Logistics company Imperial, along with small and medium-sized enterprise investment company Awethu, on Tuesday launched the Sinawe Fund, aimed at investing in suppliers to improve broad-based black economic empowerment (BBBEE) compliance, creating shared value and ushering in new black economic entrants.

The Sinawe Fund is an Imperial enterprise and supplier development (E&SD) intervention, that will be exclusively managed by the Awethu project. Imperial logistics will invest an initial R20-million in the fund, designated specifically for investment within the Imperial Logistics supply chain.

Imperial is also offering the opportunity to its clients to serve as a platform to solve E&SD challenges, enabling companies to invest their BBBEE budgets in its suppliers for returns and compliance.

Speaking at the launch in Johannesburg, Imperial Logistics chief business development and strategy officer Cobus Rossouw highlighted that the initiative would refocus the company’s E&SD to create a critical centre for its core business.

“It is about delivering much more than compliance [with the BEE codes] and to make a real difference in the transport and logistics sector.  It will drive the development of a pipeline of qualified small enterprises.”

He added that, being the biggest buyer in transportation in South Africa, Imperial Logistics now had a significant opportunity to build a pipeline for the sector to have greater black representation.

Rossouw further highlighted that the initiative would take E&SD from being a cost-intensive initiative to being a profit centre. “Therefore, we need the expertise of fund managers and incubators such as Awethu,” he noted.

Black private equity funds, such as Sinawe, are a special designation in the BEE codes. Capital invested in Sinawe is therefore considered black-owned capital and equity stakes acquired by Sinawe in a company’s suppliers are considered black-owned equity stakes.

Sinawe can thus be used to transform white-owned suppliers or provide equity capital to black suppliers without diluting BEE credentials.

Sinawe further enables black-owned qualifying smaller enterprises (QSEs) – companies with a yearly turnover of more than R10-million, but less than R50-million – to grow by acquiring equity in their businesses, providing them with offtake agreements and with post-investment support.

Awethu CEO Yusuf Randera-Rees further highlighted that the Sinawe Fund was targeting 20% or more returns for investors. “Most of our clients are looking to reinvest that money into further transformation,” he noted.

Randera-Rees added that the BEE codes have been "relatively lax” in how black procurement designation is set up. “You can set it up in such a way that a few people will get rich, but not much changes in the economy. For us, it is central to say that no matter whether we are investing in black- or white-owned business, it is critical to share the wealth created in these funds with new entrants in the economy,” he pointed out.

Looking ahead, Randera-Rees said he would like to see the Sinawe Fund list on the JSE, with a portfolio of thriving enterprises.

Sinawe further enables white-owned QSE suppliers to become black-owned by acquiring 51% of their businesses; providing them with offtake agreements, helping them to transform their management teams and providing them with post-investment support.

Lastly, the Sinawe Fund also enables large generic white-owned suppliers to improve their BBBEE status, by acquiring equity in the business using both E&SD and non-E&SD capital. Such suppliers offer the opportunity for substantial preferential procurement points uplift.