But The R34m Luminance Deal Is A Loan That Will be Payed Back – With Interest!

Editor’s Note | Kenneth Bassito Mahloane

South Africans (myself included) were so caught up in the Khanyi Dhlomo witch hunt, that we forgot one important factor: the R34m she received from the NEF was NOT a grant. It is actually a loan that needs to be repayed back, with interest.

As soon as this fact dawned on me, I started to feel bad about some of the negative reports leveled against this enterprising woman. But then again, Khanyi is a media mogul. She knows that this game has no space for biased journalism.

My argument in this whole debacle was clear and simple; I believe (without evidence, of course) that Khanyi Dhlomo and friends could have easily secured capital from other sources outside of the NEF. More than anything, I felt that the shocking R34m pricetag should have been spread amongst various small businesses.

With that said, I ignored all the facts presented before me, specifically how boutique Luminance stands to lift other small retail oriented businesses locally. Like many others, I heard what I wanted to hear and saw what I wanted to see. Anything else held no water.

Be that as it may, an article I read a while ago came to mind, which made me think really hard about the state of small businesses in South Africa. One alarming factor is that much as we advocate entrepreneurship, the gospel truth is; 80% of start-ups fail within the first 2 years of operation.

“It’s well known that most start-ups fail. What is not well known is that over 90% of the remaining successful companies that ultimately became successful had to abandon their original founding strategy – because their original plan was not viable. In other words, successful companies became successful not because they had the right strategy in the beginning, but rather that they were flexible enough to re-align their strategy when they discovered it was not working and more importantly, there was still enough money left over to pivot and try another approach,” wrote Charles Alcock, ICCIT Business Mentor.

Charles further alluded: “The unsuccessful start-ups however, fail because they gamble their all on their original “no brainer” strategy, which turns out to be flawed. By the time they finally accept their error they are out of cash.

“For a company to become successful, it needs to find a viable strategy as fast as possible. Only once a company has found a profitable strategy, the focus then changes to investing for growth. Clearly any initial strategy that seeks growth ahead of profitability has a high chance of failure.”

Ndalo Luxury Ventures can be closely aligned with what Charles Alcock elaborates. Not only does NLV seek to be game changers in the otherwise white and foreign dominated retail sector, but it came with what I eventually accepted as a bankable idea, some of the mitigating factors being, amongst other things; Location, the LSM group frequenting Hyde Park, and the caliber of Destiny Magazine readers who will most likely convert to Luminance patrons. In strength of this, one item is expensive enough to pay for staff wages and monthly rental liabilities.

We should also be mindful of the fact that Khanyi’s business acumen is a force to be reckoned with, which saw Ndalo shying away from putting all its eggs in one basket. This, I believe, may have contributed to NEF ultimately deciding to award Khanyi the biggest loan yet within the sector. In a nutshell; should the Luminance brand fail, she will still have other repeat income streams to meet her NEF loan obligations, which makes her a far better risk to flirt with as opposed to other applicants.

In light of the above, should the NEF be vindicated for awarding NLV a R34m loan? I say absolutely – in a sense that this was not a charity transaction. The same can’t be said about many other emerging entrepreneurs, who are quick to buy luxury cars and move to Dainfern with money loaned to expand their businesses – not to fund their extravagant lifestyles.

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