A case study of African Foresight

CONTENTS

INTRODUCTION4

FUNDING7

KTI12

DEVELOPMENT16

KT’s LEADERsHIP

26

LOOKING TO THE FUTURE

30

wHAT CAN bE LEARNED

31APPENDIx 1

38

APPENDIx 343

APPENDIx 238

APPENDIx 4a44

APPENDIx 4b46

APPENDIx 546

APPENDIx 648

APPENDIx 750

APPENDIx 851

APPENDIx 952

APPENDIx 1052

REFERENCEs53

5

For the past 30 years, Kagiso Trust (KT) has worked to achieve a society which offers liberty, justice and freedom from poverty. Starting out in 1985 as an anti-apartheid resistance organisation, its aim then was to support the anti-apartheid movement by empowering black people to fend for themselves and stand up against the apartheid regime. With the advent of democracy in 1994, KT’s role could have ended there. But it did not. KT’s trustees and directors realized that although the struggle against apartheid had been won, the struggle against its effects would take longer. As a consequence, there would be a need for strong, professional, development organisations to continue this struggle.

And so, starting as early as the late 1980s, KT began to transform itself from an apartheid resistance organi-sation into a professional development organisation. Today (2015), it is a sus-tainable black-owned, black-managed entity, and it is sharing the expertise that it has gained over the years with other development organisations, seeking to make a sustainable impact in South Africa and beyond.

KT sees its unique strengths to be its ability to relate to ordinary people, coupled with its experience in facilitat-ing sustainable development. Even though not expressed in these terms when it was founded, the organisa-tion’s current philosophy of integrity, accountability, a passion for develop- ment and adopting a hands-on, bottom-up approach, have been its guiding principles since the outset.

This study aims to tell the KT story, from its inception as a vehicle to disperse money from the European Union’s (EU’s) Special Fund for the victims of apartheid, to the present day. It will detail how the organisation has changed as its environment has changed, how its development philos-ophy has evolved, and how the forma-tion of Kagiso Trust Investments (KTI)

provided a fundamental shift that set KT on a path to self-sustainability.

The study was conducted by research-ers from the Wits Business School (WBS) Case Centre in conjunction with WBS academics with speciali-sations in the areas of leadership, organisational design and develop- ment, finance and development studies. KT’s brief was that the case study should examine the history, development and evolution of the organisation as it has sought to become a professional, development organisation that makes a sustainable impact in uplifting the lives of the poor in South Africa.

Of specific reference was the fact that KT has spanned two contradictory periods, ruthless racial discrimination on the one hand and an evolving democracy trying to dislodge itself of racial baggage on the other. The intention is for the case to examine KT’s role in improving the lives of the poor in both the pre-democracy and post-democracy eras, and how the organisation has evolved strategically to remain relevant as the socio-political landscape has changed.

The case draws on information obtained from a wide range of docu-ments, and, most importantly, from interviews with 25 people who have been associated with KT over the years: trustees, directors, employees and beneficiaries (see Appendix 1 for a list of interviewees). The researchers conducted semi-structured interviews with the interviewees, using question- naires that had been drawn up in conjunction with the WBS academic experts. The interviews were all conducted in 2014.

The result is a case study which is divided into six sections dealing with different aspects of KT’s history: KT’s early years, KT’s funding, the story of Kagiso Trust Investments (KTI), KT’s development activities, and KT’s leadership and organisational development. This is followed by an analysis of KT from the perspec-tives of leadership and organisational development, financial management and approach to development, in an attempt to understand why KT has been successful over the years and what the organisation itself and others can learn from its experiences.

KT came into being at a time when the struggle against apartheid was intensifying dramatically. A State of Emergency had been declared in the Western Cape in July 1985 and lifted in March 1986. Then a nationwide state of emergency was declared in June 1986 and only lifted again in June 1990. Peaceful protests became running battles between the police and protestors. Townships throughout the country were in a state of turmoil, as Caspirs patrolled and political factions battled against each other. The press was being censored. There was growing international pressure against the apartheid government and sanctions were starting to make an impact.

Thami Mazwai, a consultant to KT and a former Business Editor of The Sowetan, notes that life in South Africa was tough, particularly in the townships. “What worsened the situation was the political rivalry amongst the various political strengths in the townships,” he says. “There were the com-tsotsis (comrade tsotsis) who were thugs. Then there was the second dimension of the response by government which infiltrated the liberation movement; the result of which was the emergence of Inkatha as a political force. The third dimen-sion was the political rivalry between the Africanist BCM and Charterist (UDF) groups, while the fourth dimen-sion was the usual hostility between the government forces and the demo-cratic forces on the ground.”

When KT began its development work in 1985, it was as a vehicle to promote the struggle against apartheid. Eric Molobi, who served KT in various

capacities from KT’s inception until his death in 2006, recalled in Reflections: Kagiso Trust – A Twenty Year History that when KT was formed, there had been at least 10 years of concerted resistance to apartheid. “Many of us had been forged in the struggles of Soweto 1976,” he wrote. “The 1980’s was a period of intense struggle in which the watchwords of ‘isolation’ and ‘ungovernability’ formed an essential part of our vernacular to bring down the apartheid regime.”

It was in this context that Archbishop Desmond Tutu, Dr Beyers Naudé, Rev Frank Chikane, Rev Allan Boesak, Dr Max Coleman, Molobi and other political leaders were trying to per- suade the EU (the European comm- unity at the time) to impose complete sanctions on South Africa. These men had been drawn together in the struggle against apartheid under the umbrella of the United Democratic Front (UDF). (Appendix 2 contains profiles of many of those involved as founders, patrons, trustees and directors of KT over the years.)

However, persuading the EU was a difficult task because the EU was wary of taking any action that, in its view, would come at an unacceptably high cost to the very people whom sanctions were intended to benefit. This position gave the EU a certain lack of credibility among the members of the resistance movement in South Africa, and led to mutual suspicion between the two groups.

In the end, to the great disappointment of the South African delegation, the EU agreed in 1985 to impose only partial sanctions on South

INTRODUCTION THE EARLY YEARS: FURTHERING THE ANTI-APARTHEID STRUGGLE

Africa. It also decided, through its Special Programme for the victims of apartheid, to support projects that promoted non-racialism and capacity development among those disadvantaged by apartheid. The EU indicated that it wanted to allocate development funds using three channels: the South African Council of Churches (SACC), the South African Catholic Bishops Conference and a third, secular channel.

Thus on 10 July 1986, the Kagiso Trust was formally established, with the intention that it would be the secular channel which the EU required. In 1986 the EU sent KT an initial sum of ECU 5 million (R10 million). It was used to fund 30 projects. Thus, with its first two staff members, CEO Achmat Dangor and project officer, Peta Qubeka, KT started its work from offices in Von Wielligh Street, opposite the Carlton Centre in the Johannesburg city centre. The Trust’s founding trustees were Rev Boesak, Coleman, Rev Chikane, Prof Jakes Gerwel, Father Smangaliso Mkhatshwa, Molobi, Yunus Mohamed, Dr Naudé, Dr Abe Nkomo and Archbishop Emeritus Desmond Tutu.

Mkhatshwa recalled in 2001, “It was a very exciting time because the struggle for freedom had begun. But repression also became very severe indeed.” The Trust and those associ-ated with it had to withstand strong opposition from the apartheid gov-ernment. Molobi was detained under Regulation 3 of the Internal Security Act in 1987. Archbishop Tutu, Moham-med, Molobi, Rev Chikane, Father Mkhatshwa and Dr Nkomo continued

4

6

Although the EU was KT’s largest single funder in the early years, donating R834m between 1986 and 1993, KT also managed to secure funds from elsewhere. Thus, between 1987 and 1997, the Japanese government was KT’s second largest donor, with total donations of R107.8 million. Canadian and Scandinavian aid agencies also made significant contributions to KT. To cover its staff and other administrative costs, KT took a management fee of between 5% and 7% of donors’ funding.

EU development funding came in three phases. The first was under the Special Programme for the victims of apartheid. Then, after 1990, the EU dissolved this programme and provided funding through the Special Programme for South Africa. After 1994, funding came via the European Reconstruction and Development Programme (ERPD).

Between 1986 and 1990, the EU specified that its development aid to South Africa was to be used for humanitarian and social initiatives, training and education, and legal assistance. Dangor notes that during that formative period, KT found ways of supporting community-based initiatives in ways that laid the foundation for the transition from “opposition to empowerment” which would be needed to overcome the legacy of apartheid. He says that this approach became the norm among progressive funding organisations, both local and international, and anticipated a change in approach by the EU. In 1991, when the EU’s Special Programme for South Africa came into effect, the EU altered its funding mandate, saying that it wanted to assist projects that would foster the “transition to a democratic and prosperous South Africa by integrating development objectives and supporting disadvantaged communities”.

The lack of trust that had characterised the relationship between KT’s founders and the EU characterised the relationship throughout. There was tension between the two organisations from the start because many of the EU’s members did not want KT to give direct support to the apartheid resistance movement itself, but rather to victims of apartheid and to poverty alleviation. The conflict between the two organisations came to a head in 1988, at a meeting which KT would later refer to as ‘Black Friday’.

Horst Kleinschmidt, (who was head of the International Aid and Defence Fund for Southern Africaa in London at the time, but whose relationship with KT and its

FUNDING: PRUDENCE AND INNOVATION WORKING TOGETHER

a The International Aid and Defence Fund for Southern Africa was established by Canon Collins of St Paul’s Cathedral in London to assist families of political activists while they were in prison and to help with legal fees for defense during political trials.

to be detained and/or harassed be-cause of their involvement in KT and their other political activities. Despite the fact that Dr Naudé’s banning order had been lifted, he still received some unwelcome attention from the security police. Coleman believes this was be-cause Dr Naudé worked so tirelessly for the Trust.

The advent of democracy brought about a new era. Government op-position ceased. Co-operation with government became possible. In fact, a number of KT’s early trustees went to work for the new government. South Africa, as a country, entered a new period of optimism, unity and eco- nomic growth under the first demo-cratic government, to be replaced more recently by a more pervasive sense of disunity, anger at lack of service delivery and slower economic growth. In all of this, the need for professional development work has remained. KT’s story in this environ-ment has been a function of three main factors: how it has managed to secure funding for its development work; how its philosophy on how to conduct its development work has evolved; and how its leaders have steered the organisation through the changing times.

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founders extends to the early 1980s) recalls the meeting. Wim Blonk, the director general of development at the EU, had tried to tell Archbishop Tutu and Molobi how the money should be spent, he says, continuing, “Eric told Blonk that the EU could get lost and take their money, and said KT would not be dictated to as to how it spent the money to help victims of the apartheid regime. The next day there was a flurry of Italian and German diplomats who came to soothe the Arch [Tutu] and Eric’s sensibilities and assure them that there would be no more interference on this matter from the EU.”

KT nevertheless still had to adhere to basic donor grant practices, such as accounting and reporting on the projects. Recognising the importance of doing so for its reputation and, therefore, for its continued ability to raise donor funding, KT made sure to do this as best it could. Nontando

Mthethwa, KT’s current corporate affairs manager, comments that early on in its history, KT realized the importance of “monetizing goodwill”: that is, that the organisation’s success was founded on its reputation, and that it had to make sure that it and all its beneficiaries could not be accused of spending money other than in ways agreed with the donors.

The relationship between the EU and KT remained troubled, however, and Kleinschmidt often had to fly from London to Brussels to mediate. “Our agendas were quite mixed: on the one hand we were negotiating with the very conservative establishment and on the other we were involved in what we called ‘internal reconstruction’. There were complete breakdowns”, he says. “And then there would be some repair work done at night and we would try again. And then three months later it would start all over again. They would always say:

‘You’ve got to write all these reports’, and inevitably in South Africa in the eighties, that turned out to be not very do-able.”

KT’s outgoing CEO, Kgotso Schoeman, who joined KT in 1994 as a programme manager, believes that the organisation’s willingness to stand up to the EU – even though it was KT’s main source of funding – indicated the independent thinking of the trustees and management even then. “Although KT was reliant on donor-funding, we knew you can negotiate. You don’t have to accept anything from whoever feeds you” he says.

In the end, however, the success of the Special Programme for the victims of apartheid exceeded the EU’s expectations, and its impact far surpassed the EU’s actual financial contribution.

Although the EU continued using KT as a conduit for funding until 1994, in 1990, when Nelson Mandela was released from prison and the ANC was unbanned, the EU gave notice that it would redirect its funding to the new democratic government when it was elected. At the time, the trustees and management of KT came to the conclusion that the organisation should never again be in a position of dependence on one main donor. Nkululeko Sowazi (who joined KT as a project officer in 1992 and is now the chairman of Kagiso Tiso Holdings (KTH) recalls: “As it came towards 1994, it was clear there was going to be a shift of resources from those governments which were supportive

of entities such as KT to a legitimate and democratic government. We had to think of ways to continue the work of the Trust.”

The Trust was presented with three options: close shop, merge with the Independent Development Trust (IDT), or find alternative, sustainable sources of funding. KT’s directors and trustees saw an opportunity to take advantage of the fact that black economic empowerment (BEE) deals were fast becoming a necessity for the predominantly white-owned business sector, and chose the latter. They decided to launch Kagiso Trust Investments (KTI), in the hope that KTI would be able to enter into BEE

share ownership deals and, in time, provide dividend funding that would finance KT’s development work. Rev Chikane believes the success of KT resides firstly in the way with which it dealt with the crisis of apartheid and how it helped its victims, and secondly in how it creatively managed to survive when funding was withdrawn. “I always give credit to Eric Molobi for that,” he says.

Still, forming KTI necessitated a paradigm shift on the part of some of the trustees. Archbishop Tutu later told Schoeman that, because he held to a socialist ideology at the time and was suspicious of capitalism, he had agreed only reluctantly.

A WATERSHED

It was not only trustees whom KT had to persuade. It was also potential funders. Molobi and Sowazi travelled around the world trying to raise money for the idea of an investment trust. They saw many people who wanted to assist with development in South Africa. But the idea of an endowment met with little success. Sowazi thinks that the idea was ahead of its time. “We wanted to form a Ford Foundation, or a Kellogg Foundation. We had an idea of forming an African philanthropic institution that was not reliant on hand-outs and donations. But people were not happy to put money into a pot from which an investment return could be generated in order to sustain an organisation,” he says.

Help came in the form of Lauretta Bruno, an investment banker from JP Morgan in New York. She had been introduced to Molobi by civil rights lawyer and anti-apartheid activist, Judge Jan Steyn. Since the release of Mandela, Bruno had visited South Africa often for business purposes. During one visit in 1993 she brought a JP Morgan client to meet Molobi. While they were chatting, Molobi asked Bruno whether JP Morgan would give KTI a loan of US$ 5 million (R17 million at the time) to help with the launch of KTI and an investment in an empowerment deal in African Life Assurance. African Life was being sold off by Anglo American in what was hailed as the first big BEE deal on

the Johannesburg Stock Exchange. She tried to deflect him because she did not want to talk about business with one client in front of another. “But Eric insisted on talking about it. He said he needed to borrow the money and that he had been everywhere else, in South Africa and abroad and that everyone had turned him down,” Bruno remembers. “He said he did not want to take money away from the bursaries’ budget for the empowerment deal.

“In the end, because of Eric’s impeccable reputation and the fact that he would not take no for an answer, we called in a loan from one of our other clients, a bank whose loan we were going to reschedule, and gave it to KTI at the minimum pricing we had committed to in the reschedule. We believed in him and wanted to help out. It was great for JP Morgan because banks almost never pay back their loans, hence the rescheduling,” Bruno explains.

KTI was launched with loan funding of R26 million from JP Morgan and KT, and later with R50 million each from Liberty Life and Nedcor Investment Bank.

Schoeman says there was a deep concern on the part of trustees, particularly Archbishop Tutu, that in chasing self-sustainability, KT would be tempted to chase profit and there-

fore lose focus on development. Thus, to ensure that the new invest-ment company stayed true to its development agenda, there was a deliberate cross-over between the two organisations, with KT trustees serving as board members on KTI. Fani Titi (one of KTI’s first directors) explains, “The trustees felt they needed to somehow make sure that the business entity did not run away and suddenly get into things that would embarrass the Trust. So a number of the original board members of KTI were trustees of KT. Thus, from the beginning the values were ingrained in KTI. We needed to make sure that the patrons of the Trust – the likes of Archbishop Tutu and Dr Naudé, were happy. In the beginning, therefore, there was a huge responsibility on the business entity to conduct itself in a manner that upheld the values of the Trust.”

