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Why You Need To Consider Environmental and Social Factors When Getting Your Project Financed

One of the hidden costs that can delay or even prevent a project finance deal is green expenditures. Here’s how to evaluate if your project is at risk.

Nelius Scheepers and Marion Thomas



Project Financed

Sustainable businesses need to focus on the triple bottom line, comprised of economic, social and environmental factors. Economic factors tend to be top of mind, followed more recently by social factors. Environmental factors often come third, but are as important as their counterparts.

Consider the ramifications of environmental incidents such as oil spills, chemical spills, illegal waste dumping, operating without an environmental permit/licence, and injuries or fatalities due to poor environmental management.

The growing importance of good environmental management

Through the years, multi-national corporations have realised the importance of good environmental management — and the consequences of non-compliance with regulatory requirements.

Understandably, environmental incidents that may result in harm can have significant legal and financial implications that result in major complications, when an entrepreneur and his financiers just want to ‘get on with business’ and be profitable. A certain business owner and his project were delayed for years because a protected species was present on the project site and no regard was ever given to adapt the project design to minimise the impact on this species.

Related: Need Growth Funding? Here’s How To Get It

Social risks to business are often neglected — lack of skills, political unrest and legacy issues that have left populations disgruntled with particular operations — are all critical issues for investors to understand, as these issues would require time and cost to remedy, and in the era of social media they could have a reputational impact and affect the bottom line.

Shifting the context

If you’re a seasoned entrepreneur, you’re familiar with financial due diligence, where the risks of long-term financing of extractive, industrial and infrastructure projects are assessed based upon inherent project risks. These could adversely affect the project financiers’ cash flow, and reputation.

But what happens when a non-banking sector-financier partners with you to fund a project? Numerous international standards and guidelines (that are prerequisite for major capital projects involving the banking sector) might no longer be compulsory. This results in corners being cut — either by design or because the parties involved simply do not know or understand the potential risks.

What are these risks?

Project risks could include a combination of economic, technical, environmental and social, statutory, site history, political risks, and so on. This is of particular relevance in developing countries and emerging markets such as Africa.

If risks are not managed to an acceptable level, financial institutions and project sponsors may lose interest in a project if they conclude that the inherent risks render the project ‘un-financeable’.

Environmental risks can range from sensitive ecological areas being in close proximity of a project, to previously contaminated areas. There are also inherent risks of your type of project to consider, from pollution to social risks (community objections to a project or relocation and pollution impacts on the community). The potential environmental and social ‘show-stoppers’ are numerous.

What you should be doing

The principles of the available international guidelines should be tailored for specific projects. Site assessments may also be undertaken to establish risk of legacy issues from prior users of the site to be developed.

Not all businesses require environmental permits, but they may need other licences and permits for certain aspects of a project. For example, to abstract water, to use non-municipal water, discharge waste water/effluent, cut down trees, dispose of waste, and so on. A review of environmental and social legislation and regulations during due diligence identifies potential illegal activity, or shortcomings.

Find out what environmental permits you need

Consult your local provincial environmental department and environmental consultant to determine which permit you require.

Assessing a site’s history of previous owners or operators can swing purchasing negotiations into the entrepreneur’s favour or assist financiers to decide if a project is ‘unpalatable’. As a start — find out all you can about your site’s history. Who were the previous owners and what was the land used for? Does the site show evidence of contamination?

Related: Funding Your Start-Up

Strategies to determine social and environmental issues

Financiers should determine early in the project if there are any ‘red flag’ environmental and social issues and formulate strategies to address these. Such strategies could include:

  • Biodiversity Management Plans for areas with sensitive ecological features
  • Site remediation and restoration for sites with historical contamination
  • Construction and operational environmental management plans for infrastructure developments, industrial developments and mining operations
  • Implementing Environmental Management Systems (e.g. ISO14001)
  • Community and stakeholder management plans
  • Environmental audits and monitoring programmes to assess and monitor construction and operational activities.

In a nutshell, poor environmental and social management can sink a business. Current and legacy environmental and social issues should be considered early on in the business lifecycle to determine the financial risks in order to determine whether a project is viable from a risk-reward point of view and whether it could be financed by a venture capitalist or lending agency. Involve environmental practitioners during the concept stages of any project.


Company Posts

SAB Transforms Supply Chains

Supplier Development Programmes grow black-owned suppliers and create jobs.

South African Breweries (SAB)




The South African Breweries (SAB) has invested more than R200 million into creating an inclusive supply chain that incorporates black-owned and black women-owned SMEs through its supplier development programmes, SAB Accelerator and SAB Thrive. In addition, more than 100 jobs have been created through these efforts.

