‘Building a humanised economy the way to go’
Courageous social investors needed to back people with tenacious drive, says expert
Practically implementing the concept of “business for good” is the basis for building a humanised economy – where economies serve communities and their people.
That is according to Transformational Business Network co-founder Dr Kim Tan, who said to build a humanising economy, the world needed a generation of courageous social investors to financially back people who may not have an MBA qualification, but rather possess a tenacious drive to develop sustainable communities.
Tan, who is from Malaysia, was speaking at Nelson Mandela University Business School in Port Elizabeth on Monday, where he presented the first of a series of masterclasses hosted by the institution.
He said the ideal could be achieved through social impact investing – a means of tackling social problems by finding businesspeople with creative and innovative ideas to come up with enterprise-based solutions.
Tan said when such investments were made, these businesses had to be profitable.
If not, they merely became charities.
Tan, who is an expert in social entrepreneurship and community transformation, is also the founding chair of Spring Hill Management Ltd (UK) – a fund management company in biotechnology and social venture capital investments.
“Until you have actually been in business, you don’t know how tough it is.
“Especially if it is a small business and you’re just starting up.
“And when you’re starting up a business that has some social benefits for the poor, it is even more challenging,” he said.
Transformational Business Network, which was founded in 2003, has grown into an international movement and leverages its network of more than 2,000 members across seven countries.
This enabled it to create more than 1,500 jobs, support 67 entrepreneurs to scale their businesses and unlock more than £55m (R880m) in investment.
Tan said a leading South African investment was Silulo Technologies, founded by Eastern Cape-born Luvuyo Rani.
“[Rani] was selling computers out of the back of his car and struggling to put food on the table for his family. But he had a big vision,” Tan said.
“[Transformational Business Network] mentors helped him develop a business plan and we provided a growth loan of £50,000 [R800,000].
“Today Silulo Technologies is highly profitable, with 39 outlets, which trains thousands of youth every year.”
But Tan said policy instability in SA had seen Transformational Business Network focus its investment initiatives in other developing countries.
“I’ve stopped investing in SA for the last six or seven years because I have not been happy with the kind of direction that the government has been taking and there are many other places where we can invest.
“You are now a middle-income economy country.
“And some funds just can’t invest in you anymore.
“You are really caught in a real mess, just as we are in Malaysia,” Tan said.
But one of the first funds Tan set up was Inqo and its first project was to build a safari game park, namely the Kuzuko Lodge, in the Greater Addo Elephant National Park.
“Everything that we do is intentionally geared towards stimulating the economy in the local area. And Inqo is [now] the largest private investor in that area.
“We need to be intentional about helping to bring change.
“We measure, among other things, the amount of income tax that is paid, because if a country doesn’t collect taxes, it is going to need aid,” he said.
Tips for investors in social impact projects
Here are some of Tan’s tips for investors looking to fund social impact projects that seek to develop economically sustainable communities – based on the investment model of Spring Hill Management Ltd.
● Businesses must meet your social impact mandate – provide basic goods and services for low income markets, create employment for marginalised groups, and benefits for low-income suppliers and producers in the value chain.
● The business’s management must be competent, have market awareness, have integrity in terms of its relationship with staff and stakeholders, and be modest.
“If you visit the business you are funding, and you find the guy is driving a fancy car, it’s better to walk away – because in the end you’ll find yourself funding a lifestyle,” Tan said.
● Understand the business’s potential for growth – the time and management needed to break even and then generate profit.
● Understand the specific social needs being addressed by the enterprise and what measurement metrics are required.