Hylton Appelbaum notes that an early, short-lived investment of KTI was in partnership with the Alexandra Disability Movement in a wind-up radio business. While this investment created hundreds of jobs for disabled people and helped to pioneer new, ‘clean-energy’ technology, it did not fit with KTI’s investment approach and KTI soon disposed of the asset. Appelbaum observes that this was an example of KTI trying to find its way in balancing a developmental approach with sound business principles.

Both organisations knew that to be able to pay KT dividends on a sustainable basis into the future, KTI had to be sustainable. Says Johnson Njeke, who, along with Titi, was one of KTI’s first directors: “The one thing we always emphasized to the trustees

of KT was that we needed to create a business that would be sustainable in the long term. It was not going to be something that was going to happen overnight because we started off with such limited capital”. There was some debate among the trustees and

management of KT over this matter, but eventually they decided to give KTI 10 years to establish itself before requiring a dividend. In the interim, KT had to find other sources of funding.

A LEAN PERIOD

10 11

The EU had aimed to close non- active projects by the end of Dec-ember 1997, but extended this deadline to the end of 1998. KT’s relationship with the EU remained difficult. Tension between the two organisations grew as the EU made attempts to retrieve funding which remained unspent on beneficiary projects. KT had invested the money so as to preserve and even grow it, and as a consequence, the value of the funds had grown from R14 million to R100 million. The dispute arose because the EU maintained that, in terms of its agreement with KT, it was due the full R100 million, while KT wanted to keep the interest generated by its investment of these funds (R86 million in total) and use it for development work.

KT trustee, Dean Zwo Nevhutalu explains: “I was part of the delegation which was interfacing with the EU on a regular basis over the money. It took years. At some stage, when KTI was becoming well known, we thought that the EU might have thought we used their money to fund KTI. I don’t know if they really believed us, even though we gave them the records. So the EU wanted to take the money back to Europe. And we were saying, ‘why don’t you take the initial grant you gave us’.”

The dispute was tense, emotional and costly, as KT had to engage lawyers in South Africa and in Europe to handle the issue. KT even asked Mandela if he would write a letter to the EU to persuade the organisation to KT’s point of view. He did so, but to no avail.

The matter was finally resolved in 2009 at a meeting which KT likens to the Black Friday meeting of 1986. “The EU brought a top-level delegation to that meeting,” says Schoeman. “They told us that we should abide by the laws of the EU. We told them: ‘Our country also has laws. We will abide by the laws of our country.’” Nevertheless, KT was not successful in persuading the EU to let it keep R86 million for development work. It did manage to negotiate retaining 7% of the total amount as a manage-ment fee.

This was a bitter pill to swallow, particularly for KT’s trustees, as they saw a large sum of money, which could have been available for development work, disappear out the door. Schoeman says that in the end

In 2004, just before the KTI dividends started to kick in, KT took another step that would set it further on the path to financial independence. It decided to take advantage of an opportunity to participate in a BEE deal with banking group, FirstRand. FirstRand (with a market capitalization of R96 billion at the end of February 2005) planned to sell 10% of its issued share capital to a range of BEE partners comprising black South African staff and non-executive directors and broad based BEE groups. In terms of the deal, 6.5% of the company’s issued share capital was allocated to FirstRand Empower-ment Trust (FRET), set up for the benefit of broad based BEE groups, including KT, the Mineworkers Invest-ment Company and the Women’s Development Bank.

Beneficiaries financed the deal using a combination of loans from FirstRand

itself and third-parties. The initial term for the loans was set at five years. The term of the transaction itself was 10 years, however, and no exit would be possible during this term. By virtue of its status in FRET, KT received 2% of the issued share capital of FirstRand and gained representation on the boards and the committees of the bank.

Sizwe Nxasana, CEO of FirstRand, says KT was a natural partner for the FirstRand deal. His first dealings with KT had been in the late 1980’s as an auditor, when he observed then that KT had good corporate governance processes and ran highly effective programmes. Partnering with the Trust itself, instead of its investment company, was also attractive, because this would ensure that all the benefits went to the Trust and its operations, instead of being divided between the shareholders in the investment company.

Integral to the deal was the expectation that it would be mutually beneficial, and Nxasana says the bank looked at the transaction on the basis that there would be further share incentives given to the BEE partners for supporting the growth of objectives of FirstRand. Thus, all entities under KT and the burgeoning KTI umbrella appointed FirstRand as their bankers. “Both Kagiso Trust and KTI benefited from these share incentives. We supported them and they supported us,” he says.

As specified in the deal, almost all dividends due to KT in terms of its shareholding in FirstRand have thus far been used to settle its debt with FirstRand. KT expects to settle its debt fully in 2015.

In 2005, when KTI’s dividend holiday came to an end, KTI was keen to delay paying dividends, wanting to be able to continue to invest the funds and grow even further. Themba Mola, who joined KT in 1995 as a project officer and is its COO today, believes that KTI’s reluctance to pay dividends resulted from the fact that, as KTI had grown, it had taken on new employees who were not as close to KT and its vision as the founders had been. KT tackled the issue head-on. Schoeman and his executive team requested

a meeting with the KTI executive to secure a commitment to disbursing a dividend and insist on the formulation of a dividend policy.

The first dividend, which was paid in 2006, was small – just over R5 million. Since then, the dividend has in- creased each year, and in 2014 it amounted to nearly R41m. In 2013, it amounted to in the region of R25 million. By 2014, KT’s investment in KTI had yielded a total of almost R179 million in dividends.

Mola comments that the real ad-vantage of the KTI dividends is that they have allowed KT to secure co-funding for development projects from other private and public sector organisations. This is the premise upon which KT approaches all of its development work. In so doing, it is able to multiply the funding available for its projects and, thereby, broaden their impact.

DISENGAGING FROM THE EU

A BEE OPPORTUNITY

DIVIDENDS PAID

KT had to accept that its initial contract with EU did indeed specify that any

growth in the funding that the EU had provided belonged to the EU, and that

it would cost too much in lawyers’ fees to persuade the EU otherwise.

Dr Nkomo points out that KT already had a strong track record in mobilising financial resources, and was therefore able to continue doing so while waiting for KTI’s dividends to come on stream. Money was still coming into the Trust from donors: the EU continued to provide funding until 1996, with donations amounting to R134.5 million for projects that it had funded already and which had to continue operating; the Japanese government gave R20 million in 1996, R19.6 million in 1997 and R9.4 million in 1999; Scandinavian donors gave more than R10 million to help civic associations and advice centres. In 1996, KT partnered with the national disability movement and other community service organisa-tions in the ‘Zama Zama’ scratchcard initiative. The Viva Trust, of which Hylton Appelbaum (who by that

stage had joined KT’s board) was the chairman, launched the initiative in 1996, with a particular intention of raising funds to support people with disabilities. (The Viva Trust board included representatives of Disabled People South Africa and the national councils for the blind, the deaf and the physically disabled, among others.)

Appelbaum and Molobi encouraged KT’s links with the Viva Trust and Viva agreed to use KT to channel 50% of funds raised through Zama Zama to RDP projects. Appelbaum remembers the scepticism of some members of the board, but at its height, and before ceasing activities ahead of the implementation of the national lottery, Zama Zama employed approximately 1 000 disabled people (or their breadwinners) and was generating about R1 million per month for KT. Between 1996 and 1997, Zama

Zama channelled close to R47 million through KT. Schoeman is proud of the fact that KT can account for every cent it received from its donors including the EU.

In addition to donations, KT had reserves which it had developed over the years, because the organisation and its trustees had taken a strong view that money would not be wasted on administration costs. As a consequence, administration costs had been driven down to under 2.5% of the budget. This meant that between 1999 and 2005, KT could add R45 million of its own funds to the development pot. (See Appendix 3 for details of KT’s sources of funds between 1986 and 2005 and Appendices 4a and 4b for selected KT financial information from 2000 to 2014.)

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KTI had reached the stage where it was in a position to pay dividends to KT by virtue of the fact that, by 2005, it had achieved a net asset value (NAV) of R2 billion. It had taken some effort to get there. KTI and its leaders were operating in new territory. BEE was a new concept in South Africa and there was little precedent from which to learn.

Molobi was therefore well aware that he needed people with the right skills to lead the organisations and appointed Njeke and Titi to manage KTI. Titi recalls the discussion that led to his appointment: “I remember when Eric first met up with me at the Parktonian Hotel in Braamfontein. He said, ‘I am a Robben Islander. I understand politics and I understand development. We are trying to set up a business. We are not businessmen so we are looking for people who understand business.’ He wanted to hire me because I had been recommended by his trusted friend.”

Molobi may have taken a bit of a chance with Njeke, who acknowledges that working for KTI was an excellent opportunity. “When I joined, I had never run a business before. I was just a simple accountant. They were looking for someone to head up the investment company, and I happened to be in the right place at the right time,” he remembers. Njeke’s experience reflects what Paballo Makosholo, KT’s current finance and investment executive, believes to be one of KTI’s secondary purposes – to “provide

a home for black professionals to thrive”.

The KTI board comprised Molobi as non-executive chairman, Mohamed, Appelbaum, Kleinschmidt, Norman Michaels, Erich Scorgie and Bishop Mazwi Tisani. Kleinschmidt comments that, because BEE was such a new phenomenon, the process of securing mutually beneficial deals was complex for everyone involved, both the com- panies wishing to secure BEE partners, and KTI wishing to take advantage of the opportunities that BEE presented.

In its early years, KTI operated from KT’s offices, with KT paying KTI’s running costs. KTI moved to its own offices in about 1998. At the same time, Molobi resigned his position at KT to take up a full-time position at KTI. (He retained his links with KT by joining its board of trustees). Mola says that the physical move was designed to clear up the confusion that had been caused in the market by housing an investment company and the development trust that owned it in the same premises.

KTI: AFRICAN INVESTMENT AT WORK KT prescribed that KTI should not

invest in tobacco, alcohol, gambling or micro-lending. “We respected that, because we are carrying the Kagiso name and we also respected the people behind the organisation called Kagiso Trust,” says Njeke.

To start with, because it had limited capital, KTI wanted to create a portfolio that did not present a high risk in terms of asset selection. As a consequence it sought to spread the capital across a reasonable number of investments. In addition, it opted to partner with private equity funds, such as First Corp, and invest in leveraged buyouts.

One of KTI’s first purchases, in 1994, was of a leading educational publisher, De Jager-Haum, which, up to that point, had been backed by the conservative Afrikaans Nederduitse Gereformeerde Kerk. KTI went into the deal with First Corp and renamed the company Kagiso Publishers. Titi recalls that this purchase was logical, as with the new government in place, educational publishing was moving in a different direction.

Appelbaum remembers another of KTI’s early investments: “Allan Greenblo, editor of Finance Week, called with an idea, having identified the publishing of the Yellow Pages as a lucrative opportunity for KTI. Unfortunately, Perskor (which owned the Yellow Pages) was not interested in engaging with us, so I called Johann Rupert, whom we believed would have influence in Perskor, and I introduced Eric and Johann. They got on very well indeed and Eric landed up serving on the Rembrandt board. Our relationship with Rembrandt/

Venfin remains very close, and they are still partners with KTH today.”

Titi says it was not always easy, “because here you come with a struggle background, a development background and you are trying to move the country forward, and yet you have to engage with people who had supported apartheid and still believed very much in some of the merits of apartheid.” He describes how uncomfortable it was seeing a huge bust of Hendrik Verwoerd in the Perskor offices on one of his first visits there. “You needed to move the country forward and in some ways you maintained your values, while on the other you engaged with ‘the enemy’,” he observes. “But Eric was a gracious man, very wise. He spent a lot of time in the struggle and a lot of time on Robben Island. The idea of reaching out to the likes of Koos Buitendag, who, at the time, ran Perskor, was a difficult one, even for him. But we knew we needed to move forward.”

Appelbaum recalls another example: “It was during our negotiations with Boumat and the Imperial Group. Eric and I went to meet the late Bill Lynch, chairman of Imperial. He and his financial director walked into the room and introductions were made. Eric had gone white and I could see something was wrong. The meeting went well, but afterwards when I asked Eric what the problem had been, he said he had been shocked that the financial director was Tak Hiemstra. Tak looked uncannily like his father – Judge [Victor] Hiemstra – who had convicted Eric and sent him to Robben Island. As things turned out, Eric joined the board of the Imperial Group and Bill Lynch joined the KTI board.

Tak Hiemstra served on Kagiso Media’s board for many years. That’s the sort of man Eric was.”

KTI also participated in some privat- isation initiatives such as the privat-isation in 1996 of some of SABC’s radio stations – East Coast Radio in Durban and Jacaranda in Gauteng among others. These investments were the genesis of Kagiso Media.

KTI’S INITIAl INVESTMENT STRATEGy

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KTI’s initial philosophy of making minority leveraged investments under- went a major shift in 1998, after Molobi invited Lynch to a brainstorming session with Titi and Njeke. Njeke remembers the meeting: “Bill asked Eric, ‘Eric, do you want to tell me that BEE is all about buying minority stakes?’ We all replied ‘Yes’ – in terms of spreading investment risk. Bill said that if BEE was only about minority shares in order to play it safe, it would be a shame, because all you are doing is pounding on someone else’s business and you will never have expertise in running a business. I think it was a wakeup call for us, because from that moment we then decided to identify areas where we could become the operators of business.”

As a result KTI changed it strategy from one of managing a portfolio of assets to one of actually operating those assets. One of those assets was Kagiso Media. KTI also created a number of businesses in the financial services sector, including a highly successful asset management company, Kagiso Asset Management. “I think it was the right shift for us. It enabled us to also identify black talent and nurture it and make sure that we could hire people who would not ordinarily be hired so that they would gain experience in running companies,” Njeke says.

KTI’s shareholding also changed during this period. It became clear to KTI’s directors that if they wanted to attract deals from financial institu-

tions, they needed to look for a new shareholder to buy out Nedbank and Liberty Life. They therefore approached investment company Remgro to buy the Nedbank and Liberty shareholding. Thus, at that stage, Remgro owned 40% of KTI and KT, 60%.

Shortly thereafter, in order to incen-tivise its staff, KTI created a staff incentive trust and KT and Remgro each diluted their shareholding to assign shares to this trust. The result was that KT now owned just over 50% of KTI, with Remgro and the staff trust owning the remainder.

AN END TO MINORITY INTEREST

In July 2011 KTI, with a net asset value (NAV) of R4.4 billion and about 25 employees, merged with the Tiso Group to form Kagiso Tiso Holding (KTH). This created one of South Africa’s largest black-owned investment groups, with a net asset value of R7.7 billion and total assets of R13 billion. KTI had certain things in common with the Tiso Group in that Sowazi, one of KTI’s founding directors, had left KTI in 2001 to found Tiso. Tiso also had a philanthropic component. The Tiso Foundation, which supports develop-ment in education, held a 7.5% stake in the Tiso Group. Management and staff of Tiso held 65.5% of shares and Standard Bank, Rand Merchant Bank, Investec and Liberty Life owned 27%. Ratings agency, Moody’s, des-

cribed the deal as a merger of equals.

The head of KTI at the time, Kgomotso Matseke became the merged group’s CEO until he left in November 2011. Vuyisa Nkonyeni, Tiso’s director of investments prior to the merger, then took over as CEO of KTH. Sowazi became chairman. (See Appendix 5 for details of KTH’s current board members.)

Matseke said that the rationale behind the merger had never been in doubt and that there had been agreement that a merger would create a bigger balance sheet that would give the combined entity better access to larger and more attractive transactions. He described it as “transformational and a watershed in the history of the two

companies, particularly in the black economic empowerment space.”

Sowazi added “This merger by two black-owned companies, driven by mutual aspiration to build a noteworthy business platform that is reflective of the new SA, is a great milestone in the country’s economic transformation project. It represents a validation and maturation of black economic empowerment and the creation of an enterprise that will deliver both social and shareholder value.”

KT’s 50.2% shareholding in KTI had a NAV of R2.4 billion in 2011. It now has a 38% shareholding in KTH, with a NAV of R3.2 billion in 2014.

