Building the Board at the Small Enterprise Foundation

Building the Board at the
Small Enterprise Foundation (SEF)1
The Client
alome Baloyi rose early on a Tuesday morning in late
January of 2000. She wanted to insure that she would
arrive to her bimonthly center meeting on time. At that
day’s meeting, Salome was to make the final repayment on her
5th loan from the Small Enterprise Foundation (SEF), a microfinance organization serving the region. As she fixed her gaze
down the muddy road in search of the Toyota minivan taxi, she
thought about the benefits of her membership in SEF. She
owed R722 ($12), plus she intended to pay R2 into her saving
account. That amount of money may seem small to the average American, but to Salome it meant plenty. Ten fortnights
previously she had taken a loan for R600, which she used to
purchase used clothes in bulk. The profits generated from the
sale of this clothing enabled Salome to send her three children
to school, and smoothed out her income between the monthly visits of her husband who lived and worked in Johannesburg.
Salome achieved the type of success John de Wit envisioned
when he formed SEF to provide financial services to South
Africa’s rural poor. SEF counted these successes one client at
a time, and by the year 2000, it could count 10,000 of them.
It had been a long road to this point.
The Beginning
It all started with an earthquake. In June of 1986, John de Wit
stared in disbelief at the disaster that unfolded before his
eyes. In the comfort of his Cape Town home, the newly graduated civil engineer watched on television with rapt attention
the footage of the ruins of Mexico City. An earthquake measuring 8.1 on the Richter scale had hit Mexico. The epicenter
was some 220 miles from Mexico City, the largest city in
North America. In this earthquake, an estimated 8,000 people died and thousands of buildings were flattened.
C A S E S for M A N A G E M E N T E D U C A T I O N
De Wit decided then and there that he would dedicate his
engineering talents to helping people rebuild after such disasters. In the next several months, he sent his resume to several major international aid agencies, detailing his building
skills and his desire to help people recover from natural disasters. The agencies all lauded the young man’s enthusiasm
and his stated objective of helping people rebuild. His engineering skills attracted a lot of interest as well. However, one
aspect of de Wit’s C.V. made him unemployable. As a white
South African National, he was unable to travel in much of the
world. Numerous countries throughout the world prohibited entry to holders of a South African passport. Countries
enacted this sanction against South African Nationals in order
to protest the discriminatory policies of South Africa’s
apartheid regime.
De Wit realized he could not attain his dream of traveling
internationally to provide humanitarian aid. But he did not
want to abandon his idea of helping those in need, so he
decided to cast about for similar opportunities inside South
Africa. He resisted the temptation to seek stable employment
with one of the many large mining or engineering firms based
in South Africa, even though these organizations clamored for
his talent. He left Cape Town and headed north to Gauteng
(pronounced “howting”), the province that included the major
cities of Pretoria and Johannesburg, South Africa’s political and
economic capitals respectively.
He visited many of the South African-based aid agencies.
During his visits, he learned that engineers were not in demand
in the development sector of the South African economy.
However, a new field had emerged in the country’s non-profit
sector. It centered on economic development, helping South
Africa’s large urban poor population improve economically.
Exhibit 2. Provincial Map of South Africa
Exhibit 1. Map of South Africa
De Wit pursued these opportunities and landed a job with
the Get Ahead Foundation (GAF) funded by the United States
Agency for International Development (USAID). GAF provided small business loans to individual entrepreneurs who
operated existing businesses. The average loan of this program was $10,000, and the repayment rate hovered around
30%. Prior to adopting the revolving loan fund methodology,
GAF gave outright grants to this same target market of small
business owners. Now lending money, it was delighted to
extend its available capital by 30% by re-issuing funds received
as repayment for loans. This improvement over the grantmaking program meant that they could reach more entrepreneurs each year.
learn more about the Grameen Bank. Since South Africa
remained isolated from the outside world because of antiapartheid sanctions, he found it difficult to get material. In the
end, he managed to get some publications from USAID on
peer lending and the Grameen Bank.
He contrasted what he learned in this reading with his work
at GAF. He questioned the performance of his organization.
Were they helping the people who needed the most help?
Why did his organization achieve only a 70% repayment rate,
while the Grameen bank lent to a much poorer clientele and
did much better? In his continuing work with the pilot program, he was disappointed that its terms of operational performance peaked at a maximum 70% repayment rate.
