Aiming to preserve 27 000 South African jobs
Aiming to preserve 27 000 South African jobs - 5 Insights into Sanlam’s Investors’ Legacy range
Cape Town, 30 July 2020: As South Africa’s unemployment rate rises past 30%, the country is reaching breaking point, and Sanlam Investments is calling on all those who can help to do so, urgently. Last month, Sanlam Investments launched the Investor’s Legacy range with the specific objective of preserving South African jobs. The response from investors across South Africa has been overwhelming.
The range consists of three impact funds, which share the common goal of backing companies negatively affected by COVID-19 but have a strong likelihood of producing sustainable cash flows after the pandemic should they receive the required financial support. Each fund focuses on a different part of the market – small and medium enterprises (SMEs), mid-market and large corporates – and will provide financing in the most appropriate form, whether it be in the form of loans or equity investment.
Mervyn Shanmugam, Chief Executive: Alternatives at Sanlam Investments, says, “The need for funding among businesses of all sizes is incredibly urgent. We have been extremely gratified by the warm response our funds have received so far, aligned with investors’ needs to make a contribution to society – it’s been far greater than we anticipated. Which makes me believe that together, we can move the needle.”
He says, “We are working as quickly as we can and call on other investors to join us in providing capital to companies in need, through one of our funds or similar vehicles. Large parts of the private sector are in a position to make a deep impact by doing all they can to help reactivate the economy and to create and preserve jobs.”
Shanmugam says that after the initial announcement, it became clear there was a need to further unpack the funds, so the market has a fuller grasp of their size, mandates and targets. “In line with this, here are five key figures to give more insight into our legacy range.”
1. Preserving 27 000 jobs is one of the overall objectives of the range – and certainly the most important.
Shanmugam says as per the jobs fund data it costs in the region of R75 000 to maintain one permanent job. “So, by our calculations, we can, at minimum, preserve around 27 000 jobs through these funds. Our emphasis is squarely on inclusive, fair and quality jobs.”
2. R2.25 billion has been committed by Sanlam Investments across the Investors’ Legacy range.
In order to be as effective as possible, Sanlam Investments intends to raise R4.75 billion more from the market. “We are specifically speaking to retirement funds because we believe they should be responding proactively to the crisis by allocating assets to impact investments to invest in the real economy where their members are employed so together we can invest in ourselves to save our livelihoods.”
3. 30 companies will each be loaned between R20- and R50 million in the first fund, the SME Debt Fund.
“The SME fund will provide loans based on a specific criterion including, strong underlying credit fundamentals, job preservation, job growth and inclusivity, which will be analysed during the selection process.”
4. 20 to 30 companies will be loaned R50- to R150 million in the Corporate Debt Fund.
Shanmugam says this second fund will provide loans to mid and large-cap (typically JSE-listed) companies that are well established but require liquidity following the economic impact of the pandemic and lockdown period. “The initial investment period will be 24 to 36 months, with an option to renew.”
The investments into this institutional fund are expected to be taken up predominantly by those industries most severely impacted by COVID-19, including tourism, travel, hotels, restaurants, health and leisure, retail and the financial sector.
5. R1 billion has been committed to the Private Equity Mid-Market Fund with the intention of raising another R2 billion from the market.
The fund will make a minimum investment of R50 million per company for a period of up to 10-years. This fund will provide equity capital to companies. Priorities for this fund also include saving and creating jobs, addressing the quality of jobs while ensuring the jobs support economic inclusion in the wider South African context. They must be fair in terms of gender parity and enabling people who have been disadvantaged to begin to actively participate in the economy.
Shanmugam concludes the Investors’ Legacy range will be deemed a success if it facilitates the formation of deep partnerships and is able to make a meaningful contribution to the futures of many South Africans.
For more information, visit . https://www.sanlamintelligence.co.za/institutional/investor-legacy-range/
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