KTI MERGES WITH THE TISO GROUP

At the time of the merger, KT took the opportunity to gain liquidity and sold some of its shares in KTI, thus realising an amount of approximately R180 million from the sale. KT then immediately invested the money in Kagiso Asset Management. KT gave KTH a one-year dividend holiday, but made sure to agree a future dividend policy with KTH before signing the deal. Its directors realised that KT would now be only a minority shareholder in KTH, and therefore needed to secure this agreement upfront. Paballo Makosholo explains that the KTH’s total dividend pay-out is 30% of KTH’s cash profit and that KT receives 38% of that. He acknowledges that, given that KTH has to take on signi-ficant amounts of debt to effect its transactions, its cash profit may be lower than some other investments. Nevertheless, he believes that the dividend is still comparable to other potential investments, because of the proportion of the cash profit allocated to dividends.

KTH’s investment philosophy is somewhat different from that of KTI, in that it will invest in any industry sector that it regards as potentially profitable. Sowazi describes KTH as “sector agnostic” and says, “KTH is a pan-African investment holding company. It is equipped in its entire construct to be an investment company. Its aim is like any other investment company – to grow its value for its shareholders, who are diverse, but include Kagiso Trust and the Tiso Foundation. So a lot of the benefit of KTH goes to good causes. But we treat KT like any other shareholder.”

Nkonyeni says that KTH has to balance the imperatives of growing the company on the one hand (at the

time of the merger KTH planned to double its asset base in five years) and remaining true to a developmental ethos on the other. He told the Financial Mail in 2013: “The company has evolved into a business model that is about marrying the creation of financial value to the facilitation of social value,” adding, “there will continue to be healthy discussions among management and our board on balancing growth initiatives with the social aims.”

Ntobakae Angel who is a non-executive director of KTH as well as a trustee of KT notes that there was “a good cultural fit” between the two organisations and that the merger has been a success. Makosholo comments that the shared values have helped the organisation navigate the growing pains of merging the two entities. “In our view the merger has been very positive,” he says. “It has meant that as an entity, we have been able to do much larger transactions. In December last year KTH bought Kagiso Media, in which KTI had a 51% stake. The transaction was worth R1.8bn. The merger provided us with a platform to do these mega deals.”

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In the early days, KT funded literally hundreds of small projects, with a focus on activities in education, human rights, freedom of the press (through the funding of left-leaning newspapers such as New Nation, South, and Vrye Weekblad), and the creation and support of civic structures and advice centres. Tutu notes that funding was not disbursed on a party-political basis. The single most important criterion was that the applicant had to have taken a stand against apartheid. Secondly, applicants themselves had to be empowering people to stand up against the apartheid system.

The EU granted most of its money on a project-by-project basis and required careful reporting on each and every project. KT would therefore audit the projects’ use of funds and send a full progress report to the EU office.

DEVELOPMENT: SEEKING SYSTEMIC IMPACT

Although KT provided funding for hundreds of projects in the 1980s, it is particularly proud of a few: the Civics and Advice Centres Programme, the Kagiso Trust Bursary Programme and the Alexandra Disability Movement.

The Civics and Advice Centres Programme

In the early 1980s, civic activists had started to establish civic advice centres that were linked to local civic organisations and the UDF. Many of these organisations helped communities to deal with forced removal, police brutality, and non-payment of unemployment insurance and state pensions. They faced con-certed opposition from the apartheid government and, as a matter of urgency, KT wanted to ensure that their work continued. Thus, from its inception until the mid-1990s, KT channelled millions of rands through its Civics and Advice Centres

Programme to these organisations.

Initially, KT saw its work in this arena as one of strengthening resistance to apartheid. However, in 1990, Molobi told a conference that the focus needed to change and that KT should consider development its biggest challenge. “We have to think of ourselves, in a sense, as a department of a government-in-waiting,” he said, “meaning that as an alternative funding agency we will be dealing with areas that should be dealt with by the present government, but which it is incapable of or unwilling to deal with.” Thus KT actively sought to build financial, organisational and administrative capacity in civic and community-based organisations and, among other things, funded a national Civics Development Programme.

In 1994, KT took this a step further and established the Community-Based Organisation Support Programme

in conjunction with the Graduate School of Public and Development Management at the University of the Witwatersrand (now the Wits School of Governance). The idea behind the programme was to help strengthen institutional development, and tech-nical and administrative capacity in CBOs.

Nevhutalu notes that the trustees initiated this programme “in response to the very strong realization that there were many people, who, because of their involvement in the struggle, had not had the opportunity to study.” He added: “So an entity was created so that they were not left behind and they could go to the Wits programme and at the end of it get a qualification with clear skills.”

The Kagiso Trust Bursary Programme

One of KT’s most important projects

SOME OF KT’S EARLY PROJECTS

in the 1980s and early 1990s was the KT Bursary Programme, which assisted around 25 000 promising black matriculants to pay for tertiary education. This was a strategy not only to offer tertiary education to those who could not afford it, but also to open up universities to black students. KT itself did not want the responsibility of choosing individual bursary recipients. Instead it gave its criteria (that there be a 50/50 allocation of funding between students from rural and urban communities and a 50/50 allocation to men and women) to universities and asked them to select recipients.

At the outset, KT provided assistance in the form of a 100% bursary. Over time, the organisation started requiring students to repay a portion of the bursary. At first, students had to repay 40% of the funds, but by the time the government took over the fund in 1997 (known by then as the Tertiary Fund for South Africa), students had to repay the full amount. In an article written in 2001, Molobi explained the rationale behind the change in approach: “We went internationally to look at bursary programmes. We

discovered that in South Africa, white people were long ago just borrowing money from the bank and going to study and paying it back afterwards.” He argued that, upon completing their studies, students would be empowered to obtain a profession that would see them join the middle class and therefore be in a position to repay the loans.

In the late 1980s and early 1990s, the programme dispensed about R300 million a year to bursary recipients. After 1994, donor funds diminished and dispersements had dropped to around R190 million by 1997.

The Alexandra Disability Movement

KT started the Alexandra Disability Movement (ADM) in 1987 to help disabled people in the township of Alexandra (adjacent to the wealthy suburb of Sandton in the north of Johannesburg) to provide for themselves and their dependents. Mola says one of the reasons that KT is particularly proud of its work in establishing the ADM is that while initially the ADM was entirely

dependent on grant funding from KT, under KT’s guidance it became financially self-sustaining.

As a result of these efforts, the ADM still exists today, operating out of premises that KT helped it to acquire. Among its income-generating projects is a basket weaving project that started in 1991 and now employs more than 30 disabled people. Another is the Disabled Art Printers Association, which was launched in 1993 when KT donated funds for a sewing project. This organisation now produces beadwork, cushions and cushion covers, printing material, raincoats and dustcoats.

In 1997, the ADM was instrumental in starting the Pillsbury Child Care Centre with funds raised from US biscuit and baking products company, Pillsbury. Today this operates in partnership with Pillsbury (now part of the General Mills stable) and the Gauteng Department of Education, providing education, daycare and residential care for disabled children from Alexandra.

As KT’s dependence on the EU for funding diminished and as its ex-perience in development work increased, so its approach to develop-ment changed substantially. Firstly, being less dependent on donors meant that KT could set its own development agenda. Secondly, KT realized that it had spread its activities too wide and needed to have a more focussed approach. In his CEO’s report in the 1994/1995 Kagiso Trust Review, Kleinschmidt said: “If we do not have a focused approach to

development and say, ‘this is what we are doing’, we will probably lose ourselves along the way completely. Within that focus we will have certain priority areas.”

Thirdly, KT decided that it wanted to focus on funding its own long-term programmes, rather than short-term projects developed by others. KT explained in Reflections: Kagiso Trust – a Twenty Year History, “political, eco-nomic and social challenges in recent years have resulted in a revision of

Kagiso Trust’s operating model. The Trust has moved from being an organisation which disburses small grants on an application basis, to one that focuses on integrated development programmes that the Trust designs, implements and monitors.”

A presentation which Molobi made to the Parliamentary Portfolio Comm-ittee on Trade and Industry in 2003 explained the conclusions that KT had drawn over this period. He told the committee that the organisation

A CHANGE IN APPROACH

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had learned through “trial and error” that in severely deprived communities, the quality of the relationship between development stakeholders (including KT programme staff, community-based structures and government) is the most significant determinant of the long-term viability of development processes.

Molobi stressed that isolated project funding tended not to produce

sustainable results and that funding single development projects scattered across the country was “far less sustainable than investing in a range of development projects in a set number of poverty-stricken communities”. He pointed out that the vast majority of poverty eradication processes are “managed from a heavily resourced city-based head office, with comparatively little being invested in

hands-on, site-based skills-transfer to the targeted beneficiaries.”

in this way KT’s philosophy that its development activities should not create dependence, but rather assist communities and individuals to do things for themselves and build capacity among community members and their leaders, had evolved.

In the early 1990s, KT’s change of approach to more focused, long-term interventions was evidenced by its focus on funding voter education, as well as health organisations and a national HIV/Aids programme. The organisation also played an important role in funding the National Peace Accord in 1993. At the same time, KT decided to identify programmes that it could fund for three to four years with a view to ensuring their sustainability into the future. A number of these organisations are still in operation today, among them Soul City, Moretele Edu-Care Programme, Operation Blanket, the Johannesburg Housing Company, the Mvula Trust and Kagiso Trust Consultancy.

Soul City

In the mid-1990s, KT saw potential in Soul City, a health promotion and social change project which comprises a popular prime-time television series, daily radio dramas in South Africa’s official languages, booklets and advocacy strategies. KT made a substantial initial contribution to the project, which encouraged other donors, such as the EU, also to make funds available.

Mola says KT was attracted to Soul

City because it was launched at a time when confusing messages were being sent out regarding HIV/Aids and when there was general denial about its impact on South African society. In this context, Soul City’s approach was to simplify the message and show the humanity of the people affected by the disease. In addition, Soul City sought to address broader issues of community development and the frustrations relating to access to primary health care in the townships.

More than 20 years later, Soul City is still operating, reaching more than 16 million South Africans and operating in the Southern African Development Community.

Moretele Edu-Care Programme

The Moretele Edu-Care Programme is another example of KT’s evolving strategy of trying to deepen the impact of the projects it funded and enable them to be self-sustaining. After a crèche in Hammanskraal (northern Gauteng) approached KT for funding, KT thought it best to turn it into an early childhood development programme for the whole area. So the Trust identified 25 crèches which had as yet been unable to qualify for registration and, therefore to receive a

state subsidy, with the aim of bringing them up to a standard where they would qualify.

Today the crèches that have benefited from this programme have trained teachers and provide care, education and meals to hundreds of children in Hammanskraal.

Operation Blanket

Operation Blanket started life in 1984 as an initiative to hand out blankets and food parcels to needy families and communities in the North West. When it came to KT’s attention in 1994, the Trust saw potential to turn the organisation from a well-intentioned welfare project into a self-sustaining organisation that could equip people in the community to provide for themselves. KT has invested R2.1 million in the project over six years.

With KT’s assistance, Operation Blanket redefined its goals and broadened its activities. Among the early projects was one to install a borehole for a community which was struggling to get access to water. Another was to establish a preschool that operates today with subsidies from the Departments of Education and Health.

SOCIAl IMPACT INVESTMENTS

Mola explains that KT discovered that parents were keeping their young children away from school because of the 10km walk to the village with the nearest school. “Early learning is essential to prepare children for school,” says Mola. This motivated KT to find a solution. Initially KT just started a small school, but it soon saw the need to provide a more compre-hensive intervention that would enable the school to sustain its activities. As in Hammanskraal, KT provided teacher training and helped the school to put the necessary infrastructure and processes in place that would allow it to receive the necessary government subsidies.

Today Operation Blanket also offers skills training and healthcare services to communities in the North West and has attracted funding from other organisations such as the United Nations Development Programme.

Johannesburg Housing Company

KT formed the Johannesburg Hous-ing Company (JHC) as a section-21 not for profit (NPO) to help alleviate worsening living conditions in Johannesburg’s inner city. It has become a model in social housing development. Through KT, the EU contributed R50m towards the project. Taffy Adler was appointed as JHC’s first CEO in 1994.

Initially KT set up the JHC as a private company, based on the assumption that it would be raising money from the market as a whole and would therefore need private registration. However, about a year into the process, there were concerns that funding could be taken out of the company, so it was converted into a NPO. “This meant that any surpluses could not be distributed outside of

the company and it also meant that in the event of the company folding, any surpluses would be distributed to a NPO with a similar concept,” Adler says.

KT appointed directors, but let Adler run the organisation as he saw fit. His closest contacts at KT were Sowazi and Schoeman. “The link was then directly a reporting relationship as a director to a shareholder,” explains Adler. He liked their management style, saying they were not too “hands-on” and did not micro-manage. He adds that Sowazi and Schoeman provided strong financial acumen and made sure to complement this by employing people who understood the business to help run the JHC.

From the outset, KT made an important policy decision: that “not for profit” did not mean “for loss”. The result of this was that the JHC has produced a surplus in every year of its existence. All in all it has been one of KT’s most successful development projects. “We started with nothing, from a building point of view and I think they are now [in 2014] at over 3 000 units,” says Adler. “From a funding point of view, the initial grants were R72m and the capital currently is just under R1 billion. It is a flagship programme. It meets every development criteria for sustainable development. It’s made a major impact on a whole range of areas – regenerating the inner city.”

Mvula Trust

KT set up the Mvula Trust in 1993 in conjunction with the IDT and the Development Bank of South Africa. KT provided a portion of the seed funding from EU money and the IDT provided the remainder by virtue of a parliamentary grant that it had secured for the provision of water.

Mvula went on to become a significant enabler of community water schemes and sanitation projects, playing a vital role in the formation of legislation and policy in the early days of the new democracy. After 1999, when the Water Service Authorities in South Africa were established, Mvula focused on water, sanitation and related services for rural and peri-urban communities.

“Mvula became much bigger than KT with a bigger staff,” explains Kleinschmidt, who ran the organisation from 1998 to 2000. “It brought water and sanitation to South Africa’s rural communities in four provinces only: Limpopo, Gauteng, KZN and the Eastern Cape. We worked very closely with the Department of Water Affairs with Kader Asmal and Ronnie Kasrils as ministers. We employed countless engineers. It was a particular area of development that the EU wanted to continue funding.”

Kagiso Trust Consultancy

Another important development was the establishment of the Kagiso Trust Consultancy (KTC) which was originally registered on 6 December 1996 with Schoeman as the director. It has had a diverse history, and a variety of focus areas over the years. In the early stages, KTC implemented a local government development dialogue programme which managed and facilitated community participation in development processes.

Then, after Schoeman was appointed CEO of KT, Mola became executive director of KTC, and coordinated the Alexandra Renewal Project (which was part of an urban renewal programme targeting eight urban townships). An initial budget of R1.3 billion spread over seven years

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was set aside to embark on the integrated development programme that would deliver housing, roads, water supply, sanitation, schools, clinics, magistrates offices and police stations to Alexandra. Among other projects, under Mola, KTC also led the Poverty Eradication Programme evaluation for the Department of Social Development in Gauteng and designed the Tshwane Metro’s SMME Development Strategy.

KTC was collapsed in 2007 when Mola became COO of KT, but then revived in 2008 as a vehicle to buy 49% of Activ Training, an IT company

focusing on education and training, with a special emphasis on rural communities and educators.

In 2011, KTC repositioned itself to offer specialist services that would support development planning and management in rural municipalities. In the belief that accurate billing and meaningful revenue collection are crucial for municipalities to be able to deliver effective services to their communities, KTC developed the Kagiso Data Optimisation System (K’DOS), a web-enabled platform that helps municipalities to bill accurately and collect revenue by cleaning up

their data. Municipalities do not have to purchase the system. They can simply access K’DOS via the internet. Mola says KTC has now also formed a partnership with the Department of Local Government to build leadership in the municipalities, much in the same way that the Beyers Naudé Schools Development Programme (BNSDP) works to build leadership in schools. “KTC is working to place more emphasis on organisational cultural change and less time on isolated problem resolution,” he says.

KT’s new approach to development came of age in the early 2000s when the organisation decided to focus on development in rural areas, and to limit its activities almost exclusively to education and providing assistance to entrepreneurs who would create jobs and, thereby, help alleviate poverty. Archbishop Tutu explained in Reflections: “I think that if we are going to have effective transformation, we are going to have to invest massively in education…. We are way behind most countries in that. Secondly, we have to hone people’s entrepreneurial skills. Empowerment can’t just be letting people have a stake in different enterprises if they don’t have the

know-how….Thirdly – and these are all related – I think we have to be involved in poverty eradication. Because there is no question at all that that is a powder keg.”

