A case study of African Foresight

A case study of African Foresight CONTENTS INTRODUCTION 4 FUNDING 7 KTI 12 DEVELOPMENT 16 KT s LEADERSHIP 26 LOOKING TO THE FUTURE 3 what can be learned 31 appendix 1 38 appendix 2 38 appendix 3 43 appendix
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A case study of African Foresight CONTENTS INTRODUCTION 4 FUNDING 7 KTI 12 DEVELOPMENT 16 KT s LEADERSHIP 26 LOOKING TO THE FUTURE 3 what can be learned 31 appendix 1 38 appendix 2 38 appendix 3 43 appendix 4a 44 appendix 4b 46 appendix 5 46 appendix 6 48 appendix 7 5 appendix 8 51 appendix 9 52 appendix 1 52 REFERENCES 53 INTRODUCTION THE EARLY YEARS: FURTHERING THE ANTI-APARTHEID STRUGGLE For the past 3 years, Kagiso Trust (KT) has worked to achieve a society which offers liberty, justice and freedom from poverty. Starting out in 1985 as an antiapartheid 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 198s, KT began to transform itself from an apartheid resistance organisation into a professional development organisation. Today (215), it is a sustainable 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 facilitating sustainable development. Even though not expressed in these terms when it was founded, the organisation s current philosophy of integrity, accountability, a passion for development 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 philosophy has evolved, and how the formation of Kagiso Trust Investments (KTI) provided a fundamental shift that set KT on a path to self-sustainability. The study was conducted by researchers from the Wits Business School (WBS) Case Centre in conjunction with WBS academics with specialisations in the areas of leadership, organisational design and development, 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 documents, 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 questionnaires that had been drawn up in conjunction with the WBS academic experts. The interviews were all conducted in 214. 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 perspectives 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 Then a nationwide state of emergency was declared in June 1986 and only lifted again in June 199. 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 dimension was the political rivalry between the Africanist BCM and Charterist (UDF) groups, while the fourth dimension was the usual hostility between the government forces and the democratic 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 26, recalled in Reflections: Kagiso Trust A Twenty Year History that when KT was formed, there had been at least 1 years of concerted resistance to apartheid. Many of us had been forged in the struggles of Soweto 1976, he wrote. The 198 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 persuade the EU (the European community 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 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 1 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 (R1 million). It was used to fund 3 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 21, It was a very exciting time because the struggle for freedom had begun. But repression also became very severe indeed. The Trust and those associated with it had to withstand strong opposition from the apartheid government. Molobi was detained under Regulation 3 of the Internal Security Act in Archbishop Tutu, Mohammed, Molobi, Rev Chikane, Father Mkhatshwa and Dr Nkomo continued 4 5 to be detained and/or harassed because 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 because Dr Naudé worked so tirelessly for the Trust. FUNDING: PRUDENCE AND INNOVATION WORKING TOGETHER The advent of democracy brought about a new era. Government opposition 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 economic growth under the first democratic 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 environment 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. 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 R17.8 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 199, 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 199, 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 Africa a in London at the time, but whose relationship with KT and its 6 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. 7 founders extends to the early 198s) 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 A Watershed Although the EU continued using KT as a conduit for funding until 1994, in 199, 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 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: 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 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 donorfunding, 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. 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. 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 A LEAN PERIOD 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 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 R5 million each from Liberty Life and Nedcor Investment Bank. 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 Sch
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