He decided to leave the organization. He began working as a
consultant, bringing the idea of peer lending to other economic development organizations in South Africa. Most of
A USAID consultant visited the organization to offer advice
on the program design. He had been to Bangladesh and seen
the Grameen Bank at work. The Grameen Bank achieved
repayment rates close to 99%, largely using a peer-lending
methodology. The crux of this method involved organizing
individual entrepreneurs into groups of five, and the five guaranteed each other’s loans. It also lent smaller amounts of
money than GAF and required a clean repayment record for
entrepreneurs seeking additional loans.
The consultant advised GAF to implement this method in
their region of South Africa. He advocated a program that
reduced the loan size to $1,000 and incorporated the peer
lending methodology. De Wit worked with him on this pilot
program. This change resulted in the repayment rate climbing
to 70%. The change in methodology energized de Wit to
Exhibit 3. Map of the Northern Province
P O R T R A I T S of B U S I N E S S P R A C T I C E S in E M E R G I N G M A R K E T S
B O A R D at the S M A L L E N T E R P R I S E F O U N D A T I O N ( S E F )
The “Poverty and Inequality Report” (as commissioned by the South African Government) stated that in per-capita terms, South
Africa was an upper-middle income country. 1997 per capita GDP stood at around U.S.$3,040. Despite this, the majority of
households experienced poverty or were particularly vulnerable to falling into poverty. The country’s distribution of wealth was
in fact among the most unequal in the world.
Nineteen (19) million people lived in the poorest 40% of households, earning below R360 ($60) per adult per month. Ten
million earned less than R192 ($32) per adult per month. In terms of the Human Development Index (HDI), South Africa
ranks 86th along with countries such as Paraguay, Iran, Sri Lanka, and China.
The Northern Province, the area in which the Small Enterprise Foundation operated, had a Human Development Index (HDI)
equivalent to that of Zimbabwe which ranked 121st in the HDI and was in line with countries such as Lesotho and Namibia.
According to the 1996 census, the total population of South Africa was 40.5 million. The population of the Northern Province
was 5 Million. According to the results from this same census, for South Africa as a whole, 76.7% of the population was Black,
8.9% Colored, 2.5% Indian or Asian, 10.9% White, and 1% other or unspecified. For the Northern Province, the census data
stated that 96.7% of the population was Black, .2% Colored, .1% Asian or Indian, 2.4% White, and .7% other or unspecified.
Exhibit 4. South Africa and the Northern Province
these organizations focused on the urban Johannesburg area.
But de Wit realized that the rural population did not receive
adequate financial services. He was determined to bring
financial services to these rural poor. He identified the
Northern Province as the poorest province of South Africa
(see Exhibits 2, 3, 4 and 5), and selected this province as the
place to start. By operating in South Africa’s poorest
province, he could see if the methodologies that worked in
Asia could also work in Africa.
The Western Cape is South Africa’s wealthiest province. Cape
Town, often described as the world’s most beautiful city, is the
economic driver of this province. It is included for comparison purposes. The Northern Province, Eastern Cape, and
Northwest Province are largely composed of former African
Homelands, or Bantu states as they were known in apartheid
times, and are home to large rural poor populations. The
Northern Eastern Northwest Western
Province Cape Province
No Schooling
Secondary Education
Earning >4500 ($750)
Living in <3 rooms
Cooking with wood
Piped water in house
Phone or Cell-Phone
No Toilet
Refuse removal
Exhibit 5. Results of 1996 Poverty Census
C A S E S for M A N A G E M E N T E D U C A T I O N
Northern Province ranks near the bottom in nearly every category examined for the 1996 census.
With his contacts in USAID, he felt that he could raise the
necessary funding, but he needed help on the operations side.
He had never been to the Northern Province and wanted to
set up shop there. He realized that a good Board of Directors
could help smooth the way.
SEF in the Beginning
John de Wit and Patrick Malatji founded SEF together in 1992.
Their partnership sprouted from an act of kindness by de Wit
several years prior to their first meeting. A member of the
once illegal ANC3 party and community activist, Malatji usually made little time to meet with white South Africans.
However, de Wit had unknowingly aided one of Malatji’s
friends years earlier. In 1986, Mr. Malatji had been paying his
friend Harry Ramaphosa’s university fees. In that year, Malatji
was arrested and then imprisoned for two years under the
Internal Security Act of 1984. Malatji’s activities in the then
illegal ANC party resulted in security forces identifying him as
a communist instigator.
