Financial sustainability remains critical for Kagiso Trust
Interview with Silindokuhle Chamane, Kagiso Trust Head of Finance:
How has Kagiso Trust managed to be self-sustainable after the 1994 funding from European Union and Japanese government was redirected?
Between 1986 and 1993 the European Union was Kagiso Trust’s (KT’s – Trust) largest funder, donating ZAR834 million in the early years. During that time, KT also managed to secure funds from the Japanese government with total donations of ZAR107.8 million.
The Canadian and Scandinavian aid agencies also made significant contributions. Between 1986 and 1990 the EU specified that its development aid was to be used for victims of apartheid, humanitarian efforts, training, education and legal assistance. With the dawn of South Africa’s democracy, funding from the international agencies was redirected to the newly elected democratic government.
From 1985 to 1994 our international donors had faith and trust in KT’s governance structures and ability to be accountable with ensuring that the funding was used for development work, KT continued to adhere to basic donor grant practices such as accounting and reporting on programmes and we recognised the importance of transparency and accountability. With time, the Trustees decided to no longer depend on donor funding but rather find alternative ways of being financially self-sustainable.
After 1994 KT’s directors and Trustees at the time, identified an opportunity to participate in Black Economic Empowerment deals, which were fast becoming a necessity for the predominantly untransformed business sector. Kagiso Trust Investments was founded with the objective of entering into BEE share ownership deals so that dividends received would finance KT’s development work in order to empower disadvantaged communities.
Why is Financial sustainability an integral part of KT’s strategy refresh moving the Trust into the next 30 years and what investments does KT have currently?
Our financial sustainability framework is intended on ensuring a continual balance between asset growth and programme spend, working towards achieving our vision of overcoming poverty. KT has different investments and we manage the investments by remaining diversified, ensuring our dividend inflow is also sustainable year-on-year, as well as managing our partnerships.
Our financial sustainability model looks at:
- Maximising returns
- Preference on low-risk investments
- Having a balanced portfolio of investments (high risk and low risk)
- Generating income that will fund our development programmes and operational expenses.
Some of our investments include Kagiso Asset Management, Andisa Capital, Kagiso Tiso Holdings, Open Learning Group, Tenfold Education and Kagiso Capital which is wholly owned by the Trust.
When choosing a BEE transaction or investment partner what are the fundamental attributes that you look for?
Being a development organisation working towards overcoming poverty, we are always guided by our founding principles and values which are integrity, accountability, passion for development, and hands-on bottom-up approach. We are always conscious of the type of investments that we want to align ourselves with and ensure that they adhere to the practice and principals of ethical investment.
What advice would you give to NGO’s on becoming financially self-sustainable?
It begins by having a long-term vision and putting plans into place to reach that vision. Some of the challenges that face NGO’s are governance and organisational structuring; understanding the compliance issues affecting them and the parameters which they should operate is critical.
Formalising monitoring and evaluation of projects and programmes will put NGO’s in good standing with donors by showing impact and return on investment.
Partnerships and collaborations with other NGO’s in the same or similar environment will open an exchange opportunity to leverage on resources, capacity and infrastructure.
Leveraging public participation and assistance through memberships, fundraising events, solicitation of donations, corporate social investments and the sale of goods and/or services is another alternative way of generating income.
It is also important to assess current budget expenditure by looking at:
- Core operational expenses
- Programme/project expenses
- Capital expenses
- Obtaining a range of types of funding, including unrestricted funds
- Building financial reserves
- Assessing and managing risks
- Strategically managing and financing overhead costs
KT is self-sustainable why do you need more partners and collaborators?
Our strategy going forward will focus on how we can deepen our development work as well as scale and replicate development models to maximise impact in the areas of socio-economic development, education development, institutional capacity building – local government support and civil society capacity building. To address the triple challenges of poverty, unemployment and inequality will need all sectors of society to collaborate.
KT works on a matched funding approach with like-minded partners, consequently, both KT and its partner/s are accountable and share a balanced risk. One example of this type of collaboration is one between KT (R100 million) and the Cyril Ramaphosa Foundation (formally known as the Shanduka Foundation, R100 million) where the Free State Department of Education has come on board and matched the collaboration with R200 million to implement the District Whole Schools Development Programme in the Motheo and Fezile Dabi districts in the Free State in over 340 schools.