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Magnificent 7: Here's who will champion the goals of a R1.4bn SME fund

Sep 26 2019 21:30
Compiled by Lameez Omarjee

The SA SME Fund on Thursday named seven fund managers set to manage about R1.4bn to develop small businesses in the country.

The fund, launched in March this year, is a joint effort of the Public Investment Corporation and other 50 companies to support small businesses. The idea of the fund was first developed in late 2015, as the country was facing an investment downgrade.

It is typically a "fund-of-funds" that it invests in venture capital companies with a history of developing small businesses, Fin24's Ferial Haffajee previously reported.

The SA SME Fund's CEO Ketso Gordhan leads a team of six executive managers. The fund's board of directors include SA businessman and Discovery CEO Adrian Gore, Eskom acting CEO and chairperson Jabu Mabuza and businesswoman, author and chancellor of Wits University, Judy Dlamini.

The fund also has an investment committee, chaired by former FNB CEO and entrepreneur Michael Jordaan. The investment committee acts independently in identifying potential investments into funds and opportunities into funds, according to the Fund's website.

Via its official Twitter account, the SA SME Find on Thursday morning announced the seven fund managers to which more than R1.4bn has been allocated to. Jordaan in a separate tweet said that about R200m more is expected to be added to the fund.

SA SME Fund did not say what amounts over which each fund manager will have oversight.

The fund managers are:

Spartan

Spartan is a debt financing house, strictly for small and medium enterprises. Spartan is in a partnership with Black Umbrellas business incubator, to supply funding to entrepreneurs who graduate from the incubator programme, according to the SA SME Fund.

Spartan has been financing small and medium sized businesses since 1981 and focuses on small and growing businesses, not start-ups. "We back entrepreneurs with growth finance, asset finance and working capital finance," the financier's website states.

Spartan is also specific in the businesses it does not finance. These include businesses involved in the production and trade of weapons and munitions, tobacco, alcohol, radioactive materials, gambling and casinos, among others.

PAPE Fund Managers

This is an established, black-owned boutique private equity manager that invests in South Africa, according to the SA SME Fund.

While PAPE is still in the process of updating its website, the SA SME Fund noted that PAPE "aspires to improve the lives of all South Africans through job creation, a broader tax base and sustained economic growth."

PAPE has offices in Johannesburg and Stellenbosch.

Knife Capital

Knife Capital is known as a growth equity investment fund. It focuses on innovation-driven ventures with proven traction – in other words, ventures that have a product that meat a real need if their target market. Knife particularly helps entrepreneurs in SA to expand internationally.

Entrepreneurial success stories include online ticket platform Quicket and e-learning tutoring platform Skill Up. Knife Capital has offices both in Cape Town and London.

Grindstone Accelerator

The Grindstone Accelerator is an entrepreneurship development programme, part of Knife. Grindstone helps 10 small businesses at a time become investment ready.

The small businesses which have been part of the incubation programme in the past include Stellenbosch-based software company iKubu and audio platform for radio stations and podcasts, iono.fm.

Grindstone boasts with helping small businesses grow their revenues, jobs and other efficiencies. 

4Di Capital

The venture capital firm focuses on developing tech businesses at seed, early and growth funding stages. 4Di has offices in Cape Town, and Atlanta in the US.

The find manager launched its first fund in 2011 and focused on early stage technology venture capital. It supported financial technology ventures, among others. The third fund was launched in 2019, focusing on early and growth-stage investments into start-ups in the fintech, insuretech, healthtech, edutech and agritech spaces.

Savant Technology Incubator

Savant is a "commercially-focused" hardware technology incubator, providing tailored business development support. Savant partners with science and technology inventors or start-ups, according to its website.

"At any time, Savant will be partnered with companies in various investment stages and across various industries," the incubator's website states.

SummerPlace

According to the SA SME Fund, SummerPlace is the "first woman-owned and managed private equity fund" in SA.

Through the partnership with the fund they will focus on investing in "credible existing SMEs" with "a high potential for growth."

Partnership to develop black entrepreneurs

In a separate press statement issued by the SA SME Fund on Thursday, it announced that it partnered with the Masisizane Fund to create a fund to invest in black-owned fuel station dealerships.

"The fund is expected to create long-term wealth and economic opportunities for black entrepreneurs, spark much needed economic stimulation in townships, rural and peri-urban areas, and help oil companies accelerate their transformation commitments and goals," the statement read.

The SME Fund will contribute R50m and Masisizane will contribute R20m to what will be known as the Masisizane Franchise Fund. It will be managed by Masisizane Fund Management.

"The fund aims to lower the entry barriers into fuel retail franchising by providing debt and equity funding to black franchise entrepreneurs."

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