At the time John de Wit worked at GAF where Malatji’s friend
Harry Ramaphosa also worked as a student intern. After
Malatji’s detention, Ramaphosa approached de Wit for the
favor of a loan, and de Wit agreed. Years later, this good deed
would pay back dividends. When de Wit decided to begin
operations in the Northern Province of South Africa, he realized he would need contacts there. De Wit contacted Harry
Ramaphosa, a native of Tzaneen, and asked him to provide
some names of people he thought he should contact to pursue his plan. The first person Ramaphosa suggested was
Patrick Malatji. Malatji lived in the area, and de Wit learned
The Small Enterprise Foundation (SEF) is a non-profit NGO that commenced operations in 1992. The aim of the Foundation
was to work towards the elimination of poverty and unemployment. This was accomplished through two programs, the
Micro-Credit Program (MCP) and the Tshomisano Credit Program (TCP). MCP focused on existing but generally marginal
micro-enterprises and provided them with micro-loans. TCP strictly targeted women who lived below half the poverty line.
SEF employed a group-based lending methodology patterned after the Grameen Bank of Bangladesh. Potential members formed
themselves into groups of five. The groups were rigorously tested on SEF procedures and knowledge of each other before they
were officially recognized. Upon recognition, groups were eligible to apply for loans which they collectively guaranteed.
SEF did not provide savings services. Instead, it required members of both programs to accumulate regular savings through
a group Post Office Savings Account. SEF had no direct control of or access to the group savings. Through the savings plan,
borrowers built up a fund that they could fall back on when they faced mishaps or tragedies.
For 2/3 of the population of the Northern Province, self-employment was the only hope of generating an income. Small businesses struggled to survive due in part to a paucity of credit sources. SEF was established to respond to this need.
Exhibit 6. Overview of the Small Enterprise Foundation
that he was active in community development. After de Wit
contacted him, Malatji contacted Ramaphosa to verify de Wit’s
credentials. Ramaphosa shared the student loan story of
years before and persuaded Malatji to make time for de Wit.
Malatji and de Wit met, discussed their common objectives,
and agreed to form SEF. Their goal mandated that SEF provide
micro-credit to the rural poor in the Northern Province. An
overview of SEF appears in Exhibit 6.
SEF Today
SEF has become a success. By the year 2000, SEF had signed
on over 10,000 clients, extending loans to two different classes of the rural poor. In 1998, SEF was featured in a front-page
article in The Wall Street Journal. De Wit himself had been
named to the Advisory Board of a World Bank micro-finance
initiative. His responsibilities to this Board required quarterly trips to either Europe or the United States to attend meetings. Things had changed since he had his vision of working to
help earthquake victims. His micro-credit program (MCP)
provided loans to existing operators of small businesses. A
second program, Tshomisano Program (TCP) (Zulu for
“working together”), provided loans to poor women who
sought to be self-employed. The financial targets were being
met, as shown in Exhibits 7 and 8.
Though still losing money, SEF’s actual figures shown in Exhibit
8 were considerably better than what was projected for the
year. If SEF continued along its current path, it would reach
profitability in three years. Profitability represented one of
the two primary goals of the organization. The second goal
was to reach a client base of the poorest citizens of South
Africa. Through its innovative outreach program, SEF had
reached this goal as well.
SEF’s Methodology
While the poor may have initiative, ideas, and the will to
become self-employed, they very often do not have the small
amounts of capital needed to start a business. Likewise, the
majority of those running micro-enterprises were unable to
stabilize and expand their activities due to lack of capital. In
order to receive a loan, an applicant had to form a group of
five with four others who were interested in gaining access to
SEF’s services. The strength of the group was rigorously
checked and where weakness was detected, applicants were
motivated to find alternate members. The group was then
given preliminary recognition and began a series of training
sessions that explained the credit and savings methodology,
motivated applicants to begin regular savings deposits and
dealt with the duties and responsibilities of group members.
During the training process the group was introduced to the
“center” concept. A center was the 2 weeks meeting of all
groups from a section of a village. They were run under the
leadership of an elected Center Committee.
