Innovative private sector financing of small businesses contributes to social upliftment 

The Chester Finance Group has facilitated the construction of two public playgrounds for under-privileged children in Mofolo Park and Cosmo City through the provision of innovative funding and supportive management to Mzanzi Parks Maintenance and Logistics CC (Mzanzi).
  
Tamar Sack, a spokesperson for Chester Finance, explains that Mzanzi, a 100% black-owned company, faced the typical challenges of any growing business. “Despite a great business model and passionate and committed owners, there was lack of understanding in the market place of the financing structure that would suite the business best. After winning a tender to provide playground facilities to Johannesburg City Parks (JCP), Mzanzi was faced with the hurdle of securing the finance necessary to purchase and construct the playground equipment. Mzanzi was determined. Having spent several years researching playground facilities around the world, Mzanzi knew they had a great product to offer  - one which would provide South African under-privileged youngsters with playground facilities that are safe, fun and importantly, accessible to the physically disabled.” 

Says Natasha Springfield, spokesperson for Mzanzi states, “Mzanzi Parks’ initially started out as a parks maintenance and management company to see if we could assist companies like Joburg City Parks to expand service delivery through community development programmes such as the Expanded Public Works Programme. We wanted to create opportunities for the unemployed within our communities. We saw ourselves coming in as a company who manages this labour force. While doing research to see where we could assist, we realised that the playground equipment used today is exactly the same as it was 50 years ago (except that it is now painted in different colours). We were fortunate to come across an invitation to tender for playground equipment with our local municipality, and following the required process, we were awarded a 3 year contract.”

In its quest for finance, Sack says Mzanzi applications were not entertained by traditional banks and financiers, with the recurring problem being that these traditional financiers insist on using their standard 'one size fits all' approach in which they review all applications, which may look over an exciting and profitable opportunity. “To overcome this problem, Chester Finance reviewed the application and designed an appropriate Purchase Order Finance Facility for Mzanzi. It required looking beyond the manner in which other financial institutions review applications and developing a manner in which such an application could be secured through innovative thinking while taking into account the associated risks. In this instance we were able to apply our minds to a specific financing structure that would pose acceptable risk with a good return, and ensure that our client received what it required.”
  
Sack explains this means Chester Finance becomes involved with and monitors every aspect of the transaction - including equipment purchasing, shipping, insurance and final payment collection from the customer, in this case JCP. “The final outcome was a contract delivered on time and on spec.”
  
The purchase order finance facility – a less conventional, but highly beneficial form of trade finance - is ideal for growing, stable businesses with limited capital, or those where large new orders may exceed the capital in that business. This type of structure requires a higher degree of assistance and involvement from the financier in the procurement, transport and sale of stock involved, with the financier levying an additional management fee for its professional services and expertise. The financier oversees procurement from reliable sources, that goods meet quality standards, and plays a larger role than usual in managing the risks associated with the specific transaction.
  
Sack emphasizes that these types of innovative financing solutions need to become far more common in South Africa. “In this particular instance, Chester Finance enabled a growing business to succeed and prosper – Mzanzi is now in a position to tender for further contracts in the knowledge that there is a financing structure which can assist them in funding a successful tender. The social consequences of this type of innovative and creative solution are also very rewarding – there are many happy children out there having fun in local playgrounds.” 
  
Sack says this type of partnership between a financial institution and a small private company which has significant opportunities available to it from municipal government contracts, but is held back by financial constrains, needs to be seen more frequently in South Africa. “It promotes the development of young private businesses and the social consequences of the projects, in this case playgrounds for children, are most rewarding.”