SAB Accelerator and SAB Thrive aim to create a diversified and inclusive supply chain by supporting the growth of black-owned suppliers through business development support and funding. The programmes are two of four entrepreneurship development programmes run by SAB to help create 10 000 jobs in South Africa by 2022 — SAB KickStart, SAB Foundation, SAB Accelerator and SAB Thrive.

SAB’s agriculture programmes also contribute towards the aim to create jobs by growing emerging farmers.     

Related: SAB-Commissioned Research Shows SA Poised To Reap Entrepreneurship Rewards

“From rural entrepreneurs to big business, SAB has laid the foundation to support entrepreneurs and to contribute towards government’s efforts to grow the economy and reduce unemployment in the country,” says Ricardo Tadeu, Zone President, SAB and AB InBev Africa.

“We recognise that one of the major hurdles for SMEs in South Africa is the ability to gain entry into big business and form part of their supply chains. This requires a symbiotic relationship with big business working alongside smaller suppliers.”

SAB Accelerator and SAB Thrive cohesively solve the challenges of creating a healthy pipeline of suppliers that represent the demographics of the country. SAB Accelerator has piloted ten businesses that have created 29 permanent and 79 part-time jobs in a period of just six months, and is currently incubating 24 businesses as part of the official post-pilot intake. SAB Thrive has invested R100 million in seven businesses, which have created 46 new jobs. In addition, the programme has contributed R140 million in new B-BBEE preferential spend.

The SAB Accelerator is an in-house programme dedicated to developing black-owned and black women-owned suppliers. Geared towards fast-tracking participants’ growth, the programme employs ten highly experienced business coaches and ten engineers, offering both tailored business and deep technical coaching to the participants.

It has a three-phased approach consisting of:

  1. Diagnostic: Screening the business’s current situation and systematically identifying gaps and opportunities for growth.
  2. Catalyst: Proposing an intensive three-month coaching intervention addressing key business functional and technical areas of improvement or growth.
  3. Amplify: Providing additional business development to support graduates of the Catalyst Programme.

The SAB Accelerator strongly focuses on enhancing market visibility and access of its participants.

Eligibility criteria:

  • Existing black-owned or black woman-owned suppliers currently servicing SAB’s supply chain at the time of application.
  • Existing black-owned or black women-owned businesses that have potential to join the SAB supply chain based on their product or service.

The SAB Thrive fund is an enterprise and supplier development (E&SD) fund set up to transform the company’s supplier base. The fund was established in partnership with the Awethu Project, a black private equity fund manager and SME investment company. The aim is to invest in and transform SAB suppliers to represent our country’s demographics. SAB Thrive investees benefit from 100% black equity capital and business support.

Related: 6 SAB Entreprenurship Programmes That Provide Business Management And Support

The fund invests growth equity capital into SAB’s existing high-growth black-owned suppliers, furthering their profitable expansion into the SAB supply chain without diluting the black-ownership of these businesses.

Existing white-owned suppliers are provided equity capital to support the enhancement of their black ownership, while facilitating the introduction of black entrepreneurs to their business. The intention is to apprentice the individual to take over the business in the near future.

Eligibility criteria:

  • Black-owned suppliers in the SAB supply chain that want to grow their business through access to black-owned growth equity capital.
  • Existing white-owned suppliers in the SAB supply chain that want to transform their B-BBEE ownership.

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Company Posts

Alternative Finance – Filling The Gap

Alternative Finance is finance beyond the traditional – it is defined by the financiers’ area of specialisation – by what they specialise in, whom they serve, and how they provide their funding.






Vital stats

Alternative Finance is finance beyond the traditional – it is defined by the financiers’ area of specialisation – by what they specialise in, whom they serve, and how they provide their funding. It does not replace traditional finance but rather functions as a complementary and additional form of funding.

Alternative financers are specialists – they focus on a particular need and on a specific audience. As a result their ‘how’ is customised to deal with their chosen target market and for this targets unique needs. This applies to the funder’s processes and to their level of flexibility around things such as collateral. An example of this is that a SME may have an existing R1 million overdraft (their traditional finance) secured by R 1.5 million collateral but suddenly they need R5 million for some kind of contract or bridging finance – they need it fast and don’t have that extent of collateral.

The traditional funder cannot provide what they need, their process is too long and their flexibility is too low. An alternative financier providing bridging finance and specialising in SMEs is ideally positioned to fill this gap.

Related: 5 Key Questions To Answer For Raising Funding

One of the most significant differences between a traditional funder and an alternative financier is in their process. In the case of the alternative financier, they have often chosen to deal exclusively with a particular customer base, for example SMEs. As a result, this funder has both an affinity and contextually relevant empathy in working with SMEs.

