Introduction to Kgatelopele

A slow down in the overall economic activity around the world has without a doubt affected the South African economy which relies in SMME’s for economic growth and employment. Currently, the SMME’s sector is faced with a myriad of challenges. Some of the challenges that SMMEs face in this current turbulent market are start-up or early stage capital, expansion and later stage financing for growth. There is a hive of entrepreneurial activity in the low end and middle segment of the market, and this is accompanied by a high failure rate of small start-up businesses in this market. The failure is attributed by access to funding, management and operations amongst other problems. Despite these challenges, South Africa continues to attract foreign direct investment, and many foreign companies see our country as an entry point to the rest of Africa. Having been accepted as the member of the BRICS countries opens up even greater opportunities.

Private Equity funds generally refers to investment vehicles that invest shareholder capital in private companies, as distinguished from publicly listed companies. In South Africa, Private equity has played a vital role in facilitating the introduction of BEE investment, and as a contributor to the financial services industry. The sector continues to be resilient and performed more positively than peer sectors abroad during 2010. Despite an overall decrease in funds from R105.4-billion to R97.6-billion, there are undrawn commitments in the region of R31-billion. This represents many investment opportunities for the private equity industry.

Kgateloplele will be geared to raising capital from retail and institutional investors on behalf of SMME’s. The funds raised will be channeled towards start- up and emerging companies with a strong business case. The focus will primarily be towards the low end of the market and the middle class. Kgatelopele aims to play a vital role in providing equity to SMMEs who are the driving force for economic growth in emerging economies. A root cause for the limited access to capital is that the start-up companies are considered to be risky as these ventures have limited track record, lack of proper financial records, inadequate business plan, insufficient management capacity/ skill, poor management of funds, under capitalization, insufficient assets for security/ collateral and no corporate governance structures. Kgatelople aims to fill this gap by facilitating access to funding, and will become a partner to share the returns associated with the risk. Kgatelopele will also provide technical and managerial assistance to bridge the capability shortfalls and mitigate the risk.