23 May 2018 – Ecsponent Limited today announced a transaction that will expand its capability to stimulate the growth of South Africa’s small and medium enterprises (SME) sector. It is proposing an investment of up to R400 million into venture capital company (VCC), Capitis Equity Proprietary Limited (Capitis). The transaction is intended to be effective before the expiry of the financial period ending 30 June 2019.
Through its investment in Capitis, a black women-owned VCC in terms of Section 12J of the Income Tax Act, Ecsponent will have access to an effective and professional investment vehicle that will enable the Group to expand its investment opportunities.
Ecsponent CEO, Terence Gregory, explains, “Capitis’ expertise and investment management skills will provide us with opportunities for diverse but targeted investments that will help stimulate much-needed economic growth in the SME sector.”
The Group’s investment will see it subscribe for classes of equity shares in the Capitis VCC. It will, therefore, provide funding to Capitis for onward investment in qualifying investee companies as in line with the Group’s investment mandate.
“Capitis have the infrastructure and deal flow to provide the sourcing, due diligence and ongoing investment management of the targeted assets. This ability will increase our exposure to qualified investment opportunities without the need to establish our own infrastructure. Additionally, Capitis and Ecsponent can join forces as investment partners for larger transactions. In all, the transaction will bolster our skills and aid in reducing the Group’s overall investment risk,” Gregory adds.
“We also expect that an investment in Capitis will enhance our existing business activities, which are aimed at improving local economic development through the support, skills transfer to, and funding of South African SMEs, which is the basis of our Supply Chain Solution.”
The Group also announced two additional transactions that will strengthen Ecsponent’s position for future strategic growth, by investing in assets that provide the Group with medium to long-term capital growth.
The transactions include the conversion of two loans by the company to share equity in the Luxemburg-based FinTech innovator MyBucks SA, listed on the Frankfurt Stock Exchange. The value of these transactions is around R340 million and will see the Group increasing its shareholding in MyBucks by 11.568% through these loan conversions.
Gregory added, “These transactions will improve the quality of the Group’s medium-term assets and growth earnings prospects. The additional shareholding will also increase Ecsponent’s ability to influence the decisions of MyBucks and leverage the relationship between the groups.”
“Equally important, the increased shareholding in MyBucks will give us access to financial services and related technology, which provides quantifiable value for the Group.”
Gregory concluded: “These transactions fit neatly into the company’s long-term strategic focus on unlocking real value, all the while creating an efficient management structure for the Group’s equity investments.”