Once the group had been recognized by the center and completed its training, it would undergo a final recognition “test”
Loan interest income
Operational expense
Interest paid
Investment interest
R2 566 919
R4 613 809
R 73 653
R1 026 690
R3 396 444
R 114 886
R 429 542
R3 806 934
R 974 812
R5 067 755
$1 = 6R
Exhibit 7. SEF Financial Indicators
P O R T R A I T S of B U S I N E S S P R A C T I C E S in E M E R G I N G M A R K E T S
B O A R D at the S M A L L E N T E R P R I S E F O U N D A T I O N ( S E F )
fiscal year
Net Interest Earned
R 2,313,278
R 2,077,329
Branch Expenses
R 1,483,673
R 1,652,424
time and money of traveling to town versus paying the higher
prices to local merchants.
MCP - Micro-Credit Program
Loan Loss Provisions
R 10,902
R 9,679
Zonal Office Expenses
R 500,709
R 554,573
R 317,995
(R 139,347)
TCP – Tshomisano Program
Net Interest Earned
R 253,644
R 247,742
Branch Expenses
R 538,060
R 678, 915
Loan Loss Provisions
R 5,470
R 2,179
R 310,322
R 229,115
(R 600,208)
(R 662,467)
Head Office Expenses
R 1,505,792
R 1,912,605
Zonal Office Expenses
R 223,735
Investment Income
R 429,542
R 254,273
R 60,040
R 45,877
(R 1,642,638)
(R 2,506,023)
Interest Paid
Net Profit/Loss
Exhibit 8. SEF 1999 Results vs. Projections
conducted by a senior manager. If recognized, the group
could then apply for loans. Each member’s business plan was
discussed and refined during the training, and each member
applied for his/her own loan for his/her own income generating activity. All group members guaranteed the loan repayments of their fellow group members and could be called
upon to assist any member who fell into arrears.
Within a few days of disbursement, members were expected
to utilize their loans in accordance with their pre-agreed
business plans. Disbursements came in the form of checks.
Clients had to cash their checks. They did this either by traveling to the nearest bank branch or by cashing it with a local
merchant. Because of SEF’s focus on the rural poor, traveling
to a bank usually required a day of travel to and from the
nearest large town. Traveling involved taking public transport,
if available, and this required an additional cash outlay, which
cut into profits. After cashing the checks, clients could buy the
inventory needed from large merchants in town. South Africa
had a very developed retail environment. National chain
stores similar to Wal-Mart operated in any town large enough
to have a bank. Alternatively, cooperative local merchants
would cash checks if the clients purchased their needed
inventory from them. Prices of local merchants were often
higher than those in town. Clients had to weigh the cost in
C A S E S for M A N A G E M E N T E D U C A T I O N
Group leaders checked that loans were used according to plan
and the SEF Field Worker checked loan utilization on the first
and second loans, and made spot checks thereafter. The principle aim of this process was to encourage members to assist
each other and to demonstrate that utilizing loans in accordance with business plans was the first step towards success.
Throughout the loan cycle, group leadership had responsibility for checking the progress of each member’s business.
Results of these visits were reported at each biweekly center
meeting. Towards the end of the loan cycle, the Field Worker
assessed the growth of the businesses seeking loan renewal.
The Field Worker then assisted them in determining an
appropriate size for the next loan.
SEF encouraged regular savings by requiring groups to open a
savings account at a local post office. At center meetings,
members were encouraged to save in this account. The average amount saved ranged from R2 ($.33) to R10 ($1.67) per
member per meeting. This account was entirely controlled by
the group.
With the exception of a few loans made in a pilot program
testing monthly payments, loans were repaid in bi-weekly
installments. Members brought cash repayments to group
meetings and group members pooled together their individual payments. The entire center’s payments were placed in a
steel lock box. After the meeting was over, repayments were
deposited into accounts SEF maintained at the Post Office.
Group payments to savings were deposited into the group
savings account. Money from SEF’s account was eventually
transferred back to one of the banks that SEF used to issue
disbursement checks.
Ninety-seven percent (97%) of SEF clients were female. Three
factors contributed to this heavily female client base. First,
SEF focused on the poorest of the poor. In South Africa, the
poor tended to be women. Econd, the organization of South
African labor meant that men left the villages for jobs in the
mines or in the large cities. They returned about once a
month at “month-end” when they were paid. Often, if they
came back at all, it was only for the big holidays such as
Christmas and Easter. A majority of South African businesses
closed the last two weeks of the year for the Christmas holidays. Easter was a four-day weekend. This meant that most
of the time women were the only full-time residents of rural
villages. Three, the Grameen Model loaned mostly to women,
and in micro-finance circles women are viewed as better
credit risks.
