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Preferential procurement financing gives Ecsponent a leg up

BUSINESS LIVE / 29 NOVEMBER 2017 - 06:15 / HANNA ZIADY

Ecsponent’s Development Fund provides vendor financing and acts as a middleman in managing enterprise development

Black economic empowerment (BEE) codes and the National Credit Act, albeit well-intended pieces of legislation, are at odds when it comes to promoting procurement through black-owned businesses, says Terence Gregory, CEO of Ecsponent. Ecsponent invests in niche financial services businesses and manages preferential procurement for large companies.

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Black economic empowerment (BEE) codes and the National Credit Act, albeit well-intended pieces of legislation, are at odds when it comes to promoting procurement through black-owned businesses, says Terence Gregory, CEO of Ecsponent. Ecsponent invests in niche financial services businesses and manages preferential procurement for large companies.

In terms of the new BEE codes, a third of a business’s procurement spend was expected to be obtained through black-owned businesses, Gregory said on Tuesday. "On the other hand, you cannot lend to an individual who can’t pay you back, because that is reckless lending under the National Credit Act. So how do these chaps get any form of funding?"

Vendors that were unable to access funding or lacked the skills to procure goods cost-effectively could not access supply chains. "We see this as a tremendous opportunity."

The complexity of the BEE codes has spawned an industry that advises large companies on how to meet scorecards. The Ecsponent Development Fund provides vendor financing and acts as a middleman in managing enterprise development. For the six months to September, Ecsponent’s business credit unit, under which the fund falls, reported a 143% increase in operating profit to R205m on the previous comparable period.

The unit, which also lends to small and medium-sized businesses, accounted for 87% of the group’s total revenue of R154.6m for the period — up 41.9% on the prior period.

"We hold the hand of the PDI [previously disadvantaged individual] and take them through the entire process," Gregory said of the fund. This included registering the vendor for VAT and assisting in procuring goods, with the long-term goal of integrating the vendor into the supply chain, he said.

Ecsponent, which funded its operations primarily through JSE-listed preference share structures, had more than 1,000 vendors on its books but worked with about 50.

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LINK - https://www.businesslive.co.za/bd/companies/financial-services/2017-11-29-preferential-procurement-financing-gives-ecsponent-a-leg-up/

Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER

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