Although investment activity was subdued across the board in 2020, it was an extraordinary deal making year for South African venture capital firm, Empowerment Capital Investment Partners (Pty) Ltd. The company had its most active year yet, aggressively and proactively executing investments in South Africa’s up-and-coming entrepreneurs.
Empowerment Capital and its investment funds – Andzani Ventures, Imvelo Ventures and Thuthuka Nathi Ventures – approved and placed a total of R162 million into 13 South African start-ups between July 2019 and February 2021. Furthermore, R32.5 million is approved for placement in the coming weeks in three exciting new ventures.
Started in 2015 by Anton Baumann and Mark Fitzjohn, Empowerment Capital is seeking aggressive growth as it enters the next phase of its business, to raise funding with institutional investors for further support of the SMME sector. The focus of the next 24-month growth phase is a second raise of third-party institutional investment into a portfolio of de-risked investment assets backed by strong listed corporate partners that value both financial returns and meeting social upliftment and transformation objectives.
All of the Empowerment Capital’s funds have been set up to promote commercial investments into the SMME sector and are conducted in the true spirit of transformation, empowerment and nation building. The company has pioneered mutually beneficial long-term equity investments in the SMME sector as a form of sustainable and impactful enterprise and supplier development with its corporate partners Sappi, Capitec Bank, Shoprite Checkers and others.
“We looked for investees with strong leadership teams that offered our corporate partners attractive investment opportunities which we believe are able to drive inclusive growth in the South African economy through solutions that address the current challenges faced by consumers and society,” said Anton Baumann, Executive Director at Empowerment Capital and Co-founder of the venture funds Andzani, Imvelo and Thuthuka Nathi.
“Twenty-twenty was a pivotal year for us to show how promising tech start-ups can showcase the value offered by corporate venture capital,” said Mark Fitzjohn, Executive Director at Empowerment Capital and Co-founder of the venture funds Andzani, Imvelo and Thuthuka Nathi.
The deals closed span a range of sectors including agriculture, food and beverage, but with a bias towards a variety of technology platforms and marketplaces which all provide their corporate investors with strong transformation prowess, a promising model for attractive returns on their investment, while also addressing their transformation objectives that most often go beyond black economic empowerment scorecard requirements.
The successful entrepreneurs who received equity investments don’t just receive capital which allows them to quickly scale their operations, but they also receive hands-on support and mentorship from the Empowerment Capital team in the form of management and stakeholder support, strategic marketing, mentoring, access to extensive business networks and most importantly, access to market.
“Successful businesses and their owners require different forms of support as they evolve from concept to start-up to a sustainable and profitable company. The South African environment is dominated by large and established market players. We provide support to SMMEs at various stages of their growth path while ensuring that the capital invested goes to supporting sustainable growth” said Fitzjohn.
So, who are the up-and-coming entrepreneurs worthy of R200 million in investments?
Thuthuka Nathi Ventures approved and placed investments into start-ups in the sectors of food manufacturing, distribution and agriculture namely LBB Foods, Red Baron Agri and Zulzi On Demand.
“In a year punctuated by an economic meltdown, the Shoprite Group’s ongoing commitment to small suppliers has enabled Thuthuka Nathi start-ups to access new consumer markets. We are proud of these black-owned, entrepreneurial suppliers who are a core focus for us, and we are excited to watch them scale their growth in 2021,” said Pieter Du Preez, Company Secretary, Shoprite Checkers.
Imvelo Ventures partnered with Capitec Bank to fund 10 promising South African small to medium and micro enterprises (SMMEs) in the broad spectrum of financial technology.
“There is so much excitement in the South African fintech space right now and we are pleased to be actively involved. Through our partnership with Imvelo Ventures, we have invested in tech start-ups that align with our purpose of addressing the challenges faced by our people and supporting initiatives that improve their circumstances and more specifically, their financial lives,” said Anbann Chetti, Retail Bank Financial Head at Capitec.
Andzani Ventures, formed in 2018 with corporate partner SAPPI, approved an investment in Acumen Software for the soon-to-be-launched My Smart City platform. The mobile platform allows citizens to engage critical service providers in their cities to access relevant information, log issues and request services.
“At SAPPI we believe in creating shared value that benefits our business, our customer’s businesses and the communities we call home. Our Andzani Ventures partnership aligns with our core business focus to invest in sustainable and practical innovation solutions that advance human potential, planting seeds of change and opportunity that can enhance people’s everyday lives,” said Mpho Lethoko, General Manager Corporate Affairs at SAPPI Southern Africa.
While some of the investments are already generating profits, most of the investments concluded are expected to start generating profit within the next two to three years.
As Empowerment Capital embarks on an aggressive fundraising drive over the next 24 months, the company believes there is ample opportunity for investment in South Africa with promising start-ups regularly being introduced to the market. The challenge faced is to raise capital from the right investors and place the capital with the right entrepreneurs.
“If you are aligned to long-term growth of our economy and nation building, there should be no question of your ability to generate substantial returns on your capital. We believe that the venture capital market in South Africa will be led by corporates offering market access in an all-inclusive manner, thereby achieving a combination of commercial returns and social impact which is our purpose as a company,” said Baumann.