With a view to making a long-term, sustainable impact, KT decided to adopt a programmatic approach to development: designing and develop-ing its own programmes, rather than funding those designed and developed by others. Key to KT’s approach is a philosophy of partnership – with government, with other funders and with other organisations which have the technical skills which KT lacks.

This shift of mindset did not come easily within the Trust, however. There were those on the executive and among the trustees who were used to being involved in many projects throughout the country. They thought that focusing KT’s efforts would make the organisation’s impact too small. But Molobi and Schoeman (who by that time was KT’s CEO), were adamant. “We cannot carry on doing what we used to,” said Molobi. After KT started receiving dividends from KTI, Schoeman had to re-emphasize this point, as trustees felt the urge to spread KT’s development focus wider. “My position was, we need to think differently,” says Schoeman.

NARROWING THE FOCUS

KT launched its flagship programme, the Beyers Naudé Schools Development Programme (BNSDP) in 2004. Schoeman relates how the idea came into being: “We went to see Oom Bey [Dr Naudé] with the idea of

launching an education programme in his name. And he said to us very, very softly, that he was very disappointed with the bursary fund. We asked him why, because we had sponsored so many people. He said it was because

he had thought that the young black people to whom we gave bursaries would go back to the communities and develop those communities and we hadn’t succeeded in doing that.” So Schoeman and his team came up

BEyERS NAUDé SCHOOlS DEVElOPMENT PROGRAMME

with the idea of the BNSDP, with a view to impacting on schools instead of individuals.

The BNSDP has three strategic objectives: to create functional schools by implementing training interventions that address leadership capacity and relationships between educators, parents, learners and the surrounding community; to foster communities that impact positively on the at-school and after-school life of rural learners; and to create environments in rural schools which are conducive to learning and teaching. Rev Chikane points out that what makes the BNSDP different from other education support programmes is that it seeks to encourage government to adopt those components of its programmes and processes that have been successful. “Our intention is to influence policy at the highest level,” he says.

KT uses the donation of much-needed infrastructure as incentives for improved performance, but does not measure performance in terms of matric pass rates alone. “It’s not about matric, it is about the school system working,” says Mola. “It’s about district officials beginning to manage schools differently and about the acknowledgement of the hard work teachers do and of the improvement. It is not about curricula, it is about making a system work.”

He adds, “We award schools with infrastructure as an incentive for improved performance, but the solution does not lie in this, it lies in the commitment of the stakeholders in the school and in the willingness to take responsibility and accountability.” Vital to the buy-in by the community is that the community is invited to share in the resources of the upgraded school. When KT awards infrastructure such

as libraries, science laboratories, equipment and computers to schools that have met the agreed benchmarks, it invites all community stakeholders, including parents, to the launch to celebrate and take ownership of the achievement.

The BNSDP provides assistance to the Association of School Governing Bodies to help the association fulfill its mandated role of promoting the well-being and effectiveness of the school community. Rev Chikane adds that KT has noted how disempowered parents in rural communities are, and that the BNSDP helps to promote parent participation and broader community input into the schooling system.

Key to the process is a leadership and ownership programme that the BNSDP initiates with the schools before any work begins. “This pro-gramme is quite comprehensive. It starts with a conversation with the school stakeholders at a retreat. These are the teachers, the principal, the members of the school governing body, and the representative council for learners. We ask them what they think is contributing to the school not achieving good results,” Mola says. The KT task team then asks them how they can take personal responsibility for making their school function effectively and holds in-depth discussions about what the problems are and how they can be addressed.

KT first piloted the programme, starting at the beginning of 2004, in the Lwamando Secondary School in the Thohoyandou district of Limpopo province. By the end of the year, the school’s pass rate improved from 70% to 84%, and teachers, learners and parents were showing greater commitment to education. “We then decided, instead of going for a school

in another province, to target a cluster of schools around this particular school,” says Schoeman. Thus, at the beginning of 2005, a further eight schools in the same district were identified. After this, KT extended the project to four other provinces: Limpopo, Mpumalanga, Eastern Cape, KwaZulu Natal and the Free State.

Insisting on Joint Funding

When KT started working on the BNSDP in Mpumalanga, the Eastern Cape and KwaZulu Natal in 2007, it reached a co-funding arrangement with the departments of education (DoEs) in these provinces. In terms of these agreements, the provinces agreed to contribute R5 million to R10 million respectively to the programme. These provinces subsequently had difficulty in meeting their co-funding agreements, but this process opened KT’s eyes to the benefits of co- funding – most importantly that it is a powerful tool for influencing the provincial administrations to adopt the BNSDP principles and approaches.

KT now insists that the provincial DoEs match its investment in the programme and surrender the project purse strings for the programme to KT. The Trust believes that this leads to effective and uninterrupted implementation of the programme. KT has therefore pulled the BNSDP out of all provinces except the Free State, which is the only province thus far to have upheld the co-funding principle.

Says Mola: “The model we are now using is that we do not go into a school unless we are talking to the provincial department of education and we don’t get involved unless that department matches us rand for rand. The department also has to agree to designate capacity, which means their

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own officials. Because we argue that if we go and implement the programme and their officials are not involved, it means the programme is going to collapse.

“It is a pity that other provinces miss the point of this approach, because essentially KT is saying to them, ‘You have a budget of R5 million and we will put in R5 million and will help you to spend the money better’. The tendering process wastes a lot of time and money. We administer the money ourselves and the infrastructure is delivered cheaply.” By way of illustration, Tate Makgoe, the member of the executive council for education in the Free State provincial administration, says that KT has just overseen the construction of a school hall in Welkom that will also serve the community. Central government had quoted R17 million to build the hall. KT, in partnership with Free State Department of Education (DoE), completed the state of the art building for R7 million.

KT started the BNDSP in the Free State in 2007 with 10 schools in the Thabo Mofutsanyana District. In 2010 KT and the Free State DoE committed jointly to investing R174 million in a further 156 rural schools in the same district. A highlight of 2012 was the formalisation of a R400-million agreement between KT, the Shanduka Foundation and the Free State DoE to collaborate in rolling out a whole school education programme in an additional 428 schools in the

Free State. In terms of the agreement, which extends over a period of five years, KT has committed R100 million, Shanduka R100 million and the Free State DoE R200 million.

Mola says that the result of a three-year intervention in a school that is achieving a pass rate of between 47% and 62% for their matric results is that it can perform at above 80%. To date KT has rewarded 73 Free State schools that exceeded the benchmark of a 75% pass or better, with infrastructure ranging from libraries and computer centres to science and maths laboratories. Through the Shanduka collaboration, infrastructure in an additional 74 schools was upgraded in 2014.

Makgoe says education department officials from other provinces often come to see him to find out the reason for the success of schools in the Free State. “We have some pupils who are getting 100 percent for maths. They want to know our secret – how we can be the top performing province in the country regarding matric results, but they don’t want to let go of the finances,” he says.

Since inception KT has spent a total of R340.4 million on the BNSDP, in limpopo (Vhembe and Sekhukhune), Mpumalanga (Kwaggafontein), Eastern Cape (Mount Fletcher), Kwa Zulu- Natal (Mzinyathi), Free State (Thabo Mofutsanyana, Fezile Dabi and Motheo districts).

Highlighting the dynamism of the BNSDP, KT trustee, Mankone Ntsaba says that at every board meeting the KT executive team comes up with new ideas on how to improve the programme. She says that these are ideas “that we need to embrace and learn from, and that guide us as to what we need to include in implementing the programme.”

Angel says that the KT trustees would like to see the BNSDP expand into other provinces but only if the provincial administrations buy into the programme. She says that KT meets resistance because the organisation insists on being hands-on. “The disbursement of government funds by other entities like us reduces the chance of pilfering, so the perks go,” she explains. “So in those areas where they say it takes tens of millions, someone is siphoning money. So when we come and say we want to manage, there is resistance.”

“During President Mandela’s time, he used to fundraise for schools’ renovations. The difference between those schools and our schools is that the communities in his programme never took ownership of those schools. In time they were vandalized. With our schools, the community is involved and they view those schools as their assets that define them. So we hardly find those schools being vandalized in any way”.

KT is also involved in three new programmes in a further effort to improve the education of learners in rural areas: the Eric Molobi

Scholarship Programme, Education Conversations and the Resilience Network Programme.

KT launched the Kagiso Enterprises Rural Private Equity Fund (KERPEF) in 2002 with a donation of R30 million from the Kellogg Foundation. The purpose of the fund is to assist rural entrepreneurs, who have the ability to make a substantial impact on rural communities, but conventionally find it difficult to attract the necessary finance. At first, KT housed the project within KTI because of the similarities between the work of the two organisations.

KERPEF sets the following invest-ment criteria: the company has to be a (Pty) Ltd or Ltd company; it has to operate in a rural area and show high growth potential; it has to be sustainable; it has to create jobs for women and the youth, and transfer skills to employees; it has to have at least a 25% empowerment share-holding; and it has to practice good governance. The fund does not invest in businesses that KT defines as harmful to humanity, such as

liquor, tobacco, micro-lending and armaments.

In mid-sized companies, KERPEF typically advances 20% and 30% of the required funds. In smaller companies, KERPEF can provide up to 90% of the capital needed. Even though it is often difficult for the entrepreneurs to find finance, KERPEF has found that it is important for them to provide at least 10% of the funding at their own risk, because this incentivizes them to

THREE NEW EDUCATION PROGRAMMES

THE KAGISO ENTERPRISES RURAl PRIVATE EQUITy FUND

Eric Molobi Scholarship Programme

In 2006, shortly after Molobi passed away, KT launched the Eric Molobi Scholarship Programme to provide financial support to learners who are academically strong and show leadership potential, yet lack the resources to obtain a tertiary edu-cation. KT chooses the beneficiaries of this scholarship programme from schools affiliated to the BNSDP. Apart from providing total funding for tuition, books, accommodation, transport and other expenses, the scholarship programme helps learners to obtain work experience and assists them in finding employment once they have qualified.

By 2014 KT had spent R16.3 million on the programme and awarded scholarships to 108 students to study at a tertiary level in South African institutions. By the middle of 2014, of those who had completed their studies, 15 scholarship recipients were employed; nine were doing in-service training, and only a few were still looking for employment. The rest were still studying, except for two who had dropped out of the

programme. In 2014, KT awarded 15 new EMSP scholarships.

Education Conversations

Education Conversations is a partner-ship between KT and the University of Johannesburg, aimed at encouraging stakeholders involved in education to move away from the pathology of focusing on the challenges that face South Africa’s education system, and rather to take a keen interest in playing a role in creating sustainable solutions to those challenges.

In addition Conversations seeks to hold all stakeholders in education accountable and responsible for the performance of South Africa’s public education system and to anchor the participation of the Department of Basic Education, as a critical role player in these “conversations”.

The Resilience Network Programme

The Resilience Network Programme was the brainchild of the University of the Western Cape (UWC). The idea behind it is to celebrate, promote and develop resilience instead of

victimhood. KT started working on the concept with UWC in 2013 and now also collaborates with the University of the Free State on the programme.

It targets grade 10 high school learners who have displayed resilience and achieved good results despite coming from poor homes with little support. The learners meet on Saturdays during the course of their Grade 10 year and are put through a programme that aims to develop their strength and tenacity. At the end of the programme, they have to enter a competition where they devise and implement a project that aims to address challenges that youth in their area are facing.

KT selects its participants through the BNSDP. Mola says that the transformation that takes place in the lives of participants is amazing, and that teachers and parents alike notice the change.

KT has set aside R1.2 million in 2014/2015 for the Resilience Network.

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ensure that the business succeeds. KERPEF takes an equity stake in the business, with the aim that as the business grows, the KERPEF stake will be transferred to employees.

In its first few years KERPEF funded two main projects, Meropa Heritage, a high-end fashion operation that used rural women to bead garments, and Midland Mushrooms. The investor relationship with Meropa Heritage came to an end when the two partners in the business fell out and the business was closed. Midland Mushrooms was owned by a holding company which experienced financial problems and the relationship with KERPEF ended for financial reasons. Both, however, were relatively successful under KERPEFs stewardship, says Mohlolo Selala, KERPEF’s senior programme manager.

Learning from Experience

In 2010, when the initial Kellogg funds had run dry, KT recapitalized KERPEF using R30 million from its own funds, and decided to bring the management of the fund and its activities in-house. Schoeman explains that this was because the KERPEF investments are so much smaller than the KTI investments and, as a consequence, the nature of the work involved is too dissimilar from KTI’s core business for it to receive the focus it needs within KTI. He believes that KT’s interests and those of KERPEF are much better aligned.

KERPEF has also focused its activities on franchising and fast-moving consumer goods (FMCG), while still allowing for more general investments.

Franchising

Following KT’s general strategy of

partnering with organisations with the required skills, KERPEF has allocated R10 million for investment through the South African Franchise Warehouse (SAFW). It has done this to minimise risk, but also because the SAFW is able to transfer skills to franchisees and thereby ensure that they have a greater chance of success.

SAFW acts as the mediator between KERPEF and potential franchisees, screening the applications and sending the best to KERPEF for approval. Thereafter, for the duration of the loan (a period of between three and six years), SAFW monitors the progress of, and transfers skills to the franchisee. Loans are made at an interest rate of prime plus about 2% and repayment is structured so that it should not affect the franchisee’s cash flow.

To date KERPEF has made loans of R8 million to SAFW franchisees. Selala expects to make the remaining loans relatively shortly. He says that KERPEF was targeting the creation of 100 jobs with its R10 million investment. Thus far it has created 131.

FMCG Investment

KERPEF’s FMCG investment is in Thembeka Sales and Logistics (TSL), which is owned by Clinton Nel, a young entrepreneur, based in Mahlaleni (Witbank). He used to work for South African Breweries (SAB), but wanted to run his own business. Over the years he had saved and invested his money in property and other instruments, and by the time he was 30 he had saved up R1 million and was ready to work for himself. He had extensive experience in marketing, distribution and merchandising and initially approached SAB about setting up his own business to distribute the

organisation’s non-alcoholic brands. In the end, the discussions took too long, so he approached FMCG giant, Unilever, with the idea of setting up a rural distribution network for Unilever products in Mpumalanga. His business enables large suppliers to deliver to small, rural retailers at an affordable wholesale price. In turn, the small retailers can pass on the price benefit to poor, rural customers.

Nel needed more funding to get his business off the ground and found a match at KERPEF. “I pitched the idea of this business to other potential partners, but they had different visions,” he says. “But when I met Mohlolo, it was hand-in-glove – a good fit. We were both on the same page. They let me run the business because I have the skills. They do come and look at the financials and make suggestions on how I can improve”.

Nel says KERPEF provides a good sounding board for important issues, such as how to expand his business. In addition, through his connection with KERPEF, he has managed to get much welcome media exposure and has had helpful publicity on television and on radio. He now has 40 employees and plans to open new branches and to distribute goods for other suppliers, which means that more jobs will be created.

Selala says that KERPEF plans to invest more funds in TSL so as to grow it further.

Other Investments

KERPEF has allocated approximately R11 million for investment in other rural enterprises. Among these are Mthatha Airport Agricultural Services (MAAS) and Zizi Lodge in Leisure Bay on the Kwa Zulu Natal South Coast.

MAAS grows vegetables hydro-ponically, in tunnels on land at the airport, for the benefit of the Ncise community,. The Ncise community was removed from its land in 1976 to make way for the airport. In 2006 KERPEF matched the R1.4 million that the Ncise community had raised towards the project, making it possible to build twenty tunnels. The project provides affordable vegetables for the Ncise community, which previously had to rely on vegetables grown 230 kilometres away in the East London area.

Zizi Lodge is a wholly black-owned, three-star eco-lodge in a highly desirable tourist area that is home to three of South Africa’s top golf courses. KT and KERPEF believe in the importance of developing the tourist sector as a vital way of helping entrepreneurs to create employment in areas where there are few jobs. The lodge’s proprietor, Lindani Dlamini, bought the existing lodge and KERPEF has invested R5 million to assist with an upgrade. Selala says that KERPEF is looking at ways to increase the occupancy of the lodge which has been affected by a drop in tourism. He is also considering how to help Zizi Lodge increase its business and profitability. One of its more recent initiatives is to introduce budget golf packages.

Mola believes that KERPEF has made a substantial impact on rural communities by helping entrepreneurs create viable businesses. He adds that a further benefit of KERPEF’s investment will the broadening of the ownership of the businesses when KERPEF exits the investment because its equity will be taken over by employees of the organisations in which KERPEF has invested.