Typical enterprises included selling fruit and vegetables, new
or used clothing, or starting small convenience shops and
dressmaking. 18% of clients were involved in some form of
manufacturing enterprise.
De Wit felt proud of what SEF had achieved, but it had not
been an entirely smooth trip. [A companion case, “Managing
Decentralization at the SEF,” details some of the management
challenges experienced in the face of rapid organizational
growth.] The Board of Directors played a critical role in SEF’s
success. Board members facilitated the commencement of
operations in the rural areas and the crafting of the organization’s human resources policy. The first four Board members
including de Wit had been stalwarts. They were there from
the beginning, and they insured the organization remained
true to its vision.
John de Wit’s Goals for the Board
Maintain the vision: The first function of the Board was as the
guardians of the vision of the organization. For decades prior to
the early 1990’s, South Africa operated in isolation. This isolation was the price South Africa paid for its apartheid politics.
Other governments in the world, with few exceptions, enacted
sanctions against it. With a mission to address the problems of
the poor, micro-finance represented a new and radical idea. The
group lending methodology and the idea that SEF could recover its costs and become profitable were untested ideas in the
South African non-profit sector. The little aid that flowed to the
poorer members of society resembled the traditional Victorian
model of charity. Agencies simply gave people food, blankets, or
medicine. Few talked of empowering the masses to solve their
own problems. De Wit devoted the first few Board meetings to
inculcating the Board with his vision. He wanted them to believe
that they could be profitable, they could serve the poorest people, and they could empower them.
Once the Board accepted this vision, he counted on them to
insure the organization kept its focus. This challenge came
from several sources. Once de Wit proposed allocating
motorcycles to loan officers, but Board members asked if this
adhered to the organization’s vision of sustainability. Could the
cost of the motorcycles be recovered from the extra business
they will generate? The Board deemed the answer to be no
and rejected the proposal. The Board also helped SEF focus on
loaning money to clients starting businesses but not to finance
training or anything else that was not income producing. De
Wit continually credited the Board for holding him to the original vision, articulated when he first asked them to join him and
then fully presented in the first few meetings of the Board. He
felt this focus helped SEF to achieve its success.
secure permission from local leaders for SEF to operate. De
Wit credited the Board members with this responsibility for
a good portion of SEF’s success. De Wit expected members
tied to the formal sector of the economy to smooth relations
with the various formal financial institutions on which SEF
depended. SEF disbursed all its loans via checks. Bank
branches were few and far between in rural South Africa, so
SEF needed to cultivate relationships with several banks to
enable SEF customers to cash checks at the banks nearest
them. A requirement of SEF membership was that members
share a savings account. The People’s Bank, the first banking
institution where SEF tried to get members to open accounts,
eventually rejected the business. SEF needed the cooperation
of the Post Office to handle repayments and savings deposits.
These large volume transactions became a burden to the Post
Office. But Post Office management devised new procedures
to deal with SEF members. Connections that Board members
maintained with the head of the Post Office Bank facilitated
the development of these procedures.
Board members also facilitated start-up funding. SEF looked
to International Development agencies for grants, socially
responsible banking institutions for loans- some at favorable
interest rates-and South African Development banks for additional loans. SEF succeeded very well in raising the funds it
needed because Board members who had experience working with these organizations eased the process.
Help with management: De Wit had no experience growing a start-up organization. He depended on Board members
for advice on how to expand. He expected Board members
to play an active role in evaluating and hiring new management
personnel. The role of human resource manager represented
one management role for the Board. A second management
role was helping develop the organizational structure. De Wit
wanted to build a Board with sufficient management experience to guide him in designing a formal organizational structure of the foundation.
Other qualities: De Wit stressed that he wanted Board members to be people of integrity who wanted to participate in the
growth of the organization. He consciously chose people who
did not have a high profile and were willing to work hard to build
the organization. De Wit envisioned a Board of at least five
members and eventually six. Members were busy people and he
wanted to insure that a quorum could always attend meetings.
