a shared interest.
Article by Donna Katzin,
executive director of Shared Interest. For more information go to http://www.sharedinterest.org
|
|
|
Home | Archives
| Sponsors |
Links | Calendar
| Contact Us |
Advertising
| SRI News
MISSION
STATEMENT
The GreenMoney Journal encour-ages and promotes the awareness of socially
& environmentally responsible business, investing and consumer
resources in publications & online.
Our goal is to educate and empower individuals and businesses to make
informed financial decisions through aligning their personal, corporate
and financial principles.
“Responsibility from the Supermarket to the Stockmarket.”
The material presented in this news letter is for educational and
informa-tional purposes only. The GreenMoney Journal does not endorse
or recommend firms, products, funds or advertisers.
GreenMoney is a registered trademark.
Copyright 1995-2010 by the
GreenMoneyJournal ®
Green Money is a Registrated Trademark
of The GreenMoney Journal / Cliff Feigenbaum
|
|
|
|