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KT’s leadership has set the tone for the organisation and steered it through three quite different organisational eras, which can be broadly categorized as a period of activism (1985-1990), a period of transition (1990-2005) and a period of maximization (2005-2015).

The activist period was characterised by development activity with a strongly political agenda. The Trust’s reason for being was to aid the anti-apartheid struggle. It was extremely well funded, but completely reliant on donors for this funding. The transition period was characterised by change, as the Trust transformed into a professional development agency, embarked on its investment in KTI, and adapted to making an impact with far less funding. During the maximization period KT has refined and strengthened its development programmes to ensure that they make a greater impact, and learned to manage its investments so as to maximize the funding available for development.

The leadership team of the activist period reflected KT’s political agenda. Archbishop Tutu commented that in choosing the initial trustees, (Rev Boesak, Coleman, Rev Chikane, Prof Gerwel, Father Mkhatshwa, Molobi, Mohamed, Dr Naudé, Nkomo and himself), KT had been intentional in focusing on the “high flyers in the South African struggle”, because this would give the Trust credibility. Molobi added, “We chose people from the church because we knew that although they were nothing compared to the apartheid machine, they had built up an international profile.

Having high-profile people kept the Trust safe: otherwise the state would have tried to destroy it.”

KT’s first employees were also primarily anti-apartheid activists. Dangor and Qubeka had deep roots in the anti-apartheid movement. Dangor, a writer, poet and political activist, had been banned from 1973 to 1978 for his political activities and was an active member of several writers’ organisations which advocated an end to apartheid. Qubeka was a member of the generation of school students involved in and influenced by the Soweto uprisings of 1976, and was working for the SACC prior to joining KT. Another of KT’s early project managers, Vincent Mogane, was co-founder, along with Popo Molefe, of the Azanian People’s Organisation in 1979. (See Appendix 6 for details of KT’s trustees, directors and staff at selected periods in KT’s history.)

Political credentials alone were not enough, however. Strong organi-sational and administrative skills were also necessary to establish the new development organisation and ensure that it operated effectively. Dangor served as CEO until 1991, and he and his team put in place the necessary administrative infrastructure, and helped to steer KT through the

political and security challenges of the time.

KT’s LEADERSHIP: SETTING THE TONE AND SETTING DIRECTION As noted already, the release of

Nelson Mandela in 1990 and the start of real negotiations to bring about an end to apartheid marked the beginning of a period of significant transition for KT. It brought about an end to EU funding and the search for financial self-sustainability. Dangor stepped down as KT’s CEO in 1991 to deputize Molobi, who took over as CEO. During this period of transition, KT’s leaders made some important decisions which shaped the organisation into the future, as they saw the need to move away from activism and to professionalize the organisation. These did not relate only to the launch of KTI, but to the organisation as a whole.

This transition is evident in Molobi’s remarks in the Trust’s 1992/93 Annual Review: “Kagiso Trust is a young and vigorous South African development agency. Launched in 1986, we struggled to survive in an apartheid environment made worse by emergency rule. Today we operate under conditions of relative normality. As a result, we have been able to professionalize our services without sacrificing sympathy and identity with our many disadvantaged communities.”

At the same time, KT’s leadership took another important decision: where it had been actively aligned with the apartheid resistance movement, the organisation would not actively align itself with the new government. Dr Nkomo explains, “We said we would be independent, not aligned to government, so that we could become an anchor in civil society. We also believed strongly that there should be a strong civil society.”

By 1992, the composition of the board of trustees reflected these decisions. Thus, the founding trustees had been joined not only by Zanele Mbeki, but also by Appelbaum, Dr Mangaliso Maqhina, Rev Nevhutalu (who had previously belonged to a regional board) and Bongiwe Njobe. Commenting on KT’s period of transition, Nevhutalu says, “I think that we were quite innovative and had resilience, and realized that just because there was a new government, it did not mean that the development needs of the people were going to go away. Nor did it mean the new government could meet all the country’s development needs.”

Not only did the composition of the board of trustees change, so did that of its staff. Mohamed commented in 1994 that from a staffing perspective the transition had not been easy. “I think at this juncture, this transition has caused us problems. We have addressed this in two ways – in the new staffing policies where we are looking for slightly different kinds of combinations and in upgrading skills.”

In this period, the KT leadership team appointed a number of key people who would serve the organisation in the years to come, among them Ratsomo, Kleinschmidt, Sowazi, Schoeman and Mola. Aside from struggle credentials, these people all brought strong development skills to KT. Kleinschmidt, Ratsomo and Schoeman went on to lead KT at various stages in its history: Kleinschmidt from 1995 to 1997, when Molobi resigned to take on his new role at KTI; Ratsomo from 1997 to 2000; and Schoeman since 2000. Sowazi went on to head up KTI and,

after leaving KTI to found the Tiso group, is chair of KTH today. Mola is KT’s COO.

Restructuring KT

At the same time as the transition to a professional development organi-sation was taking place, KT had to operate on a substantially reduced budget. The Trust was therefore under pressure to restructure and cut its operating costs.

As the Trust’s activities had expanded during the 1980s and early 1990s, so had its number of employees. By 1995 the organisation had 89 employees spread across the head office in Johannesburg and six regional offices in Transvaal (Northern Transvaal as sub-regional office), Durban, Cape Town, Kimberley, Polokwane and Border /King William’s Town (Port Elizabeth as sub-region). KT’s leadership came to the conclusion, says Mola, that the Trust “had to be realistic as an organisation with all those offices nationally, because we needed to reposition KT.” This meant that the organisation had to close its regional offices, retrench staff and run a much leaner operation.

It was not an easy process. Says Rev Nevhutalu: “Everybody was concerned about the plight of the people, the projects we supported and the work we did. It was a painful experience. Because when you have been such a big family, you had staff. Radical decisions had to be made in terms of downsizing and retrenching people.”

KT tried to ensure that the process was as kind to staff as possible. Ratsomo, who was national projects

TRANSITION

ACTIVISM

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director at the time, went to each office and told people face-to-face that they would be retrenched. “We had decided to retrench people but convert them into consultants for KT,” he says. “They would still earn the same but would not be on KT’s medical scheme. In this way we reduced some of the costs. We sold the company cars to them and they then charged us per kilometre.”

What made the process more difficult for KT was that its staff could see that KTI was thriving. Ratsomo explains,

“There were arguments over why KTI money was not coming to KT.” Some of the KT trustees and management believed that in light of KTI’s apparent prosperity, KTI should start paying dividends. But after much debate, KT decided to hold to its decision to give KTI 10 years to get on a financially stable footing.

At the end of the process of retrench-ment, KT had about 25 full-time staff, all based in its Johannesburg office. This number has remained relatively

consistent ever since. Schoeman says that KT’s philosophy is not to try to have all the skills it needs in-house, but rather to partner with organisations that already have the skills. He believes that this is far more effective, because, instead of spending time and effort on developing skills from scratch, KT can make use of existing, proven expertise. (Appendix 7 contains a list of KT’s trustees, directors and staff in 2014.)

Schoeman took over as CEO in 2000, some time after the organizational restructuring had taken place, but mid-way into KT’s transition process. He has led KT ever since, overseeing the organisation’s work for more than half of its existence. He says that he has had a very strong focus on ensuring that both the communities which KT serves and KT staff are held accountable for their actions. He wants to ensure that communities do not become dependent on KT, but learn to fend for themselves.

Similarly, he wants to make sure that KT staff members deliver their best. Commenting on how he has led KT, Schoeman says, “People who worked with Eric said he took a risk for them. I have not fully copied Eric’s philosophy, but I have always thought that it is important, particularly with young people, to give them a chance. If they do not take that chance, then I will pull them back and have a hard conversation with them.”

Under Schoeman’s leadership, and since 2005 in particular, when KT was set to realize its first dividend from KTI, KT has developed into an organisation

with two major emphases: maximizing the impact of its development work and maximizing the benefits from its investments.

In regard to the former, Schoeman has focused on refining KT’s programmatic approach to development and entrenching the partnership model that maximizes the funds available and furthers government and community support for KT’s programmes. Having started the BNSDP with one school in Limpopo in 2004, Schoeman regards one of KT’s greatest achievements to be that the programme now operates in 167 schools in the Free State and has transformed education in the district in which it operates. He takes great pride in the number of schools which will be impacted by the combined investment of R400 million by KT, Shanduka Foundation and the Free State Department of Education over the next few years.

Regarding the latter, Schoeman came to the conclusion that KT itself needed to have in-house finance and investment expertise. He realized this most forcibly when KTI was reluctant to pay its first dividend at the end of

the 10-year grace period and KT had to argue its case with the finance experts at KTI. Makosholo and others have filled this gap. Having in-house financial and investment expertise enabled KTI to negotiate a dividend policy with KTI in 2006 and ensure a favourable dividend policy during the KTI/Tiso merger. It has also enabled KT to act with confidence on the KTI/KTH boards and to manage the FRET investment to its advantage.

These two emphases are also now reflected in the composition of the KT board. “We do not choose trustees randomly,” explains Mola. “We look at the skills and gender representation that we need and try to find trustees who fit.” Today, the political connections on KTs’ board of trustees remain strong, but development and financial expertise are crucial, with Goolam Aboobaker, Angel, Appelbaum, Rev Chikane, Andrew Maralack, Mbeki, Nevhutalu, Njobe, Ntsaba, Ratsomo, and Girlie Silinda as members.

More recently, KT has realized that it can share its investment experience with other NGOs. In 2012 KT

MAxIMIZATION

partnered with the Kenya Community Development Foundation (KCDF) to start an investment holdings company, KCDF Investment Holdings. KCDF operates on a similar principle to KTI. The company seeks to invest in high-quality, market-leading companies with potential for regional growth and to use dividends to fund development work. KT will also benefit because it has expanded its asset base and is now able to leverage investment opportunities in the rest of Africa. More initiatives of this kind have also been planned in Mozambique and Ghana.In South Africa, in 2013, KT started the KT Leverage Fund (KTLF) to help other NGOs become self-sufficient. Ratsomo explains, “We see many NGOs are struggling with funds, but they can be saved and take a step closer to what KT has done. We help them look into our policies, our programmes and their relevance, and see if it can help them move on.”

The KTLF began its work by helping the SACC revive its fortunes. Histori-cally, the organisation has played a critical role in fighting injustice and discrimination and KT believes the SACC is vital for entrenching democracy and moral regeneration programmes in South Africa. KT is helping the SACC to become self-funding by assisting the organization to restructure and to create its own revenue stream through the utilisation of one of its fixed assets. KTlF also supports the National Association of School Governing Bodies, an organi-sation which plays an important role in the delivery of discipline and quality education.

Reflecting on the past 30 years, KT and its trustees are proud of what the organisation has managed to achieve. “For me KT is an entity that is rooted in service,” says Schoeman. “It is a story of leaders who thought about creating an investment to support the activities of the Trust for the future. It’s a story of trust, ethics, honesty and service. It is a story of leadership – where the ones who have taken over have not forgotten what this organisation represents.” Many staff members could earn more in the private sector, but choose to work for KT because of this story.

The trust has spent close to R2 billion on development activities in the past 30 years. Its goal of being self-sustaining has been achieved, and KT is now worth a substantial sum of money. When its shareholdings in KTH and FirstRand, among others, are taken into consideration, it is now worth R7 billion. Its shareholding in KTH guarantees a dividend of about R50 million a year. Its shareholding in FirstRand could earn dividends of around R100 million a year.

Schoeman reflects that much dis-cussion has taken place between KT management and trustees regarding the way forward for KT, given that payment of the first FirstRand dividend is imminent. He says that at a recent meeting of the trustees in the Eastern Cape, Angel made a very valid point: “She said that we have to know what we are going to do with the money before we get it. She said we have to ring-fence it so that we do not waste it, and that we continue to stick to our path as a development agency that makes a contribution to society.”

KT’s decision has been to form a new investment company, Kagiso Capital (KC), of which KT will be the sole shareholder. The idea is to use the KTH dividend and a portion of

the FirstRand dividend to fund KT’s activities and to invest the remainder of the FirstRand dividend in KC. “If KT can put between R70 million and R80 million a year into development, this will enable us to put into effect our goal of partnership-based development activities,” says Schoeman.

“We decided that we cannot be dependent on dividends from only two sources. By creating another investment company, we can look for other opportunities. KC will be well positioned to take advantage of the next wave of BEE deals.” KT also sees benefit in being the sole shareholder, as this will give it complete control over the activities of Kagiso Capital, not the diluted control that it now has over KTH and FirstRand.

The trustees were concerned about how Kagiso Capital would be managed, as it would be operating in essentially the same space as KTH. “But we have decided to operate at a different level,” says Schoeman, “because they are now making investments of R500m and above. At least in the short term, KC will be making smaller investments.” he adds, “KTH has already sent one investment opportunity to KC, because this investment did not fit its criteria.”

Schoeman and Makosholo will move across to manage the new company and a new CEO and CFO will be sought for KT. Management of all of KT’s investments will be housed within Kagiso Capital, including the existing investments in KTH and FirstRand. This will allow KT to focus solely on its development activities.

Since it sought to achieve financial sustainability by starting KTI in 1995, KT has straddled the two worlds of capital and development. Where its challenges in the early years were those of navigating the political times, one of its biggest challenges in the future will be successfully straddling these two worlds. Schoeman remembers the words of a previous trustee: “Do not be seduced by the ethics and culture in business of always chasing the money. You cannot chase money at all expense. You have to be able to say that you will not do business if it affects your integrity.” He and the rest of KT’s leadership team realise that as KT intensifies its involvement in the world of capital, this must remain the organisation’s benchmark.

LOOKING TO THE FUTURE

More than 30 years after it was founded, KT has become a self-sustaining professional development agency and it is making a positive impact on South African society. What are the reasons for this success? What can others learn from KT’s experiences? The lessons from the KT story need to be shared. This section therefore provides an analysis of the KT case that will draw out the challenges and successes of the organisation thus far. We will do so by analyzing the three broad components of the KT story: organisation and leadership, finance and funding, and developmental philosophy and impact.

WHAT CAN BE LEARNED: THE REASONS FOR KT’S SUCCESS

The KT story is one of revolution, evolution and organisational growth. The organisation has been able to read the (sometimes quite dramatic) changes in the environment, and adapt in a planned and structured way. Sound organisational change is premised on identifying four factors: the organisation’s purpose, its challenges, its risks, and its opportunities. KT’s leadership has, over the years, been able to identify these factors and devised appropriate responses. It has been able to do so for a number of reasons:

People

KT was founded by some of the leaders in the struggle against apartheid and founders of the UDF: itself a powerful, well-organised movement. KT’s founders chose high-profile trustees so that it would be more difficult for the apartheid government to shut the Trust down. This had the added spin-off in that, along with untouchability

for KT, they brought with them the administrative and organisational skills that were necessary to establish the organisation properly and set it on the right path. The same can be said of KT’s first employees. Both Dangor and Qubeka had the credentials and skills to be able to establish KT’s structures and direct the organisation through some very turbulent and uncertain years.

It is interesting to note that some of KT’s founders, initial trustees and employees who left the organisation went on to hold high-profile, respon-sible positions inside and outside of government. This indicates the level of their political status – a crucial factor for the establishment and survival of KT in the early days – and also the level of their organisational and administrative skills.

This focus on securing trustees with the appropriate interests and skills has continued to this day; as has the

focus on employing people with the right skills. As a consequence, KT has avoided becoming an organisation of self-serving cronies and has become, instead, a professional organisation that aims to deliver excellence to those who it serves.

Many of the trustees and key employees of KT have been associated with the organisation for a long time. This has created continuity within the organisation. It ensures that the focus of the organisation remains the same. It means that institutional memory is retained. It enables long-term, strategic thinking.

A crucial component of KT’s success has been the role of the trustees in setting the vision for the organisation and holding the executive to account. It is evident that the trustees take the work of the Trust very seriously. They apply their minds to its work and are actively interested in and concerned with what KT does. The trustees

ORGANISATION AND LEADERSHIP

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may not always be visible, but they provide very important guidance and direction. Successful change is not about visibility, it is about presence. The presence of the trustees has contributed in large measure to the way in which KT has successfully managed to adapt to its changing environment.

Values

The founders and early trustees had a fundamentally important role in shaping the values of the organisation. What is striking is that so many of the founders, early trustees and current trustees are, or have been, involved actively in the church. It seems that this has given them a common set of values that are integral to the way in which KT operates. Some of these values have been formalized into a statement of philosophy.