Despite the impulse to have an odd number of members to provide a tie-breaking vote, De Wit preferred that the Board operate by consensus. The Board was small enough and he respected the input of all its members enough to want them all to agree
on operational policies for the organization.
Facilitate operations: De Wit expected the Board to facilitate SEF operations in two ways. Fist, local Board members
were expected to introduce SEF in the local communities and
P O R T R A I T S of B U S I N E S S P R A C T I C E S in E M E R G I N G M A R K E T S
B O A R D at the S M A L L E N T E R P R I S E F O U N D A T I O N ( S E F )
Formation of the Board
rural post offices adopting new procedures to work with SEF.
One by one the Board expanded to five people. De Wit and
Malatji were the original members. Nathanial Ramalepe
became the third member. As a local resident of the Tzaneen
area, he brought knowledge of the community. His appointment lent creditability to the organization as he was well
known in the community. He also knew a great deal about the
area and the people who lived there. He helped smooth relations with local government officials and steered de Wit away
from involvement with some opportunists.
The fourth Board member was Daphne Motsepe. Daphe was
well connected in the political and economic circles of South
Africa. She worked in the finance department of National
Sorghum Breweries. She also served on the Board of the
Women’s Development Bank along with the wife of current
President Mbekei, Nelson Mandela’s successor. She also served
on the Board of the Post Office. The link proved important for
SEF’s development as SEF’s clients used the Post Office Bank to
deposit both their loan repayments and their group savings
accounts contributions. Security issues in South Africa made de
Wit wary of SEF field staff transporting large amounts of cash,
but the SEF system placed a strain on the post office system. A
center would have loan repayments from up to 40 individuals
as well as savings deposits from 8 groups. The size of each of
these transactions could be as low as R10 ($1.67). The post
offices in the rural areas were not computerized and all transactions involved laborious manual entries. Motsepe’s position
on the Board smoothed relations with the service and led to
John De Wit
The fifth Board member was Lynn Anderson. She was a friend
of de Wit’s from his Get Ahead days. She brought micro-finance
experience and connections to the funding sources. She
resigned after two years of service, explained below. The sixth
Board member was Gabriel Nackan, the first employee of SEF
and a designer of its operating procedures. He also resigned
and left a year later. The last Board member appointed was
Marie Kirsten, another contact from Get Ahead. Now working
as a consultant to the South African micro-finance industry, she
had micro-lending experience and connections to donors.
Former Board Members
Lynn Anderson: BS, Finance.Worked in small business lending with Mr. de Wit in the Get Ahead Foundation. Lynn left the
Board after serving two years. In her official resignation letter,
Lynn stated one of her reasons was to maintain a black majority on the Board. The Board had elected to expand and nominated Gabriel Nackan as the third white member, in addition
to Lynn Anderson and John de Wit. Mr. de Wit felt that Lynn’s
real reasons for leaving were based on her discomfort with the
responsibilities of being a Board member. Ms. Anderson was
appointed to the SEF Board in 1993 and left in 1994.
Gabriel Nackan: Mr. Nackan formerly worked as a consultant
with Mr. de Wit after he left Get Ahead. He returned to work
with Mr. de Wit in the formation of SEF after getting his MBA in
Europe. Mr. Nackan designed many of the operational systems
Year Joined
BS Engineering
Executive director, SEF
High School Graduate
ANC party official, Board member
Patrick Malatji
of several development organizations
in Northern Province
Nathanial Ramalepe
BA, Education
Principal of farm school in Tzaneen
area. Board member of Northern
Province rural education project
Daphne Motsepe
Senior Financial Manager,
National Sorghum Breweries.
Board Member,Women’s Development
Bank, South African Postal Service.
Former Board Member, Get Ahead
Marie Kirsten
MA, Economics
Independent Consultant.
Formerly employed managing
micro-finance program at the
Get Ahead Foundation
Exhibit 9. Board Member (in order of Joining)
C A S E S for M A N A G E M E N T E D U C A T I O N
at the Small Enterprise Foundation. In order to insure that Mr.
Nackan received the recognition he deserved for these efforts,
he was appointed to the Board of Directors. He later left SEF to
join Price Waterhouse (later PricewaterhouseCoopers) as a consultant. Mr. de Wit cited tension between Mr. Nackan and himself as the reason Nackan left and resigned from the Board. He
had joined the SEF Board in 1994 and left in 1995.
