Today’s top entrepreneurship and business stories (2 March)
SA Taxi and SEFA sign R100 million finance deal
SA Taxi, one of the country’s few developmental credit providers, has signed a R100 million financing agreement with the Small Enterprise Funding Agency SOC Ltd (Sefa).
SA Taxi’s business model includes the financing of industry-specific vehicles, provision of bespoke taxi insurance that helps operators protect their income-generating asset and optimise cash flow, a Taximart division that restores pre-owned vehicles to a virtually new condition, and a dealership network through which both new and pre-owned minibus taxis are sold directly to taxi operators. These end-to-end capabilities create significant efficiencies throughout the vehicle life cycle and improve the ability of operators to succeed and, over time, build a sustainable fleet.
SA Taxi is funded both locally and internationally by a diversified pool of debt investors. It therefore plays an essential role in linking institutional funding to local South African small and medium enterprises (SMEs).
Sefa is a wholly owned subsidiary of the Industrial Development Corporation (IDC) and reports to the Department of Small Business Development. It is mandated to increase access to finance for SMMEs and co-operatives and help them create sustainable businesses. sefa enters into strategic partnerships that extend its reach to enterprises, with preference given to businesses owned by vulnerable groups, including women, black people, the youth, and the disabled.
“The agreement with Sefa marks the first time a South African state owned entity has partnered with us directly,” says SA Taxi capital markets director, Mark Herskovits. “It is an indication of the value we offer to small business owners in the minibus taxi industry and our close alignment with government’s approach to improving land transport in this country to the benefit of all stakeholders.
“It also acknowledges the importance of the role we play in supporting the recapitalisation and sustainability of the industry. This is particularly critical in light of the industry being a founding pillar of South Africa’s public transport sector and, therefore, to the functioning of the economy. Without the minibus taxi industry most people could not get to their places of work, schools or clinics.
“In addition, each minibus taxi creates a ripple effect for job creation. It provides a livelihood for the owner, obviously. But it also provides direct employment for drivers and conductors. In addition, there is indirect job creation via the taxi nodes, which are central marketplaces of goods and services including retail, and ancillary services such as vehicle washing and repair.”
SA Taxi currently finances over 26 000 of the estimated 200 000 minibus taxis operating in South Africa and has empowered over 42 000 SMEs.
Medu Capital takes 15% stake in HeroTel
Medu Capital, a private equity company focused on established medium sized owner-managed businesses, has acquired a 15% stake in Hero Telecoms (HeroTel) at an enterprise value of R495m.
Siya Nhlumayo, Partner at Medu Capital, told Africa Global Funds, that the firm identified the telecommunication sector as an attractive sector to investment its private equity capital largely due to the fundamentals, in particular for wireless internet service providers (WISPS), over the medium to long term.
“HeroTel is an ideal entry into telecoms for Medu due to HeroTel’s track record in successfully executing its acquisitive growth and organic growth strategy. Further, there was great alignment with the management team of HeroTel,” he said.
“They control the business and the subscription proceeds from the Medu investment is going into the business to fund further growth. HeroTel was looking for a partner with capital, track record for institutionalising owner managed businesses and has the empowerment credentials,” he added.
HeroTel was established in 2014 with a mission to consolidate the wireless internet service provider (WISP) market and connect South Africa to high-speed wireless internet.
At the time of Medu Capital’s acquisition, HeroTel has successfully concluded acquisitions of nine WISPs, thus establishing a footprint in KwaZulu Natal, Western Cape, Mpumalanga, North-West Province, Limpopo and Gauteng.
The capital raised from the Medu Capital investment will be utilised to further HeroTel’s investment and acquisitive growth strategy. (via AfricaGlobalFunds)
SA economy showing telling signs of a turnaround
A much improved global economic environment is supporting stronger growth in South Africa, with a stabilising rand and lower inflation expected to pave the way for interest rate cuts in the second half of 2017.
This is according to Old Mutual Investment Group senior economist Johann Els, who presented at the Group’s first quarterly investment update for the year today. He shared his views that tight fiscal policy, following a well-received Budget- and fading economic shocks, such as the commodity price slump and drought and food inflation, are all contributing to the case for an SA growth recovery this year.
Els says that despite recent political uncertainty, there is a sharply improved short-term cyclical outlook for South Africa compared to this time last year. “The stabilising rand could surprise on the strong side, we are seeing falling food and headline inflation and rising exports are contributing to a narrowing trade and current account deficit,” he explained.
Focusing on the stabilising rand, Els said that this can be attributed to a commodity price rebound, a recovery in other peer or emerging market currencies, the narrowing of the trade deficit and the reduction of the ratings downgrade risk following a good Budget. “As such, we expect the SA Reserve Bank to maintain rates for the first half of the year, but they are unlikely to try and prevent further rand strength,” he said.
When it comes to consumers, Els believes that, despite a challenging first half of the year and tough Budget, the environment is largely looking better. “The Budget might seem a bit harsh for consumers, but this will be balanced by lower inflation and interest rates in the second half of 2017, with real wage growth and some job growth,” he explained.
Els says that, unfortunately, medium to longer term growth prospects are not promising without meaningful economic reform, with risks still on the horizon from the threat of a strengthening dollar, waning Chinese growth and ongoing political uncertainty in the US, Europe and at home. “However, we expect growth to rise further to about 1.3% in 2017, with a possible upside surprise if Emerging Markets remain in favour and confidence improves.
“Slow economic growth, combined with a better inflation outlook, should not only assist the Reserve Bank from hiking rates further, but will likely lead them to cut rates during the second half of 2017.”