A loan of R23.3 million from the National Empowerment Fund (NEF) has helped an Eastern Cape businessman realise his dream of building a rural town’s first shopping centre.
An added bonus to building the mall was the 115 people employed in the process.
Sibongile Mdyesha says the idea behind Willowvale Shopping Centre developed when he thought about the people who had to travel to a different town to do basic things such as banking and buying food. Willowvale is situated about 30km from Idutywa and 80km from Butterworth.
“The area needed a facelift. There was poverty, unemployment, a lack of development, no infrastructure and the people here were dependent on other towns so I decided to close the gap,” says Mdyesha.
Mdyesha is co-owner of Mdyesha General Trading, along with his siblings Lwazi Mdyesha, Vuyolwethu Mdyesha, Notemba Mqingwana and Nonyameko Mbiko. They decided to invest a piece of land owned by the business for the shopping centre.
However, despite investing in the land and about R800 000, the siblings still came up short and realised they needed funding.
“We did a feasibility study, costing, business plan, drawings and plans that needed approval by the municipality and we also approached potential tenants.
“Once we had working papers we went to the banks but we were denied funding because the return on investment wanted by the banks was too high.
“We can only charge a certain amount of rent because our tenants are not wealthy people and could not meet those high returns,” says Mdyesha.
He then heard about the NEF, which seeks to assist black businesses with both financial and non-financial support, from another business owner and set up a meeting with it.
During the meeting Mdyesha did a presentation on his business and his plans for the shopping centre.
“I then filled in forms and the NEF sent a team to do a due diligence on the land and three months after applying we were notified that our loan was approved,” says Mdyesha. Besides the R23.3 million loan, the NEF also bought shares valued at R6.6 million in the shopping centre.
Mdyesha says the reason for the NEF’s investment was because the business would not have been able to pay back a higher loan amount.
“After 10 years we will have the right of first refusal. If it had not been for the NEF it would probably have taken us longer to get the money because banks want sureties and guarantees,” he adds.
Mdyesha says the shopping centre opened its doors in October 2013 and its tenants include big retailers such as Pick n Pay and Boxer Super stores, a bank and clothing store.
According to Emmanuel Mohlamme, communications manager at the NEF, the transaction was approved in August 2012 and construction began in December 2012.
“The loan horizon is 10 years and was granted on normal commercial terms,” says Mohlamme.
Since 2004, the NEF has approved funding for 500 black businesses amounting to more than R5 billion and as a result created more than 44 000 jobs.
At least 21 per cent of businesses funded are owned and managed by women.
As a result of poor business plans and lack of understanding of financials by business owners, the NEF has launched a free, comprehensive online business plan tool available on its website www.nefbusinessplanner.co.za or www.nefcorp.co.za
Business owners who apply for funding from the NEF must meet the minimum criteria available on the website.
The tool is designed to help applicants improve and refine the quality of their business plans, including financial projections, through a step-by-step question and answer process.
Article first appeared in Small Business Connect.