British asset management company, Ninety One has embarked on an impact investment initiative worth $600 million in collaboration with Ethos Private Equity firm. The partnership aims to cushion South Africa’s enterprises from the downing effects of COVID-19 while seeking an attractive return for investors.
Hendrik du Toit, Founder, and CEO of Ninety One stated that the lockdown which was imposed in March 2020, was necessary to protect the people of South Africa but still had grave impacts on the economy of the country. He described the economic situation as a “once-in-a-generation” economic challenge.
Furthermore, Hendrik believes the market-led impact initiative will mitigate the negative economic impacts of the COVID-19 pandemic. Although Ninety One did not disclose the companies that will profit from the initiative, it emphasized that good companies across all economic domains would have needful funding that may not be provided by banks or the state.
Additionally, Ninety One hopes that retail investors in South Africa will be able to profit from the economic initiative.
Hendrik believes the initiative will also save thousands of vulnerable jobs in the country and support the South African tax base.
The fund consists of a concentrated portfolio with an appropriate blend of senior and subordinated debt, preferred equity, listed equity and private equity with a deployment time window of 18 to 36 months.
At the moment, South Africa’s government is overwhelmed with the ripple effects from COVID-19, which has forced its central banks to adopt various economic measures like lower interest rate, and acquisition of government bonds to salvage small and medium scale business in the country.
Furthermore, the economy of the country plunged into recession in 2019 and is now facing a global recession which has led to an adjustment of earlier projected economic growth to 7 percent for 2020.
With this latest development from Ninety One, the sole responsibility of catering to SMEs by the government will be relieved, as enterprises in the country can also count on the private sector to access favorable credit facilities.
Hopefully, more financial institutions realize that there are investment opportunities in South Africa during this pandemic period, which can significantly save more jobs and organizations.
“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,” said Stuart Mackenzie, CEO of Ethos Private Equity.