The key investors in the fund include the IFC (International Finance Corporation of the World Bank); Dutch impact investor, Stichting DOEN; the French development agency, Proparco; the Dutch development agency, FMO; and the African Development Bank (AfDB). The fund has an underlying mandate to invest in the selected countries and offices have already been established in Blantyre, Windhoek and Lusaka. $10 million has been allocated to finance SMEs in each of the selected countries.
The Business Partners Southern Africa SME Fund will replicate the South African Business Partners Limited investment model which, for the past 33 years, has specialised in investing capital, skills and knowledge in entrepreneurs.
Nazeem Martin, MD of Business Partners Limited, says that the primary focus of the fund is to provide access to funding and post-investment technical assistance support for SMEs, thereby fostering entrepreneurship, facilitating wealth creation, broadening the tax bases, and creating much needed jobs in each of the selected countries.
“Access to finance remains an issue for many SMEs due to local financial institutions’ reluctance to take on additional risk, and the limitation placed on businesses applying for finance due to the level of securitisation required. In response to the growing need for risk capital and quality technical assistance in Africa, BPI has a specific mandate to operate exclusively in the SME space and to invest both capital and knowledge in the entrepreneur and business, as we have done here in South Africa for more than 33 years,” says Martin.
The new fund does not represent the company’s first foray into Africa. BPI launched funds in Kenya in 2007 and Rwanda in 2012, and both have reported positive operational, financial and development performances, at levels similar to that achieved in South Africa.
Martin says that following these countries’ success, the potential to roll out the Business Partners Limited SME finance model into other parts of Africa was identified. “Rather than focusing on individual country-specific funds in numerous countries, a regional fund was established which allows BPI to mitigate each country’s possible risks and minimise costs, while still maximising operational efficiency.”
Martin explains that these countries, namely Malawi, Namibia, and Zambia were an attractive choice for BPI to establish itself since these countries share many similarities with South Africa, especially in the SME environment. “Besides the rapid economic growth experienced in each of the selected countries, their regulatory environments are similar to South Africa’s, which means we can relate to both the business practices and culture in the respective countries. Also, the Governments in those countries are driving the process of creating an enabling business environment, especially for SMEs, and have demonstrated a willingness to protect foreign investor rights, thereby making each country foreign investor friendly.”
Mark Paper, COO of BPI, explains that each fund will be managed by a local investment team from a regional office in the respective countries. Each country’s fund will be diverse in its investment selection within the SME space and investment amounts will range from sector to sector, from a minimum of $50 000 to a maximum of $1 million. “Each regional office will play a crucial role in offering products and services specifically tailored to meet individual SMEs’ unique needs, and will play an active role in the businesses financed. This local presence is also needed to effectively perform the due diligence on the entrepreneurs and the investments, as well as provide value to the clients invested in,” says Paper.
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