27four Black Business Growth Fund II (27four BBGF II), a blended finance partnership between the South African Government through the Jobs Fund, and South African institutional investors, has announced a second close with total capital of R710m.
The fundraising is expected to reach final close through the course of the year.
The second close includes commitments from Consolidated Retirement Fund for Local Government (CRF), and Rand Water Provident Fund (RWPF), as well as further unlock of capital from the Jobs Fund.
Managed by 27four Investment Managers, BBGF II invests into Black Private Equity Funds focused on investing into mid-sized South African businesses for growth and job creation.
Rory Ord, Head of Unlisted Investments at 27Four, said: “The BBGF II will commit between R100-200m in each underlying fund, and will back 5-7 funds.”
“All of our selected funds must be Black Private Equity Funds investing in the mid-market in South Africa. This means that they invest in well established, sustainable businesses that are still in their growth phase. These businesses can benefit strongly from the strategic input, governance, systems and processes that private equity brings in addition to the capital injection.
The fundraising was launched in mid-2019 and has found good traction with local pension funds looking to achieve access to a diversified portfolio of local South African companies,” he added.
Ord said that the fund made a commitment to the Summit Private Equity Fund in the last quarter of 2019, which has made a number of investments to date, with a strong pipeline in healthcare, education and financial services businesses.
“We are hard at work in due diligence with a number of additional managers and expect to make another three commitments this year. While the current environment is causing difficulties for many businesses, those with private equity backing will certainly be better placed to work through this period and do well once things begin to normalise,” he said.In addition, the fund can co-invest alongside vetted and approved private equity fund managers both before and after a commitment has been made to those fund managers.“This allows us to help the fund managers we approve to complete deals ahead of reaching a formal fund close, and also helps them to be able to execute on more deals through the lives of their funds. Ultimately, all of this allows us to back more companies for growth and job creation,” Ord explained.27four’s partnership with the Jobs Fund creates substantial first loss capital within the fund, and this continues to be an attractive feature for pension fund investors.
The blended finance approach allows pension funds to create diversified local private equity exposure at low risk, while achieving tangible impact in the local economy.
A spokesperson from CRF said: “CRF is a leader in Responsible Investing and a PRI signatory, and is pleased to announce their capital commitment to the 27four Black Business Growth Fund. This will be CRF’s third investment in a blended finance fund in South Africa, all of which target job creation.”
“CRF seeks to achieve commercial returns for its members, limit downside risks and have a positive impact on South Africa and expects asset managers to create products that meet all three requirements. We are confident that the 27four BBGF II will achieve these requirements through the innovative Jobs Fund mechanism that has been negotiated.”
“Job creation is a key Social initiative of CRF, which is formalised in our Responsible Investing Policy. Support of black businesses, women-owned businesses and private equity firms is crucial in unlocking South Africa’s true potential and we commend 27four and the Jobs Fund for their efforts in realising this potential during a difficult global and local environment.”
A spokesperson from RWPF said: “Rand Water Provident Fund believes strongly in the impact that its investments can have in promoting job creation and transformation in South Africa and is proud to be part of the Black Business Growth Fund that 27four have set up.”