Contributions by
Individual Board Members
De Wit credited the Board for several facets of SEF’s success.
Specifically, he highlighted the efforts of Mr. Malatji, Mr.
Ramalepe and Mr. Nackan. In the early 1990’s in South Africa,
there was a considerable degree of distrust between white
and black residents. Mr. Malatji and Mr. Ramalepe were
respected community leaders in the Northern Province.
Their presence on the Board lent credibility to SEF’s efforts in
the eyes of the community. More than that, both these individuals actively introduced SEF into the local communities.
The Northern Province is comprised of many former homelands that local ethnic groups governed on their own under
the apartheid system. These homelands were known as tribal homelands, and tribal governments still operated at the
local level. That meant that traditional non-elected leaders
governed the rural areas in the Northern Province. SEF
needed the consent of these leaders to commence operations in these areas. Mr. Malatji and Mr. Ramalepe sought
these leaders out and explained SEF’s mission. Mr. Malatji
believed firmly that politics caused much of the economic
inequality in South Africa. He saw SEF’s program as a way to
address these past inequalities. He thus enthusiastically took
this mission to the field, insuring SEF’s acceptance by the traditional leaders.
Mr. Malatji and Mr. Ramalepe, both raised in the Northern
Province, also prevented SEF from getting entangled with
unscrupulous individuals. Mr. de Wit hailed from Cape Town
so he did not know members of the community well. On several occasions, Mr. Malatji or Mr. Ramalepe intervened to prevent individuals with reputations for theft or corruption from
becoming associated with SEF. Several times such individuals
had presented themselves to de Wit looking for positions as
Board members, employees, or informal community liaisons.
Mr. Nackan did yeoman’s work in developing a very simple yet
effective management reporting system. The Small Enterprise
Foundation operated without computers except in the head
office. Mr. Nackan developed a manual system for tracking
clients and loan repayments. Keeping good track of clients
enabled SEF to develop a reputation for good client service.
SEF issued checks to the right clients at the right time, an area
where many developing micro-finance institutions stumble.
Mr. de Wit credited this system for helping keep SEF’s dropout
rate low.
Outside South Africa, in the micro-finance world, SEF developed
a reputation as an innovative and well-run organization. Inside
South Africa, however, it was not well known. Potential Board
members had to be identified and approached. They needed to
learn about micro-finance. They needed to understand and support SEF’s mission of empowering the poor. Most importantly,
they needed to contribute in some way to the development of
the organization. Finding talented and capable people willing to
join the Board had not proved difficult. De Wit and Malatji used
their contacts and the Board grew easily to five.
However, the Board still remained short of the envisioned six
members. Both Malatji and de Wit had exhausted their lists
of personal contacts to identify suitable Board members. De
Wit asked himself what made the previous members leave
and whom should he choose as its next members? Outside
consultants cited the involvement and competency of the
Board among SEF’s positive attributes. De Wit wanted this
positive momentum to continue. He had to consider the
needs of the organization and where to find suitable candidates for the potential fifth and sixth Board seats. By tradition the Board had a black majority, so this factor also
weighed in his evaluation of potential candidates.
Relevant Web Links
SEF’s Home Page:
Profile of John de Wit:
History of the ANC:
South African Statistics:
Grameen Bank:
USAID Micro-finance in South Africa:
1. This case was written by David S. Berkowitz of the University of
Colorado at Denver under the supervision of Professor Richard Linowes of
the Kogod School of Business at American University in Washington, D.C.
It is intended as a basis for class discussion rather than to illustrate either
effective or ineffective handling of an administrative situation.
2. The Rand (R) is the standard unit of currency. At the time of writing, $1=R6
3. In 1950, the ANC (African National Congress), founded in 1912, began
the defiance campaign. The Campaign was the beginning of a mass movement of resistance to apartheid. Apartheid aimed to separate the different
race groups completely through laws like the Population Registration Act,
Group Areas Act and Bantu Education Act, and through stricter pass laws
and forced removals. In response to this movement the government
banned the ANC in 1960. The ANC began an armed struggle against the
government in 1961. As a result of the banning, membership in the ANC
and any activities on its behalf were made illegal. In February 1990, the
regime was forced to legalize the ANC and other organizations.
P O R T R A I T S of B U S I N E S S P R A C T I C E S in E M E R G I N G M A R K E T S