27four partners with ASISA to facilitate funding for black business

27four is pleased to announce its partnership with ASISA to form a fund to facilitate investment into black business. The partnership creates a channel for ASISA members to allocate capital into both existing black businesses and to facilitate further transformation of business in South Africa.

The fund forms part of 27four’s market leading Black Business Growth Fund (BBGF) initiative to gather capital from retirement funds and the financial sector to facilitate increased funding for black business.

Fatima Vawda, Managing Director of 27four, says: “The Black Business Growth Fund partnership with ASISA is a perfect example of an industry coming together with private sector participants to find practical ways to implement government policy. This initiative will help to provide capital to an under-serviced segment of South African business, and will speed growth, job creation and transformation in the country.”

Financial Sector Code

The driver for the 27four ASISA partnership was the issue in December 2017 of the revised Financial Sector Code (FSC) which sets out the rules around B-BBEE in the financial sector. The revised FSC enables financial sector participants to meet the requirements of the codes by providing financing to black owned and black women owned companies. In addition, the codes provide for the capital to be distributed by black investment managers, which will help tremendously in the transformation of the South African private equity industry.

What makes this empowerment mechanism smart is the way it runs. Black Business Growth Funding leverages existing mechanisms for capital deployment, but tweaks these to achieve empowerment objectives. This means that it can operate within many existing legislative and prudential rules to ensure effective and efficient deployment of capital. Using the well-established private equity sector, but ensuring that black private equity managers handle the deployment is an example of such a measure.

Adds to existing Black Business Growth Fund

27four formed its Black Business Growth Fund in 2017 with pension fund capital, and has begun to deploy this capital successfully through Black Private Equity Funds into mid-sized South African companies.

The BBGF ASISA fund with be managed in parallel to the existing BBGF fund, with a slightly different mandate due to the nature of the investors.

Rory Ord, Head of Unlisted Investments at 27four said:”Adding financial sector capital to the existing pension fund capital in the BBGF will create significantly more scale, and expand our ability to make transformational investments.”

Investment success to date

27four is pleased to say that capital has begun to be deployed, with the first investments of the fund going into private mid-sized businesses in the industrials, manufacturing, technology and FMCG sectors of the South African economy. Our investment team is hard at work and further investment are expected to be completed soon.

Growth and job creation

The capital deployed under the Black Business Growth funding initiative is to help mid-sized companies to grow to two to three times their size over a five year period. This kind of growth has been proven to drive the kind of job creation that South Africa desperately needs, and we expect to help to create around 10,000 jobs over the life of the fund.