Use ‘angel-funding’ for start-ups

Biznews

South Africa is synonymous with the lack of support that start-ups are deprived of, and the red tape around actually getting that support.  For local government to successfully deliver on its mandate, it requires partnerships which are often shown through the appointment of contractors on projects that are aligned to service delivery objectives.  Contractors not only have to comply with building regulations, construction regulations, legal business regulations, and ensure that personnel are qualified; they also have to endure the small slice of the pie that is available for them to fund their businesses.

Winning a tender and obtaining an order number is usually just the culmination of a long supply chain process, which also depends on various factors.  Local government is required as per the Supply Chain Management Act, to undertake a tender process for projects above R30 000.00  This entails a bid committee which adjudicates over the tender documents which have been received, carries out background checks and reference checks.  At times, interviews of the selected prospective companies are undertaken to solicit theit qualifications.

When a selected company is unable to raise the capital required to commence with the project, it delays the project.  This is how it affects local government :

  • The project is delayed due to non-availability of start-up capital for commencement of the project
  • The Municipal Project Delivery time-line is affected
  • The Grant Expenditure time-line is affected
  • The municipality is seen as inefficient and unable to spend funds meant for service delivery
  • In most cases, the National Treasury, as the custodian of all grants issued to municipalities, issues a letter to reverse the payment of the funds
  • The municipality’s coffers are then affected, as the amount allocated becomes reduced in the following year, due to the failure to spend
  • The municipalities’ ability, and the type of projects is can do thereafter becomes limited
  • The community retaliates, as this often culminates in slow-paced services and incomplete projects that lie idle for months, even years

Perhaps it is now time for the private sector to forge formidable partnerships with the government, to create a form of angel investing to support start-ups – as many are not only dependent on government spend to flourish, but the government is also dependent on them to realise its development objectives.

1 Comment on "Use ‘angel-funding’ for start-ups"

  1. This is so true, especially to black owned companies and at the end it affects the end user.If such funding for Start-ups can be available they can assist.

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