Sanlam Investments announced that the first round of transactions from one of its three Investors' Legacy Range funds had been concluded. The SME Debt Fund has committed R110 million in debt relief capital to three South African businesses and is expected to preserve 630 jobs and create a further 356.
The range of three impact investing funds was launched in June to support companies negatively affected by Covid-19 and to help create or preserve around 27 000 South African jobs. These are companies with viable and sustainable business models, but which urgently require funding due to the adverse impact of the national lockdown on their operations.
The Investors' Legacy Range, comprising an SME Debt Fund, Mid-Market Private Equity Fund and Corporate Debt Fund, saw R2.25 billion of Sanlam's own capital committed, with the company looking for like-minded investors to raise a further R4.75 billion. The SME Debt Fund was targeting a minimum of R1 billion and closed its first round of investment commitments of R250 million on 1 September in order to commence its support of SMEs. The fund had a second close of a further R100 million on 30 November.
Sanlam Investments' head of Alternatives, Mervyn Shanmugam, says funding companies that are able to positively impact as many people as possible is a priority. “To us, people matter most, and every single job in South Africa counts. The job losses in 2020 have been catastrophic, and we are committed to doing all we can to reignite economic growth and preserve and create jobs both directly and indirectly.”
Sanlam Investments has had a very positive response from investors seeking to support SMEs, and the first three deals together have the potential to preserve or create 986 jobs, adds Shanmugam. “Our hope remains that other institutions and retirement funds will commit capital to the three funds so we can have an even greater impact.
“Two of the first beneficiaries of funding are Mettle Administrative Services and Retail Capital, both non-banking financial institutions which offer support to many other smaller businesses. In addition to the positive outcome related to jobs, both businesses have a 'strong likelihood of producing sustainable cash flows for investors,” according to Shanmugam.
Mettle Administrative Services, which has been in business for 15 years, provides working capital finance – mainly to panel beaters – by way of discounting invoices issued to various short-term insurance companies and other corporates. The lockdown had a significant negative impact on the turnover of Mettle and its clients, while an existing loan facility came to an end during the lockdown. The new funding will assist Mettle and its clients in returning to full capacity, enabling them to re-hire staff or increase working hours.
Mettle Administrative Services CEO, Lebe Oosthuysen, says, “The funding line from the Sanlam SME Debt Fund has enabled Mettle Administrative Services to continue to fund our clients. The number of our clients returning to normal turnover levels is growing. As the success of our clients' businesses is reliant on the funding, we provide to them, the impact of this facility has been extremely positive to a number of SMEs.”
Retail Capital offers merchant cash-advance lending to SMEs mainly in the retail and hospitality industries. In operation for more than seven years, it provides upfront cash to small businesses in exchange for future credit and debit card receivables, with repayments based on sales. Since inception Retail Capital has funded over 28 000 South African SMEs, playing a key role given that SMEs have a rising need for working capital and capex funding, in a sector where banks' appetite for lending is muted.
”Now, more than ever, access to funding for SMEs is critical to the health and survival of this vital economic sector,” says Guy Hosking, CFO of Retail Capital. “The Sanlam SME Debt Fund has demonstrated its commitment to South African job creation and will enable Retail Capital to continue providing quick and accessible funding to support SMEs.”
The third transaction supports black-owned specialist retailer Oilstar, with the funding providing job security to around 630 current employees mainly from low-income households. Oilstar expects to open two further sites in 2021, which will lead to the creation of further onsite jobs as well as indirect employment through its range of service providers.
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