Government spends just over R600 Billion a year to procure services from businesses and enact its mandate. It is the biggest buyer of anything in South Africa. In line with understanding its power, it has made a conscious effort to try stimulate the growth of small businesses, by committing 30% of its total spend to small businesses. This means a total of R200 Billion of its spending is earmarked for emergent small businesses. 

The problem with this though, is that most small businesses do not have the capital to execute on the jobs and then receive payments 7 to 60 days after completing the job. This is a major contributing factor to delays in service delivery for the citizens of the country. 

Entrepreneurs who do get these contracts are forced to give up to 25% of the contract away to shark businesses that are their only option for financing.

On one side, how do you make the workings of government efficient and at the same time allow them to play a critical role in the development of small businesses?

We feel this is where a people owned funding mechanism comes in. You contribute to this campaign, we then use the proceeds to pay for the needs of entrepreneurs who have contracts with government (& the private sector) and they then pay us 6% of the value of their purchase orders once they receive their payment.

e.g. Tshepo just received a contract with Mpumalanga government to deliver 20000 pencils for R20 000.

The cost to manufacture these for him is R10 000. We, as the people, extend him this R10 000 and he agrees to pay us this back as well as 6% of the invoice value (R20 000 * 6% = R1200). He takes 3 weeks to manufacture & deliver these pencils. Mpumalanga agrees to pay him 30 days from Statement (or after delivery) so he pays us back R11 200 almost 60 days from the time we advanced the capital. He now has R8 800 in profit. He can now use this to finance his next purchase and request less from us. The ultimate objective is to allow entrepreneurs to become self reliant.

We have validated this model with a few small entrepreneurs and have developed relationships with certain municipalities to execute on this.

HOW IT WORKS:

1. You contribute to this campaign (minimum R100; Maximum R100 000).
2. 10% of your contribution is deducted from the fund to cover administrative costs (around 6% is lost in banking fees when receiving, transferring and moving the capital around. The other 4% are running and administrative costs such as site visits for entrepreneur procurement as well as legal on-boarding).
3. At the end of each month, your money is put to work as described in the example. We expect it to do 6 purchase orders with your money in a year (from disbursement to entrepreneur; to receiving payment back takes anywhere from 45 days to 60 days).
4. We take 0,6% as service fee for management of the process (hence leaving you with 105,4% per rotation).
5. At the end of 12 months from the time you contributed, we then pay you back your original capital as well as the facilitation fee. On six purchase orders per year we expect this to be 124%. Put another way, at the end of 12 months we expect to pay you R124 for every R100 you put in today. 
6. The entire payment process will be managed by The People’s Fund and Audited by SnB Chartered Accountants & Auditors ( Practice Number 966205)

EXPECTED RETURN:

NB!! First & foremost, we need to declare that this does not constitute financial advise in anyway and that we have made our projections based on historical yields. Buying assets that will be run by a small business is risky and you should only commit money you are willing to lose.

We have made a table of expected returns.

NB: There is a handling fee associated with the payment gateway you choose to use.

Direct Bank Transfer 0%

i-Pay Instant EFT 3%

Setl – It 3%

Payfast R3 + 5%

Scroll down & input the contribution amount you would like to put in below (minimum R100) and then click on contribute.

P.S. To invest more than R100,000.00, email us at invest@thepeople.co.za and we’ll get back to you about signing up as a private investor 😉