It is evident too that there are a number of unspoken values in place – such as independence and innovation – which have helped the organisation to stay true to its purpose in a changing environment. Valuing independence is important in organisations that are dependent on donor funds because this can prevent such organisations from developing a begging-bowl mentality and, as a result, serving their donors rather than those in need.

Valuing innovation has enabled KT’s trustees and staff to think unconven-

tionally: to embrace the idea of establishing KTI even though it would involve straddling the worlds of business and investment, which are not conventionally the domains of development activists; and to take the risk in starting new programmes, projects and organisations from scratch rather than funding the activities of other organisations.

Shared Leadership

Another component of the organi-sation’s success is that leadership has been shared. Although strong personalities have made an important impact on the organisation, the organisation has always been bigger than one person alone, and ownership and direction have not been abdicated only to one person. These have been shared. Shared leadership reduces risk and complexity and increases the potential for successful change, by bringing a variety of skills to the table and creating a strong logic for change.

Accountability

In the early days, although resolute in its desire for independent decision-making, KT’s operations were strongly influenced by its largest funder, the EU. The EU demanded accountability in reporting on the projects it supported. As a result, even though limited by operating under the apartheid regime, KT had to put in place internal structures that would

enable it to provide the necessary report-back to the EU. Thus, from the outset, there had to be a level of accountability and sophistication in the internal processes that may not have been present in an organisation that was held less accountable.

This accountability continues today and ensures that KT applies the principle to itself and also to those it seeks to serve.

Reputation

One of KT’s greatest resources has been its reputation. In the early days, aside from the compelling nature of its cause, KT’s reputation was derived largely from the formidable reputation of its founders and trustees. Today, by virtue of the fact that it has stayed true to its values, KT has a reputation of its own for acting with integrity and delivering development services in a professional manner.

KT realised the importance of a good reputation early on in its history, knowing then that as a donor-funded organisation, its continued ability to achieve its aims relies on its reputation. The value of a good reputation has been shown repeatedly over the years, among other things in its ability to attract funds to start KTI; in its ability to attract and retain employees with the right skills and values; and in FirstRand’s choice of KT to form part of FRET.

An analysis of the lessons that can be learned from KT’s journey to financial sustainability has to be preceded by an analysis of KT’s current financial position. This analysis shows a largely

favourable position.

Balance Sheet

From the perspective purely of

securing the financial sustainability of KT, KT’s investments in KTI and, more recently in FirstRand, have proven successful. According to our analysis, the total fair value of all of

FINANCE AND FUNDING

KT’s investments currently amounts to more than R6.6 billion (see Appendix 8). The cost of KT’s investment in KTI was R6.1 million. Fair value of this investment was an estimated R3.2 billion in 2014. The FRET investment, which cost just under R200 million in 2005, is now worth close to R3.8 billionb. Overall, the investments have performed well over this period, helping to build KT into an organisation with a substantial asset base.

Technical analysis of KT’s balance sheet reveals that the balance sheet is sound. KT’s assets consist mostly of investments available for sale and investments held at cost. Assets have far exceeded liabilities over the 13-year period since 2000. The highest liability that KT has had over the years relates to funds available for projects. The organisation’s working capital has been positive since 2000, and has increased by 22.3% from R9.7 million in 2001 to R271.6 million in 2014. This indicates that liquidity, as measured by working capital, has never been a problem for KT.

KT’s capital structure is also favourable, with 99% of its balance sheet comprising equity. This means that creditors cannot restrict KT’s freedom of action and that the Trust’s activities cannot be hurt by high interest costs.

Certain ratios are useful in analysing KT’s financial position (see Appendix 9). Liquidity ratios indicate that KT has sufficient cash to meet its short-term obligations when they fall due. The debt ratio and debt-equity ratios are generally very low, especially from 2010 to 2013. As mentioned above,

this means KT’s activities cannot be affected by having to pay high interest costs, as the entity’s assets are largely financed by equity.

KT’s biggest assets are its financial assets, although it does have some fixed assets. The total asset ratio is low and has deteriorated over time, indicating that financial assets and property, plant and equipment are not generating much revenue for KT. But on the other side, KT’s assets comprise long-term investments. Thus they would be expected to create revenue in the long-term rather than in the short-term. The ROA and ROE fluctuate and track each other quite closely. Both were at their highest in 2012 at 57%. Generally the profitability ratios are eratic because of the fluctuating revenue and profit which is characteristic of this type of organisation.

Overall, our analysis of the balance sheet reveals that KT has sufficient cash to finance its developmental projects or to invest for long-term growth, and that it is not highly leveraged and therefore cannot be restricted by creditors in their developmental, growth or value-creating decisions. However, KT needs to investigate different ways of generating revenue effectively and efficiently, while bearing in mind that its assets will not be able generate meaningful revenue in the short-run.

Income

More than securing KT’s sustainability as an organisation, however, its investment in KTI/KTH has secured dividends that have made a large

contribution to ensuring that KT has been able to achieve its community upliftment goals. The total sum received in dividends from KTI/KTH over nine years is almost R179 million, which is reasonably substantial. It was only in 2011 that KT did not receive any dividend income from KTI/KTH, and this was due to a post-merger dividend holiday. KTH has gone on to pay dividends of R30 million and R50 million in 2013 and 2014 respectively. The 2014 dividend was far larger than any received in previous years. In this way, the merger of KTI and Tiso to form KTH looks like it might bear greater fruit for KT in the form of dividends into the future.

At the time of the merger, KT took the opportunity to cash in some of its shares and invested this money in unit trusts and fixed deposit accounts. As a result, interest income exceeded dividend income in 2013 and 2014. In fact, interest income has formed almost a quarter of KT’s income since 2006.

KT’s financial statements support its assertion that its dividend income has helped it to leverage additional funding for its programmes. The organisation counts into donations revenue the co-funding it receives from programme partners such as the Free State Department of Education. Such donations have formed a substantial portion of KT’s revenue since the organisation started receiving dividends – averaging 34% of income over the nine-year period and reaching a high of 54% in 2014. Donation income has generally increased as KT’s dividend income has increased. (See Appendix 10.)

b It must be noted that although KT’s financial statements provided the trustees’ valuation of its investment in KTI between 2001 and 2007, no such disclosure has been made in the financial statements since then. We have approximated the fair value of KTI (who subsequently became KTH)from 2008 to 2014 by calculating the difference between the net asset value of the consolidated group results of KT and its unconsolidated results. One could question the validity and accuracy of such approximation in conjunction with the steep increase since 2008.

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Thus, taking into consideration growth in donations, interest and dividends over the 13-year period from 2001 to 2013, KT’s compound growth rate (CGR) in revenues was 30.6%. Closer investigation reveals the dividend impact: between 2001 and 2005, the CGR in revenues was 3.7%, but since KTI started to pay dividends, the CGR has been 71.2%.

Comparison with other NGOs

The benefit of comparing KT’s income with that of other NGOs and charities is limited. Each organisation operates in an entirely different sphere. Nevertheless, it is worth analysing the extent to which having the KTI/KTH dividend has indeed secured KT more funding than it would have been able to secure through more conventional methods.

According to figures provided by the Organisation for Economic Co-operation and Development (OECD), international aid to South Africa quadrupled between 2002 and 2012, from $337 million to $1.34 billion. However, most of this funding was directed to the local offices of international NGOs. Less than 2% went to South African NGOs in the governance and civil society sector (into which KT’s activities would fall). Increasingly, donors are committing funds to climate change, and these funds are being diverted from what would otherwise have been allocated to health and education. On the local funding front, while the CSI spending of South African companies has been growing at above the inflation rate, less than half of that spending is allocated to NGOs.

Thus, in recent years, local donor-funded charities have struggled to find funding. The honorary treasurer

for Johannesburg Child Welfare (JCW), Grant Robson, noted in JCW’s 2013 Annual Report that the global recession of the previous few years had made it very difficult for the NGO sector to raise funds. Early in 2013, the Institute for a Democratic Alternative for South Africa (IDASA) had to close its doors because international funding had dried up.

Evidently, then, KT’s decision to secure its own source of funds in the long-term was prescient, making it independent of the vagaries of the donor market. But what about the scale of the funding? KT’s average dividend income over nine years has been just under R20 million a year, with the highest dividend ever of almost R41 million in 2014. Average total income has been close to R60 million a year. This average is skewed somewhat by the fact that non-dividend income in 2013 and 2014 was extraordinarily large, as KT earned increased interest income and, in 2014, received a large co-funding amount from the Free State DoE. From 2006 to 2012, average nominal income was R34 million.

Given the preference of international donors for funding local branches of international aid organisations, KT’s income cannot compare with international agencies. PACT South Africa and Right to Care reportedly received a total of R650 million and R310 million respectively in 2010. World Vision South Africa received a total of R100.6 million in 2013, of which R91.2 million came from World Vision International and the rest was raised locally. In 2012 the organisation received a total of R112 million, of which R105.5 million was raised from World Vision International and R6.5 million was raised locally.

One of the better-funded local NGOs is The Nelson Mandela Children’s Fund. It has raised R1.4 billion from investments and donations since it was founded in 1995. More recently, investments have started to form a greater proportion of its income. Thus in 2014, it received income of just under R106 million, of which R65 million was from investment income. The year before, investment income amounted to R52 million and donations to R27 million.

When comparing KT to other trusts that are dependent on investment income, KT’s bigger share in KTI/KTH shows its effect. KT has received a little less than double the amount per year from KTI/KTH than the amount which Shanduka committed to the Shanduka Trust in 2004. At the inception of the Shanduka Trust in 2004, Shanduka (with an NAV of approximately R8.8 billion in 2014) committed to spending R100 million over a period of 10 years through the Shanduka Trust – that is R10 million a year on average. Women’s Development Bank Investment Holdings (WDBIH), which was established in 1996 as a means of creating sustainable income for the WDB Trust, and had a NAV of R2 billion in 2012, has transferred more than R150 million to the WBD Trust in the past 19 years – an average of R7.9 million per year.

Johannesburg Child Welfare, which is entirely dependent on donations and government subsidies, managed to raise R29.6 million in 2014 and R28.7 million in 2013.

The above analysis shows that, to date, KT’s income compares relatively favourably with a range of NGOs. KTI/KTH dividends have provided stability and they have enabled the organisation to leverage funding

for its development activities and, thereby, maximise the impact of these activities in the community.

Lessons

What are the lessons that can be drawn from KT’s experience? Clearly, not all NGOs are in a position to start investment companies that will be able to take advantage of BEE deals. Neither will all of them have characteristics that make them attractive to companies seeking BEE investment partners. Nevertheless, there are broader lessons that can be drawn from KT’s story.

Most obvious, is the value of securing non-donor income. There is an argument that doing this could take the NGO’s focus away from its core activity. KT had to start an entirely new business to secure independence from donors. NGOs devote a substantial portion of their time and resources to raising funds from government and other donors. Sometimes this effort comes to nothing. Perhaps NGO’s time and resources could be better spent on activities that secure a sustainable income. This is the model that social-entrepreneurs favour. It may have relevance in other arenas.

A second lesson is the value of a short-term strategy and long-term planning.

Faced with imminent demise because of lack of funding, this can be difficult. But it was long-term thinking that enabled KT to consider establishing KTI, knowing that dividends would not be forthcoming in the short-term. KT focussed on creating long-term sustainability and made a plan to continue with its work in the meantime, even though this required restructuring and cutting back on its activities.

A third relates to finding ways of using existing, tangible and intangible assets to generate an income. KT had intangible assets: its reputation and that of its founders and trustees; the persuasiveness of its cause; and the fact that, in an environment where BEE was becoming a necessity, it was black-owned and operating in the sphere of broad-based community development. It also had some savings of its own. KT was able to use these assets to persuade financiers to provide seed funding for KTI. KT has subsequently helped the SACC use one of its buildings as an asset that generates an income.

A fourth is the value of proactive, creative thinking. KT broke the mould when it started KTI. Not only did it choose to operate in the unfamiliar territory of capital, the Trust started a business that would fund its activities.

Conventionally, it is BEE investment corporations that form development trusts, as they look to include a broad-based component in their offering. By doing it the other way around, KT managed to secure a substantial stake (50% in KTI and now 38% in KTH) in what has grown to become a sizable investment company. BEE investment companies usually allocate a much smaller proportion of shares to a development trust. Thus, for example, Shanduka gave 5% ownership to the Shanduka Foundation. The Tiso Group allocated 7% of its shares to the Tiso Foundation. An exception appears to be the establishment by Women’s Investment Portfolio Holdings Ltd (WIPHOLD) of the WIPHOLD Investment and NGO Trust in 2003 (nine years after WIPHOLD itself had been formed). This trust owns 32.5% of WIPHOLD. The Trust’s beneficiaries own 17.5% of WIPHOLD.

Not all NGOs can follow the same model, but the principles of being creative and proactive remain relevant.

KT forged into new territory by using these principles and secured itself financially as a consequence. It may be that other NGOs can benefit from these principles too.

Development organisations have tended to adopt one of two strategies to development: a broad approach and a narrow approach. The broad approach attempts to bring about societal change through the transformation of the power dynamics in society. The narrow approach attempts to attain specific measurable outcomes.

It adopts a more limited definition of development that is linked to the reduction of poverty and achieving the Millennium Development Goals.

KT’s activities in the early years followed the broad approach, as the organisation was used as a vehicle to promote the struggle against

apartheid. During this era, KT funded a large number of diverse projects. Most were not initiated by KT as the organisation was merely a channel for funding and monitoring how the funds were disbursed. All projects that KT funded during this era fitted into KT’s broad developmental aim of furthering the struggle against apartheid.

DEVElOPMENT IMPACT

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The case study shows that, in large measure, KT’s efforts within the broader focus of development did make a positive impact. Many of the projects that KT funded in the early years enabled ordinary citizens to take a stand against the apartheid state. Hence KT’s efforts contributed to the demise of the apartheid state and the successful transition to democracy. Its bursary programme provided opportunities for people who would otherwise not have had them and who, even now, benefit from the education they received, and are able to contribute to society as a consequence.

As victory in the political struggle was achieved and EU funding came to an end, KT began to adopt a narrower approach, with the focus on making a long-term, sustainable impact and on initiating and running its own programmes, rather than funding short-term projects initiated by external donors.

The change in their approach has seen the launch of organisations such as the JHC and the Mvula Trust, both of which are currently operating successfully. The JHC in particular provides a model for others to follow. Operation Blanket and the Alexandra Disability movement are currently operating on a sustainable basis due to KT’s efforts to make them self-sufficient. KT’s flagship programme, the BNSDP, is making a deep impact on schools and communities in the

Free State, and its policies are being actively supported and adopted by the Free State provincial administration. KERPEF has had some false starts, but has enabled rural entrepreneurs to start companies that look like they will be able to create sustainable jobs into the future.

How has KT managed to achieve success in its development activities? Among other things, aid and development efforts, particularly those of foreign donors are often accused of creating dependence on the donors and making little real difference in the lives of those they are intended to help. A similar criticism has been highlighted with reference to locally-developed interventions.

However, research by development academics has shown that these criticisms are not universally appli-cable. The consensus appears to be that programmes that involve the people they are intended to benefit, aim to reduce dependence on aid, are properly directed and managed, and target education and health, tend to have the most impact. Local knowledge is seen as a critical component of successful aid interventions.

KT’s approach during the broad and the narrow eras shows many of these characteristics. Its primary focus is on education. Its other major project, KERPEF, aims to create sustainable businesses that can support themselves.

KT’s own quest for self-sustainability is mirrored in the development support it provides to communities. Since the 1990s, KT’s aim has been to move projects from donor-dependence to independence, and to create programmes which bring about deep, systemic change by empowering communities to support themselves in the long-term. By insisting on partnership with government in the BNSDP, KT aims to deepen the scope of its work by bringing about real policy change, so that the system in which the schools operate supports effective education. KERPEF is another example of how KT seeks to ensure long-term, sustainable impact that empowers individuals and communities to fend for themselves.

The decision to develop its own, sustainable sources of funding has also given KT ideological indepen-dence and freedom from having to comply with often-bureaucratic donor requirements. Because South African NGOs are experiencing problems raising funds from private sector donors, many are seeking funding from government and the National Lottery. Being dependent on government can erode the advocacy function of the NGO sector. Being dependent on the lottery, exposes NGOs to the lottery’s notoriously unpredictable processes. Because KT has its own source of funds, it can set the agenda for the BNSDP and its other programmes, and partner with government on an equal basis.

With the FRET dividend coming on stream in 2015, KT stands at yet another crossroads. The first important crossroad related to the withdrawal of significant funding.

