Thabo Thamane, Chief Executive Officer of Citizen Entrepreneurial Development Agency (CEDA) was quick to make it known that in the past 15 years the agency has been in existence it has funded businesses to the tune of P4.5 billion but asked how much the agency has received in return; the response was open to more than one interpretation. Thamane was speaking to journalists last week Tuesday in his update of CEDA.
According to Thamane the amount used so far, being P4.5 billion, has resulted in 6000 businesses coming to the market from which 57 000 jobs were created. It is common knowledge however that not all businesses started will survive, in fact it is said that about 80 percent of start-ups fail within the first five years. Using this 80 percent failure rate, it can be assumed that to date from the 6000 businesses that CEDA has funded 4800 of them have collapsed. It means from this speculative figure that roughly 1200 businesses are still operating. From this basis, it could also be deduced that CEDA’s return on the P4.5 billion it ploughed on businesses would be a far less amount if it were to be expressed. This numerical measure of performance is referred to as the return on investment (ROI) which is typically expressed as a percentage or ratio on the amount of return on a venture against its cost.
It would appear in the case of the Citizen Entrepreneurial Development Agency (CEDA) that such a numerical measure does not come readily available, at least from the response Thamane gave this publication. “We can’t give it as a mathematical figure,” he said. He reasoned that CEDA considers ROI from a broader view hence is expressed in various forms. He mentioned four things which the Agency regards ROI which are 1. Employment created 2. The amount of tax paid by the businesses 3. The value additions to the economy and 4. The amount of collections by the Agency from loan repayments.
Out of the P4.5 billion used to date, P600 million of it funded youth businesses and established 1000 businesses. The bulk of this money, Thamane said, was put in Agricultural projects which took up P326 million mainly through the Young Farmers’ Fund (YFF). Property and Manufacturing projects made away with P71 million and the Services industry projects received P187 million.
Thamane also said that almost 70 percent of enterprises the Agency has funded are startups, 60 percent of which operate from outside the urban areas. When asked how the Agency assists in growing the enterprises from startups to a mature state in which they can stand on their own, Thamane responded saying that they use the approach of co-funding. That is, the Agency attracts other lenders to an entrepreneur’s portfolio so as to strengthen funding assistance. He added that funding assistance is not is not restricted to any specific number of times an entrepreneur can access it.
CEDA as a Development Finance Institution (DFI) funds businesses in the same way commercial banks do but what sets CEDA apart is the motivation behind its funding. Development financing, which is what CEDA is involved in, is based on availing funds to ventures with the highest potential to transform lives. It is therefore important, from that perspective, for the Agency to make collections from the money funded to businesses so as to continue the cycle of lending. According to Thamane CEDA’s collection rates were 90 percent, 94 percent and 105 percent in 2014/15, 2015/16 and 2016/17 respectively. He expressed that the collection rates are consistent with CEDA’s mission initiated in 2011 to work towards the ‘path to sustainability.’ He said that the Agency has achieved self-sustainability in terms of its operations, citing that the money disbursed by government to CEDA is used strictly to fund projects.