Investec spin-out launches recovery fund to save South African economy “in induced coma”

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A new coronavirus economic recovery fund targeting South Africa has been launched by Ninety One, which has just demerged from Investec Bank, and Ethos Private Equity.

JSE- and LSE-listed investment manager Ninety One has launched the impact investment initiative – the Ninety One SA Recovery Fund – to “support the preservation of the country’s productive capacity and economic recovery from the effects of the COVID-19 pandemic, while seeking an attractive return for investors”.

The firm said a body of evidence now suggests the protracted lockdown in the country due to the coronavirus could see GDP drop by up to 10%, with the country also set to experience “the worst recession in living memory”.

Ninety One said that if productive capacity is not preserved, South Africa could experience an L-shaped recession, in which it takes a decade for the economy to return to its 2019 size.

The firm said it was eyeing a ZAR10bn ($596m) fund size for the vehicle, and was hoping to reach a first close next month given “the urgency of the economic situation in South Africa”.

Priorities for the fund are to protect South Africa productive capacity during the next 24 months, preserve jobs and protect permanent loss of equity value, the firm added.

The fund will consist of a concentrated portfolio with a mix of senior and subordinated debt, preferred equity, listed equity and private equity, with a deployment time horizon of 18 to 36 months.

The fund will initially seek to attract support from the country’s institutional investors, and is hopeful retail backers in the country will also be able to commit to the fund.

Hendrik du Toit, founder and CEO of Ninety One, said, “The lockdown, while necessary to protect the nation’s health, has been akin to putting the economy into an induced coma.

“South Africa faces a once-in-a-generation economic challenge. The SA Recovery Fund is a market-led, impact initiative to mitigate the negative economic impact of the COVID-19 pandemic, while seeking a commercial return.

“With this fund, we would like to support quality businesses and protect the nation’s productive capacity, which will in turn preserve thousands of jobs and support the South African tax base.”

Stuart Mackenzie, CEO of Ethos Private Equity, added, “The Ninety One SA Recovery Fund provides Ethos with a unique opportunity to partner with Ninety One on a critical funding initiative at an important moment for our nation.

“Our experience and institutional capabilities in private equity ideally position us to play a value adding role in the execution of the Ninety One SA Recovery Fund’s investment strategy.”

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