This crossroad relates to access to significant funding – albeit on a much smaller scale than that provided by the EU. KT is predicting a dividend income of at least R50 million a year

from KTH in the future and as much as R100 million a year from FRET. While this will not place KT in the same league as the internationally-funded NGOs operating in South Africa, it

Just as KT reinvented itself in the 1990s when EU funding was withdrawn, there is an opportunity for KT to reinvent itself now. Instead of limiting itself to following past strategies, KT has an opportunity to look to new strategies. Instead of, yet again, providing seed capital for BEE

investment, KT has an opportunity to do something new that may align better with the development goals to which it subscribes.

To date KT’s investment decisions and its development activities have promoted broad-based empower-

ment. At the same time as giving opportunities to employees of KTI/KTH, thousands of underprivileged South Africans have been empowered through KT’s programmes. The challenge now is for KT to multiply this impact.

THE FUTURE

THE CONCLUSION

will certainly place the organisation among the best-funded local NGOs in South Africa.

With this in mind, it is worth analysing KT’s decision to use a portion of the FRET dividend to fund KC. The decision is understandable in light of KT’s history. Given KT’s current programme structure, the organisation may not be able to spend all of the available funding available immediately. In this context, diver-sifying sources of income is attractive in principle. The global banking crisis has shown the fragility of the banking system and there is no guarantee that FirstRand could not fail in the future. Investment houses are always just one bad deal away from bankruptcy: the same is true of KTH. Ensuring 100% ownership of KC is also attractive, because it will give KT control over KC and 100% of KC’s dividends. The value of having substantial ownership of an investment house is evident in the benefits KT derives from KTH.

However, it could take a long time for the value of KC to approximate the value of KT’s FRET investment.

It is therefore unlikely that KC will be able to generate the same kind of dividends as the FRET investment – at least in the short-term and possibly in the longer term too. It took 10 years before KTI was able to pay a dividend and the first dividend was minimal.

Aside from this, FirstRand chose KT to participate in FRET because it believed that the entire dividend would go to broad-based empowerment. FirstRand chose not to partner with the likes of KTI, because it knew that only a small portion of the dividend would be allocated to broad-based empowerment.

In choosing to start KTI in the 1990s, KT chose to operate in two worlds with vastly different motives. Crudely put, the one seeks to maximise profit for personal gain; the other seeks to maximise development impact for societal gain. Relative to the financial benefit that KTI/KTH employees and directors have derived from the growth of KTI/KTH, the dividend benefit to KT and its programmes has been small. This has been a necessary trade-off because it has put KT in a better

position than many other NGOs, securing it more funding than other NGO’s have been able to achieve in more conventional ways.

One could question whether this trade-off is necessary now. It could be that in seeking further measures to ensure its financial sustainability, KT will unnecessarily sacrifice investment in broad-based development as it waits for KC to generate meaningful dividends, while, in the meantime, as a necessary part of its business, KC’s activities make a few people very rich.

KT has argued that limiting funding available for development will ensure that it continues its strategy of development partnerships that are so crucial to the success of its pro-grammes – particularly the BNSDP. However, the possibility of such partnerships is not excluded if KT has more of its own funds available. In fact, the possibility of such partnerships making a deeper impact is increased, by virtue of there being more funds available.

Appendix 1: IntervieweesTrustee Director Affiliate Dr Abe Nkomo Horst Kleinschmidt Lauretta Bruno Rev Frank Chikane Kgotso Schoeman Paul Harris Hylton Applebaum Paballo Makosholo Sizwe Nxasana Ms Mankone Ntsaba Thabiso Ratsomo Taffy Adler Dr Max Coleman Themba Mola Dr Thami Mazwai Ms Ntobakae Angel Dean Zwo Nevhutalu

Employee KTI Beneficiary

Joan Masemeng Fani Titi Tate Pule MakgoeNontando Mthethwa JJ Njeke Thembeka Clinton Nel Nkululeko Sowazi Vuyisa Nkonyeni

Appendix 2: Profiles of Key Role Players in KT’s HistoryDr Goolam AboobakerDr Goolam Aboobaker is a current trustee of KT. He trained as a physicist and economist and was actively involved in the United Democratic Front (UDF) serving, amongst others, on the executive of the Western Cape region of the UDF between 1985 and 1987. Among the positions that he has held since 2000 are that of deputy director general (and deputy head) of the Policy Unit in the office of former President Thabo Mbeki and as senior advisor to the IMF executive director. He is currently deputy director general of the national treasury.

Nthobakae AngelNthobakae Angel is a long-standing trustee of KT. Her career spans the private, government and NGO sectors. In her early career she served, among other positions, as a refugee councillor in Tanzania for the UNHCR and as an information officer for the lesotho Red Cross Society. In her corporate career, her positions included general manager of corporate affairs and executive director of strategic affairs at Eskom and CEO of Mvelaphanda Resources Ltd in 2004. From 2001 to 2003 she served as COO of strategic planning and committees in the Office of the Presidency. She currently serves as a director on several boards

including Kagiso Capital, TsaRona Investments (where she is chair-person), Mvelaphanda and Deloitte Touche Tohmatsu Ltd.

Hylton AppelbaumHylton Appelbaum has served as a trustee of KT since the early 1990s. He is executive director of the Liberty Group Limited, chairman of the Liberty Life Foundation and runs the Donald Gordon Foundation. He was a founding director of KTI and is a director of Kagiso Media and Kagiso Capital. He is a trustee of several other NGOs, including the Helen Suzman Foundation and the Nelson Mandela Children’s Fund. He founded, and is

chairman of, the Mindset Network, an education NPO.

Rev Allan BoesakRev Allan Boesak was founding trustee and patron of KT. He was ordained a priest at the age of 23 and completed a doctorate in ethics at the Kampen Theological Institute in Holland. He was one of the founders of the UDF in 1983. He is a former chairman of the ANC in the Western Cape and is currently a minister at Piketberg United Reformed Church.

Rev Frank ChikaneRev Frank Chikane is one of the founding members of KT and is currently chairman of the board. He became involved in the Black Consciousness Movement while studying at the University of the North. When he was expelled from the university because of his political activities, he worked as a layman for the Apostolic Faith Mission (AFM), before being ordained a minister in 1980. He helped launch the UDF, served as a member of its executive and was detained in 1985 together with other UDF leaders. Among other positions, he has served as general secretary of the SACC, as a member director of the national executive committee of the ANC, and as director general of the Presidency under President Thabo Mbeki. He currently holds a number of other positions, including president of the AFM International.

Dr Max ColemanDr Max Coleman was one of the founders of KT and currently serves as a patron. He founded the Detainees Parents Support Committee after the detention of one of his sons in 1981 and sold his business to focus full-time on political activities when the

State of Emergency was declared in 1985. He served as an ANC member of the National Assembly in 1994 and was a founder member of the Human Rights Commission.

Achmat DangorAchmat Dangor, a celebrated writer and poet who has published seven works of fiction and poetry, has over many years been an active champion of human dignity, freedom and equality. Prior to joining the foundation in 2013, he served, successively, as CEO of the Nelson Mandela Children’s Fund and the Nelson Mandela Foundation. An early advocate for the need to address the emerging HIV/AIDS crisis, he served as interim director of the World AIDS Campaign, and subsequently as director of advocacy and communications at UNAIDS. He is currently the Ford Foundation’s regional representative for Southern Africa.

Prof Jakes GerwelInternationally recognised and honoured as an academic, Prof Gert Johannes (“Jakes”) Gerwel was one of the early trustees of KT. He served as chairman of the Mandela Rhodes Foundation and the Nelson Mandela Foundation, and chancellor of Rhodes University. His career includes a term as director general in the Office of President under Nelson Mandela and Vice Chancellor and rector of the University of the Western Cape. He passed away in 2012 at the age of 66.

Horst KleinschmidtHorst Kleinschmidt has a long-standing association with KT, which started by virtue of the fact that he had served as an assistant to Dr Naudé at the Christian Institute of South Africa in the 1970s. His passport was withdrawn by the government in

1973, and in 1975 he was detained under the Terrorism Act. The following year he fled South Africa without a passport and was given political asylum in the Netherlands. He subsequently became head of the International Defence and Aid Fund in london, the body that financed many of the political trials in South Africa under apartheid. He was involved in liaising between the EU and the KT founders from the very beginning. He serves as a director for the AfriOceans Conversation Alliance.

Paballo MakosholoPaballo Makosholo is KT’s Finance and Investment Executive, due to move to KC later in the year to serve as its CFO. He is a chartered accountant by profession with an M.Com. SA and International Tax (RAU). He joined KT in 2009 and his primary role as CFO was to oversee the investments of KT and its finance operations. He gained corporate finance experience at KPMG and Rothschild. He serves on the boards of KTH, FirstRand Empowerment Trust and the JHC.

Andrew Maralack Andrew Maralack is a trustee of KT. He is a chartered accountant by profession and has 20 years’ experience in the public and private sector. He is co-founder and CEO of Sizwe Business Recoveries (Pty) Ltd, a company that specialises in curatorship, insolvencies and business turnarounds and is a former partner of one of South Africa’s leading black audit firms SizweNtsaluba VSP. He chairs Kagiso Capital and serves as a member of KT’s Finance and Audit committee as well as its Investment committee.

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Kgomotso Matseke Kgomotso Matseke was CEO of KTH for a brief period after the merger between KTI and Tiso, having been CEO of KTI for 11 years at the time of the merger. Before joining KTI, Matseke served as the head of the Actis Africa Empowerment Fund (AAEF), a fund aimed at financing black-owned companies.

Zanele MbekiHaving served as a trustee of KT for close to two decades, Zanele Mbeki is now a patron. The wife of Former President Thabo Mbeki, she is a former First Lady of South Africa. She studied social work in South Africa before pursuing postgraduate studies in the United Kingdom and United States. Her career includes service with the United Nations High Commission for Refugees and positions as trustee or director of several boards that promote development. She is the founder of the Women’s Development Bank.

Father Smangaliso MkhatshwaA founding trustee of KT, Father Smangaliso Mkhatshwa is a Catholic priest and former secretary general of the SACC. He was arrested under the Internal Security Act after the Soweto uprising in 1976 and detained for four months. He was served with various banning orders until July 1983. He served as a UDF patron and between 1994 and 2000 held a variety of prominent positions, including deputy minister of education from 1996 until 1999 and executive mayor of Tshwane from 2000 until 2006.

Yunus MohamedYunus (“YM”) Mohamed was a founding trustee of KT and was serving as KT’s chairman at the

time of his passing in 2008. Having joined the Natal Indian Congress in 1970 and later the South African Communist party and the ANC, he was instrumental in founding the UDF in 1983 and became its regional director for Natal. A lawyer by training, he was the instructing attorney in the Delmas Treason Trial. His legal skills served KT well over the years.

Themba MolaMola is the COO of KT, having joined the organisation in 1995. Prior to joining KT, he served as the executive director of KTC. He led the local economic cluster for the Alexandra Renewal Project and was project leader for the Evaluation of the Poverty Eradication Programme for the Department of Social Development in Gauteng. He was involved in the drafting of the Tshwane Metro Organisation and Support for Micro Businesses research project. He has also served as an advisor for the Department of Social Development in the expanded public works programme for the social cluster. He sits on the board of KTC, Kagiso Shanduka Trust, Kagiso Activ, JHC and Makhulonga Matala.

Eric MolobiOne of the people most instrumental in founding KT, Eric Molobi was a dedicated activist in the Black Consciousness Movement (BCM) during the apartheid era. In 1974, he was charged, tried and con-victed under the Suppression of Communism Act and sent to serve 8 years of imprisonment on Robben Island. He was released in 1982. Molobi obtained his BA degree while serving as a political prisoner. Aside from his involvement with KT and its associates, Molobi held the positions of vice-chair of Imperial Holdings, chair of Telkom, and director of numerous

companies, including Metropolitan Holdings, Northam Platinum and NM Rothschild and Son (South Africa). He was awarded the prestigious Ordre National de la Legion d’Honneur by the French government in 1994. He passed away in 2006 at the age of 58.

Dr Beyers NaudéA founder and founding trustee of KT, Dr Beyers Naudé studied theology at the University of Stellenbosch and completed a Master’s degree in languages. After the Sharpeville massacre in 1960, he resigned from both his church post in the Dutch Reformed Church and the Broederbond (of which he had been a member), and accepted a post as director of the new multi-racial Christian Institute. At the same time, he became an underground supporter of the anti-apartheid resistance. In 1977 the government banned Naudé for seven years. After his unbanning, he succeeded Archbishop Tutu as general secretary of the SACC. He passed away in 2004 at the age of 89.

Dean Zwo NevhutaluA long-standing trustee and former chair of KT, Dean Zwo Nevhutalu was introduced to KT by Coleman. He is a pastor by profession and served as chair of the Institute of Contextual Theology and Educational Aid Pro-gramme, Transvaal branch and the Independent Electoral Commission in Limpopo Province. He has extensive experience in education, having spent a number of years working as the superintendent-general of the Limpopo Provincial Department of Education. His involvement in community programmes includes being the chairperson of Ecumenical Confessing Fellowship and also the Educational Aid Programme. He is a member of the National Project

Consolidate Advisory Working Group. He serves on the board of KTH, KTC and the Kagiso Shanduka Trust advisory board.

Johnson NjekeMfundiso Johnson Ntabankulu (‘JJ’) Njeke is a chartered accountant who spent six years as audit partner at PricewaterhouseCoopers prior to his appointment as managing director of KTI on 1 June 1994. He remained in this position, serving on various boards in the Kagiso group, until his resignation on 30 June 2010. He is presently the chairman of Silver Unicorn Trading 33 (Pty) Ltd. He serves on the boards of Adcorp Holdings Ltd, ArcelorMittal (SA), the Resilient Property Income Fund, the MTN Group Ltd, Sasol Ltd and the Council of the University of Johannesburg.

Bongiwe NjobeKT trustee, Bongiwe Njobe, is the owner of ZA NAC Consulting and Investments. Prior to starting ZA NAC, she headed up the corporate affairs function at Tiger Brands and South African Breweries. She also held the position of director general of the Department of Agriculture. She went into exile with her parents in the 1950s and spent most of her childhood in Zambia. In her adult years in exile, she worked in farm management both in South Africa and in Tanzania.

Dr Abe NkomoANC veteran, Dr Abe Nkomo was a founding trustee of KT and served in this position during the organisation’s early years. He is a general prac-titioner (GP) by profession and served the community of Atteridgeville for 24 years. As an ANC MP and chairperson of the Health Portfolio, he helped to ensure implementation

of the public health reform process in South Africa. Dr Nkomo received the Nelson Mandela Health Award in 1999.

Vuyisa Nkonyeni The current CEO of KTH, Vuyisa Nkonyeni is a chartered accountant with more than 15 years’ experience in investment banking and private equity. He served his training contract with Price Waterhouse, and subsequent to his training, which he completed in 1996, he joined Deutsche Bank. There he gained investment banking experience primarily in corporate and project finance advisory work over a four-year period. He has in the past also served as a director at Actis LLP, where he was part of a team of three investment professionals responsible for Actis’ Black Economic Empowerment funding unit, the Actis Africa Indigenous Fund.

Prof Wiseman NkuhluProf Wiseman Nkuhlu, who served as a trustee of KT and is the former KTI chairman, is the chancellor of the University of Pretoria. He served as an Economic Advisor for President Thabo Mbeki from 2000-2004 and chaired the Development Bank of Southern Africa transformation team from January to May 1995. He was the first black chartered accountant in South Africa.

Mankone Ntsaba Mankone Ntsaba is a trustee at KT and a researcher at Forestek CSIR. She has authored publications on capacity building in the power sector of South Africa and an environmental perception management strategy for Engen, a petroleum company. She has professional skills in scoping and public participation methodologies,

environmental impact assessments and benchmarking studies, research and report writing.

Peta QubekaPeta Qubeka was the first employee of KT. After leaving KT, Qubeka (now Mashinini) went on to obtain an MBA and is currently serving as a trustee of the Batho Batho Trust, as a non-executive director of Thebe Investments Corporation and deputy city manager: corporate services for the Ekurhuleni Metropolitan Municipality.

Thabiso Ratsomo Thabiso Ratsomo, a previous CEO of KT and current trustee, has a long history of political activism, including student activism in 1976 and a prison term on Robben Island during the early 1980s. He is currently the head of ministerial services in the Ministry of Defence. Prior to joining the Ministry, he was chief director: governance in the Office of the Premier in Gauteng, which he joined on leaving his position at KT.

