WHAT WE DO
We allocate investment capital to accredited fund managers – venture capital or private equity funds – that invest directly in scalable small and medium enterprises with the best potential for growth and sustainable employment creation.
Through our structure as mainly a fund-of-funds, we can reach a greater network of businesses than we would have been able to through direct investment in SMEs. This will enable the Fund to ultimately have a more significant impact on employment creation.
This approach may change over time, as the Fund, its resources and the broader SME environment evolves.
We also have the ability to co-invest and make direct investments on an opportunistic basis for exceptional business cases.
Have high growth, profitability and sustainable employment growth as core elements of their investment thesis
Have a mandate that enables them to meet the needs of the investment opportunity
Cover the investment spectrum from growth- and mature-stage venture capital through to small, medium and smaller mid-market investments
Target attractive market-related commercial returns, with real capital preservation as its benchmark return
Numerous studies have found that the local SME environment is far from conducive to existing firms and businesses that are transitioning to formality or new start-ups. South Africa is experiencing a net loss of -4.9% in small businesses, which exceeds the start-up rate of 2.9% per year.
With the right investment and support, our SME sector is ideally positioned to contribute significantly to economic growth. These businesses are crucial to achieve sustainable employment growth, but operate under massively challenging conditions.
In line with our investment objective as primarily a long-term focused fund-of-funds, over time we will aim to address some of the most acute of these challenges, through:
IMPROVED FACILITIES TO ACCESS CAPITAL
The Fund aims to invest in 7 – 12 SME investment funds, and in this way we are increasing the pool of capital available for investment in the sector.
Over the medium to long term, we anticipate that this should support investment into approximately 100 high-growth businesses, leading to the creation of between 27,000 – 45,000 employment opportunities over time.
FUND MANAGER DEVELOPMENT
The Fund will have a particular focus on the transformation of the private equity fund landscape and the development of black fund managers, as well as supporting and driving the development of high-growth black SME businesses.
This will be done by scaling and supporting new managers that show the requisite fundamental investment attributes, but are struggling to become viable. It will also encourage the use of mentorship and technical support by all fund managers.
NON-INVESTMENT CAPACITY BUILDING
The Fund will look to develop and, where appropriate in an additive and non-duplicating manner, support and amplify broader SME initiatives and high-impact programmes. It will focus on ways in which the Fund can lend technical, reputational and, if required, appropriate impactful financial support.
This will include scaling Business Development Services providers that focus on the SME sector via rigorous accreditation – for platform acceptance – and ongoing measurement of outcomes to drive the transition to a quality-driven industry.