Not only do they speak the same language the funder also has an appreciation for the time and material constraints of the SME and has developed their processes to cater to this market. This applies most notably to the turnaround time of the funding need and to the assessment aspect – where flexibility around things such as collateral is vital in making the finance happen for the SME.

A traditional funder is unable to meet the deadline of a bridging finance need, submitted on an urgent basis, where the finance is needed as soon as 2-3 days from time of application. A specialised or alternative funder is able to do exactly this. A traditional funder is also unable to find creative methods in solving the SMEs lack of high-value collateral in applying for finance.

This SME has generally already used their high-value collateral for traditional credit facilities but now needs funding for growth or resolution of a temporary cash flow challenge. An alternative financier is able to look at such an application in a different way, and has most likely already established alternative ways to make this happen for the SME.

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How to Guides

6 Money Management Tips For First-Time Entrepreneurs

That R25 coffee every morning isn’t taking you to the next level any faster than brewing a pot at the office.




How many times have you been told that saving money is a good thing? Financial specialists recommend that you save a bit of money every month, but that’s easier said than done. After all, it’s not uncommon for people to live paycheck to pay cheque.

However, if you want to start a company, you’ll need to break away from this cycle and start budgeting and saving. At times, this will be a trying task, but it must be done if you want to invest in your future as an entrepreneur.

If you want to start managing your money more effectively and set yourself up to become an entrepreneur, follow the six tips below. With these techniques in your arsenal, you’ll start so see immediate changes, and you’ll set good behaviours in motion that’ll serve you throughout your career as an entrepreneur.

1. Prioritise organisation

When you are organised, you can track every facet of your finances. Record all of your financial information in one place so you can refer to it and keep track of your progress.

When you chronicle all of your financial information, you may want to try and organise it by category. For example, when you are recording your current costs, you can categorise them as “urgent” and “future.”

Not only will this system help you stay on top of your personal finances, but it’ll prepare you for entrepreneurial success because it’s a directly transferable skill.

Related: Smart Money For Small Businesses

2. Check your credit

According to a recent MoneyTips survey, nearly 30 percent of people don’t know their credit score. If you are among this group, it’s time to request a free credit report. Once you know your number, assuming money’s tight, feel free to use a few do-it-yourself credit repair techniques to quickly improve your score.

Understanding your credit score and improving it to the best of your ability is paramount when it comes to money management. A little-known fact among aspiring entrepreneurs is that the funding a new business receives is often dependent on the founder’s credit score.

3. Save where you can

People often cringe when they think about cutting back. Fortunately, there are several painless ways to save. Look at your daily habits and see if you have any spending trends. For example, if you spend $5 every day on lattes, you might consider cutting back and only having the expensive latte every other day. Slowly, you’ll get used to this new habit, and your bank account will reap the rewards.

Related: Time Is Money: Tips To Help You Use Yours Well

4. Search for additional information

The Penny Hoarder

Have you heard of The Penny Hoarder or Dough Roller? These are just two personal finance blogs that can help you better manage your money, but there’s a whole lot more out there.

Subscribe to websites and follow podcasts that offer advice on money management. Also, keep your eyes peeled for informative outlets that speak directly about entrepreneurial finances and follow them, too.

5. Set long- and short-term goals

Have you ever noticed that people want to reach their goals in as little time as possible? If you pick up almost any given health magazine, it’ll claim that it can help you achieve extreme results in little to no time.

Unfortunately, crash diets are often ineffective, and “get rich quick” money management techniques often lack substance.

It’s hard to accept that your goals will take time to accomplish, which is why you create short- and long-term goals. In either case, aim to make goals that are specific, measurable, attainable, relevant and time-based. Ideally, accomplishing your short-term goals will give you the positive feedback that you need to continue striving for your long-term goals.

Related: If You’re Trying To Raise Money, Doing Any Of These 9 Things May Scare Off Investors

6. Find a mentor

If you manage your personal finances and entrepreneurial finances, one thing is certain – at times, it will feel like you can’t keep up with everything. Financial planning can be difficult, and it’s not uncommon for it to feel overwhelming.

As an individual, you can seek out mentors that can help you with personal finances. As an entrepreneur, you can continue to work with these people or seek out more established financial consultants that provide you with guidance you need to run your business.

Managing your finances is a trying and rewarding experience. It will feel messy at times, but the more you practice, the more you’ll improve your personal finances and set yourself up for entrepreneurial money management success.

This article was originally posted here on

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