Kgotso Schoeman Kgotso Schoeman, the outgoing CEO of KT, has been involved with KT since 1994, when he was a programme manager. He has had considerable experience in project management, managing community participation and development processes, local economic programme development and SMME support and develop- ment – skills he uses daily in his current position. He serves on the board of various institutions, including FirstRand, KTH, JHC, Kagiso Shanduka Trust and Kagiso Activ.

40 41

43

Girlie Silinda KT trustee, Girlie Silinda, is a development practitioner who has been responsible for the design, strategic direction, supervision and implementation details of the Development Caravan Poverty Eradication Approach since its inception in 2005. She has a particular concern for women’s issues and is involved, among others, with South African Women in Dialogue.

Nkululeko Sowazi Nkululeko (‘Nkunku’) Sowazi is the current chairman of KTH. He started his career at KT and helped to found KTI. He then went on to co-found the Tiso Group, with which KTI later merged. He now serves as the chairperson not only of KTH, but also of Idwala Industrial Holdings (Pty) Ltd. Idwala Holdings (Pty) Limited, the Home Loan Guarantee Company and the Financial Markets Trust. He is ranked among the 20 richest black people in South Africa.

Bishop Mazwi TisaniBishop Mazwi Tisani is the Anglican Diocese of Ukhahlamba, Queenstown. He is the former bishop suffragan of Pretoria, having served as archdeacon of the Anglican Church in King William’s Town. He has a long history of involvement with the church and community development work, and served as Archbishop Desmond Tutu’s special adviser. Bishop Tisani was a director of KTI and is a former board member of the Transitional National Development Trust.

Archbishop Emeritus Desmond TutuArchbishop Desmond Tutu, a founder and founding trustee of KT, was ordained in 1960 and became the first

black dean of St Mary’s Cathedral, Johannesburg in 1975. In 1978, he became the first black general secretary of the South African Council of Churches. Archbishop Tutu’s dream was to see “a democratic and just society without racial divisions” in South Africa. His support for sanctions helped legitimize the campaign. In 1984, he was awarded the Nobel Peace Prize. In the same year he became the first black Anglican Bishop of Johannesburg and, in 1986, he was elevated to Archbishop of Cape Town. In 1995 Archbishop Tutu was appointed chair of South Africa’s Truth and Reconciliation Commission. He retired as Archbishop of Cape Town in 1996. He is currently a KT patron.

1986-2005

European Union (1986 - 1993)R842 634 096Japanese Government (1987 – 1997)R107 847 725Zama-Zama (1996 – 1997)R46 600 514Scandinavian donors (1995 – 1996)R10 151 778Other Donors (1987 – 1996)R97 415 300Kagiso Trust Own Funding (1999 – 2005)R45 000 000

Beyers Naudé Schools Development Programme: Previous Donors

Kagiso Trust Kagiso Trust InvestmentsAbsa FoundationFirstRand FoundationxstrataRemgro LimitedProvincial Departments of Education (KwaZulu Natal, Free State, Limpopo, Mpumalanga and Eastern Cape)RothschildSanitechEdward Nathan SonnenbergImperial Holdings

Beyers Naudé Schools Development Programme: Current Donors

Kagiso TrustShanduka FoundationFree State Provincial Department of EducationKagiso Tiso Holdings

Eric Molobi Scholarship Programme: Previous Donors

Kagiso Trust Kagiso Trust Investments Absa Foundationxstrata Remgro Limited Tiso FoundationRothschild Primedia BNP ParibasIDCTelimatrix Kagiso Exhibitions and Events Sanitech Hygiene ServicesProwalcoKagiso Financial Services Altron Northam Platinum LimitedUkhamba Holdings Mvelaphanda Group Limited ResolveMr Vuyisa Nkonyeni Mutotec Mr and Mrs RoodtMs Peggy Dulany Ms Tiisetso Molobi Mr Hylton AppelbaumMs Lauretta Bruno Ms Bongiwe Njobe

Eric Molobi Scholarship Programme: Current Donors and Partners

Kagiso TrustKagiso Tiso HoldingsMMI HoldingsMomentumRemgro LtdSFCE Consulting

Appendix 3: KT Donors

42

44 45

Appendix 4a: Kagiso Trust Financials 2001-2013Balance SheetItem ASSETS

Non-Current Assets

Available for sale investments

Investments held at cost

Plant and Equipment

Current Assets

Trade and other receivables

Amounts due from related parties

Current tax receivables

Other financial assets at fair value

cash and cash equivalents

TOTAL ASSETS

EQUITY AND LIABILITIES

Capital and Reserves

Revaluation and other reserves

Retained earnings

Non-Current Liabilities

Financial Liabilities at amortised cost

Amounts due to related parties

Deferred Tax Liability

Borrowings

Current Liabilities

Trade and other payables

Provisions

Funds available for projects

Financial Liabilities at amortised cost

Amounts due to related parties

Preference dividend accrued

Current tax liabilities

Overdraft

Total Liabilities

Total equity and liabilities

2013

R’000

4 924 637

2 435 626

2 467 993

21 018

280 214

174

5 694

0

204 282

70 064

5 204 851

5 183 337

2 052 132

3 131 205

12 925

12 925

0

0

0

8 589

928

1 469

5 278

914

0

0

0

0

21 514

5 204 851

2012

R’000

4 405 207

1 916 298

2 467 988

20 921

261 886

330

959

0

220 998

39 599

4 667 093

4 631 507

1 532 803

3 098 704

17 959

14 427

3 532

0

0

17 627

667

1 297

14 465

0

1 198

0

0

0

35 586

4 667 093

2011

R’000

1 280 225

1 258 440

0

21 785

73 726

238

2 323

0

0

71 165

1 353 951

1 326 015

867 800

458 215

18 298

14 766

3 532

0

0

9 638

745

1 375

6 579

0

583

0

356

0

27 936

1 353 951

2010

R’000

782 885

760 614

0

22 271

69 721

255

2 592

0

2 222

64 652

852 606

830 199

369 975

460 224

18 433

14 901

3 532

0

0

3 974

960

815

0

0

361

0

1 838

0

22 407

852 606

2009

R’000

497 318

474 882

0

22 436

171 176

1 579

8 914

0

1 923

158 760

668 494

492 026

166 840

325 186

56 570

15 300

41 270

0

0

119 899

3 879

572

100 000

0

12 821

0

2 627

0

176 469

668 495

2008

R’000

419 889

412 842

0

7 047

157 259

3 105

3 694

0

1 583

148 877

577 148

429 120

105 800

323 320

41 269

0

41 269

0

0

106 759

1 296

936

100 438

0

1 462

0

2 627

0

148 028

577 148

2007

R’000

839 086

838 381

0

705

128 860

152

2 128

128

2 185

124 269

967 948

728 318

558 597

169 721

138 826

0

138 826

0

0

100 804

1 178

259

97 359

0

2 008

0

0

0

239 630

967 948

2006

R’000

472 093

471 889

0

204

105 095

2

2 092

129

1 525

101 347

577 188

421 499

227 394

194 105

69 406

0

0

69 406

0

86 283

690

234

83 383

0

1 965

0

0

11

155 689

577 188

2005

R’000

306 496

306 411

0

85

97 704

124

1 946

129

1 667

93 838

404 200

266 322

72 753

193 569

56 481

0

0

56 481

81 397

902

0

77 907

0

2 268

0

0

320

137 878

404 200

2004*

R’000

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

2003

R’000

7 085

7 085

0

0

104 961

3 694

12 236

128

602

88 301

112 046

26 695

0

26 695

0

0

0

0

0

85 351

1 129

0

84 222

0

0

0

0

0

85 351

112 046

2002

R’000

16 612

16 612

0

0

86 812

701

0

0

0

86 111

103 424

23 643

23 643

0

0

0

0

0

0

79 781

1 007

0

77 226

0

1 143

0

405

0

79 781

103 424

2001

R’000

17 266

17 266

0

0

83 941

334

591

0

0

83 016

101 207

26 941

26 941

0

0

0

0

0

0

74 266

785

0

73 076

0

0

0

405

0

74 266

101 207

* 2004 financials not available as KT changed its financial year end

46 47

Appendix 4b: KT’s Income and Programme Spend (2006 – 2014)

Income

Donations

Interest income

Dividend income

Other income

Expenditure

BNSDP programme spend

EMSP programme spend

Kagiso Shanduka partnership

Programme related administration costs

Administration costs

Surplus

2006

7 593 000

656 000

1 784 000

5 153 000

–

9 916 052

4 652 487

–

–

–

5 263 565

-2 232 052

2007

19 844 000

4 445 000

2 726 000

12 673 000

–

10 170 994

4 686 313

–

–

–

5 484 681

9 673 006

2008

44 175 000

17 710 000

5 379 000

21 010 000

76 000

14 480 882

6 885 412

–

–

–

7 595 470

29 694 118

2009

43 304 000

5 799 000

14 900 000

22 120

485 000

33 335 202

15 766 441

–

–

2 392 752

15 176 009

9 968 798

2010

39 694 000

9 162 000

4 268 000

25 591 000

673 000

29 313 263

12 744 705

1 934 517

–

2 555 650

12 078 391

10 380 737

2011

40 030 000

8 083 000

2 891 000

26 623 000

2 433 000

39 427 753

17 917 953

2 839 054

–

3 727 446

14 943 318

602 247

2012

44 269 000

16 939 000

22 950

–

4 380 000

48 851 906

25 014 143

2 448 763

–

3 900 000

17 489 000

-4 582 906

2013

133 282 000

48 520 000

29 619 000

25 054 000

30 089 000

102 199 403

68 440 560

2 450 843

5 000 000

4 200 000

22 108 000

31 082 597

2014

161 135 000

2 425 000

42 965 000

40 713 000

75 032 000

202 280 636

128 449 316

3 363 529

37 500 000

5 364 130

27 603 661

-41 145 636

TOTAL

533 326 000

113 739 000

127 482 000

178 937 000

113 168 000

489 976 091

284 557 312

13 036 706

42 500 000

22 139 978

127 742 095

43 349 909

Appendix 5: KTH Board in 2015ExECUTIVE DIRECTORS

Vuyisa Nkonyeni - Chief Executive OfficerJacob Hinson - Chief Investment Officer Frencel Gillion - Financial Director

NON-ExECUTIVE DIRECTORS

Nkululeko Sowazi - chairpersonMankone Ntsaba - alternatePaballo MakosholoDavid AdomakohJan du ToitVhonani MufamadiDean Zwo NevhutaluBabalwa NgonyamaShams PatherKgotso SchoemanPieter Uys

Appendix 6: Kagiso Trust Directors and Trustees (1986 - 2014)

Rev Allan Boesak

Rev Frank Chikane

Dr Max Coleman

Prof Jakes Gerwel

Father Smangaliso Mkhatshwa

Yunus Mohamed

Eric Molobi

Dr Beyers Naude

Dr Abe Nkomo

Bishop Desmond Tutu

TRU

STE

ES

STA

FF

1986 1992 1994 1996 2008 2012

Achmat Dangor – CEO

Peter Qubeka – Project Officer

Hylton Appelbaum

Rev Allan Boesak

Rev Frank Chikane

Dr Max Coleman

Prof Jakes Gerwel

Dr Mangaliso Maqhina

Zanele Mbeki

Father Smangaliso Mkhatshwa

Yunus Mohamed

Dr Beyers Naude

Dean Zwo Nevhutalu

Bongiwe Njobe

Dr Abe Nkomo

Bishop Desmond Tutu

Eric Molobi – Executive Director

Horst Kleinschmidt – Deputy/

Executive Director

Vincent Mogane – Projects/

Programme Director

Nkululeko Sowazi – Projects/

Programme Deputy Director

Thabiso Ratsomo – Regional Director:

Transvaal

Melanie Preddy – Regional Director: Natal

Lumko Huna – Regional Director:

Western Cape

Glen Thomas– Regional Director:

King Williams Town

Hylton Appelbaum

Rev Allan Boesak

Rev Frank Chikane

Dr Max Coleman

Prof Jakes Gerwel

Dr Mangaliso Maqhina

Zanele Mbeki

Father Smangaliso Mkhatshwa

Yunus Mohamed

Dr Beyers Naude

Dean Zwo Nevhutalu

Bongiwe Njobe

Dr Abe Nkomo

Rev Mazwi Tisani

Bishop Desmond Tutu

Horst Kleinschmidt – Executive Director

Vincent Mogane– Projects/

Programme Director

Nkululeko Sowazi – Projects/

Programme Deputy Director

Thabiso Ratsomo – Regional Director:

Transvaal

Jacob Maluleke – Regional Director:

Transvaal

Cilla Grimster – Regional Director: Natal

Lumko Huna – Regional Director:

Western Cape

Glen Thomas – Regional Director:

King Williams Town

Hylton Appelbaum

Zanele Mbeki

Yunus Mohamed

Eric Molobi

Dean Zwo Nevhutalu

Rev Mazwi Tisani

Thabiso Ratsomo – Executive Director

Themba Mola – Programme Manager

Simon Maleka – Administration

Manager

Cilla Maud – Regional Director: Natal

Nthobakae Angel

Hylton Appelbaum

Yunus Mohamed

Dean Zwo Nevhutalu

Bongiwe Njobe

Prof Wiseman Nkuhlu

Bishop Mazwi Tisani

Kgotso Schoeman – CEO

Themba Mola – COO

Paballo Makosholo – CFO

Goolam Aboobaker

Nthobakae Angel

Hylton Appelbaum

Rev Frank Chikane

Andrew Maralack

Zanele Mbeki

Dean Zwo Nevhutalu

Bongiwe Njobe

Mankone Ntsaba

Girlie Silinda

Bishop Mazwi Tisani

Kgotso Schoeman – CEO

Themba Mola – COO

Paballo Makosholo – CFO

4948

50 51

Appendix 7: KT Trustees, Directors and Staff (2015)TRUSTEES

Dr Goolam AboobakerNthobakae AngelHylton AppelbaumReverend Frank Chikane – ChairmanAndrew MaralackDean Zwo NevhutaluMankone NtsabaThabiso RatsomoGirlie SilindaBishop Tisani

DIRECTORS AND STAFF

Linda Frampton – Executive Secretary Nothile Jiyane – Finance InternAmandla Kwinana – Corporate Affairs AssistantPaballo Makosholo – Chief Investment ExecutiveZandile Matakane – Programmes’ AdministratorJoan Masemeng – Senior Account ManagerKedibone Matsione – Finance AssistantAngelinah Mdakane – Programme ManagerMaria Mokae – Eric Molobi Scholarship Programme CoordinatorThemba Mola – Chief Operations OfficerPhila Moremi – Company SecretarySarah Motaung – Free State Office AdministratorSizakele Mphatsoe – Programmes’ ManagerNontando Mthethwa – Corporate Affairs ManagerPhathu Munyai – Finance AssistantSakhile Ncala – BNSDP Local CoordinatorsMzomhle Nyenjana – Finance ManagerKgotso Schoeman – Chief Executive OfficerMohlolo Selala – KERPEF Senior ManagerYoyo Sibisi – BNSDP Senior Programme ManagerLinkie Shabalala – Administration and ReceptionistTsietsi Thakalekoala – Driver

Appendix 8: Fair Value Estimates for KT Investments

Investments at fair value: 2012 – 2014 (R’000)

Investments at fair value: 2001 – 2011 (R’000)

52 53

Appendix 9: KT’s Profile Using Ratios

Ratios

Liquidity ratios

Current ratio

Cash Ratio

Leverage ratios

Debt ratio

Debt-equity ratio

Interest cover

Profitability ratios

Profit margin

Return on assets (ROA)

Return on equity (ROE)

2013

32.62

8.16

0.41

0.42

11.61

66.98

0.62

0.63

2012

14.86

2.25

0.76

0.77

988.95

15588.22

56.58

57.01

2011

7.65

7.38

2.06

2.11

-1.33

-24.85

-0.15

-0.15

2010

17.54

16.27

2.63

2.70

13.59

1474.21

15.84

16.27

2009

1.43

1.32

26.40

35.87

0.19

32.18

0.28

0.38

2008

1.47

1.39

25.65

34.50

3.70

876.85

26.91

36.19

2007

1.27

1.21

210.21

40.71

-2.24

-485.22

-16.35

-3.17

2006

1.22

1.17

26.97

36.94

-1.38

81.71

0.09

0.13

Appendix 10: Proportional Analysis of Income

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