“IDF capital was started back in 2008 to contribute to solving the access to finance problems that black entrepreneurs, particularly black women entrepreneurs faced. It was started in response to the policy framework put in place by the government at the time. The policy framework encouraged businesses and government entities to open up their procurement supply chains to black entrepreneurs. Getting financing was a huge problem for black entrepreneurs because a typical financier would need you to have a track record, collateral, and a sophisticated business plan. Black entrepreneurs particularly black women entrepreneurs did not have prerequisite conditions such as collateral. This is because of historical laws that had seen to it that black people didn’t get to own and grow assets.
Though from a policy perspective South Africa was ready to correct this, black entrepreneurs could not take advantage in a meaningful way. When we got IDF capital off the ground, we placed our primary focus on women entrepreneurs because we noticed that though efforts to facilitate the mainstreaming of black businesses were being made, black women were still being left out. This is despite a market study that had been done by the department of trade and industry that showed that women made up the majority of self-employed people of small micro and medium-sized enterprises. We, therefore, made it our mission to focus on women-owned businesses.
At the start, we provided mostly debt instruments like loans because the market was not yet sophisticated enough for us to have a conversation about providing equity and shareholding. A lot of the businesses were also so small that it didn’t make sense for us to take part in ownership. We also had businesses that were just not scalable and could not be relied on to give decent returns. Things have changed over the last few years though. As the market has matured and black people have begun leaving their jobs and starting businesses, the conversation around equity has become much easier to have.
We now provide a good balance between pure debt instruments as well as early-stage equity financing. We have also tried to be very responsive to the market over the years. As of now we have been able to accelerate forty-four businesses and have funded twenty-four. We have also been able to fund both debt and equity of more than one-eighty businesses with the majority of them being women-owned. Our focus on women businesses received a big boost after we went into partnership with a Nigerian private equity firm also owned by a woman.
The partnership that came into being on the 11th of November, gave rise to the Alitheia-IDF fund. Our goal is to explore and support the potential of African female entrepreneurs across the regions. Our philosophy is to have a gender lens in our investment decisions. Alitheia-IDF will not just be satisfied with seeing female ownership of businesses; we will put the entire supply chain under the microscope. We will interrogate the supply chain on the supply side and also on the distribution side. We will seek to know if female suppliers are being patronised by the businesses we seek to invest in. We will also seek to identify ways to boost female representation in the supply chain so that we put even more money into women’s hands. We will look into the consumer goods of the businesses we invest in as well to determine if their products make women’s lives easier.
We want to attract regional partners as Alitheia-IDF. We are looking to scale into Zambia, Lesotho, and Zimbabwe in the SADC region, and Nigeria as well as Ghana in the ECOWAS region. We want to minimise risk by expanding into countries where we have similarities in language, laws, and also those nearby. This will provide a great opportunity for more intra-regional collaboration, to be able to unlock opportunity. We are looking to capitalise on already existing interactions between the two African powerhouses South Africa and Nigeria. We will also be looking at lesser economies such as Lesotho and Zimbabwe.
Success for this fund in the next five years will be having been able to invest in double the SMEs we have invested in now across the SADC and ECOWAS regions. We should also have been able to provide different types of financing products and business solutions for entrepreneurs.”
Full Interview will be published as part of AfricaLive Future of Finance Report