The Kisby investment fund headed by former SA Post Office CEO Mark Barnes is hoping to raise as much as R5bn to support small businesses to stoke the economy.
Kisby, which offers funding solutions for SMEs, is aiming to invest in small businesses with revenue of R10m to R1bn and is eyeing spring to disburse its first tranche of cash, Barnes says.
The fund aimed to address the lack of fairly priced funding solutions for SMEs in SA, he says.
“The fund will have 20% of risk capital which we’ll raise from impact investors and we’ll leverage that up four times with debt instruments. Investors can invest in either of those pools. Our target initially for the fund will be up to R5bn in total. We’d like to be investing our first money by spring.”
The Kisby fund is a partnership between 4AX Africa Exchange, 4AX Debt Services, media company Arena Holdings, owners of Business Day, and online credit provider Rainfin. It will provide two kinds of funding instruments, a three-year term prime interest rate loan and a CPI related loan, Barnes says.
Small to medium enterprises are part of the centre of SA’s “economic universe” which is being neglected, he says.
“In my view, the growth engine is there, not at the top level. And so we want to go find those businesses whose only constraint is access to fairly priced capital. These companies are not known. They can’t get to the capital markets at a fair price. They have to hunt around in the overpriced debt market.”
The coronavirus has added to woes of small businesses which were already struggling in SA’s declining economy. Many SMEs have succumbed to the impacts brought on by the virus with many pushed to permanent closure.
While the pandemic may have introduced a secondary problem to the plight of small to medium enterprises in SA, the fund will not only focus on businesses that have been hit by the virus, Barnes says.
“We’re not just looking for businesses that have been affected by corona, we think it’s a general issue that funding SMEs at the right price is not addressed. They fall in the vacuum between being overcharged and not being looked at at all.”
Many capital-funding solutions in the market are payroll lending ones, which are short-term loans, often with high interest rates and may not suit the growth profile of an SME.
“Other alternatives rely on a certain survival and certain death rate of the companies. We want everyone to survive. The way we get compensated is to end up with a piece of the equity to compensate us for the risk,” Barnes says.
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