The IDC’s Risk Capital Facility (RCF) Strategic Business Unit's vision is to support sustainable economic growth in South Africa and in the rest of Africa through the provision of financial support to high development impact projects. Access spoke to the IDC’s Head of Risk Capital Facility SBU, Meryl Mamathuba to find out more …
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Meryl Mamathuba
Head of Risk Capital Facility SBU – IDC |
Tell us a little about the activities of the Risk Capital Facility SBU (RCF SBU)
The activities of the RCF SBU are closely aligned with government’s micro economic reform strategy and its broad based
BEE plan. This is a consistent theme of government’s policies such as
the Accelerated and Shared Growth
Initiative (Asgi-SA) and the economic
cluster’s programme of action. Growing
small enterprise is vital to achieving the
country’s goal of halving unemployment
by 2014.
What kind of funds does the Risk Capital
Facility SBU deal with?
The funds managed by the RCF SBU are
aimed at providing support to high
developmental impact projects. This
includes the support of SME enterprises,
job creation, broad based empowerment
and the development of poor provinces
and rural areas. The funds currently under
management include the Risk Capital
Fund, Development Fund and
Foundation Fund.
How does the Risk Capital Fund operate?
Risk Capital Fund (RCF Fund) consists of
funds donated to the South African Government by
the European Union. Through the Risk Capital Fund,
the RCF SBU provides equity-type finance
to SME businesses with more than 25%
ownership and substantial involvement
in management by historically
disadvantaged people. A special focus is
given to women entrepreneurs, targeting
at least 30% of the RCF’s portfolio, and to
high job-creating enterprises.
This facility typically supports
transactions that would not otherwise
reach fruition due to the limited financial
resources of the proposed enterprise
owners. A wide regional spread of new
investments is sought, with 65% of
funds to be committed outside of
Gauteng and the Western Cape. Projects
carried out by South African SMEs in
other countries in the rest of Africa are
also considered.
The RCF Fund operates through three
investment channels, namely the direct
channel, niche fund channel and third
party channel. Direct channel
investments are co-investments
alongside the IDC’s mainstream
business, helping to improve the
financial structure of otherwise
undercapitalised companies. Niche fund
channel investments are venture capital
funds targeting particular sectors of the
market, or specialising in certain types
of deals. Lastly, third party channel
investments are co-investments with
other financial institutions in South
Africa. As with niche fund investments,
this channel allows the RCF Fund to
involve the commercial sector and other
financiers in the emerging entrepreneur
market, and to diversify its portfolio.
Explain the IDC’s ring-fenced funds
The Foundation Fund is aimed at
facilitating the acquisition of shares by
the community foundations in IDC
funded projects. The Foundation Fund
plays a significant role in facilitating
broad-based black economic
empowerment (BBBEE) and ensuring
that a more significant socio-economic
impact is achieved. The Foundation Fund
has a bias towards projects in rural areas.
The IDC Development Fund assists
Historically Disadvantaged South Africa
(HDSA) workers to acquire equity stakes
in existing and new companies, in order
to facilitate the empowerment of
workers, through sustainable Workers
Trusts. This product is aimed at ensuring
that HDSA workers at all levels of
occupation have a meaningful stake in
the economy.
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