Newtown, LionPride announce R500m Section 12J fund for SMEs
JOHANNESBURG – Newtown Partners and LionPride Investment Holdings on Friday announced plans to raise R500 million for a co-managed section 12J Technology Investment fund at the 12J Marketplace Conference, in Melrose Arch.
Deven Govender, LionPride chief executive, outlined the fund structure at the conference: “The LionPride Agility VCC Fund is a single technology fund with a choice of two share classes providing the opportunity for a compelling risk-weighted return. The two unique themes to invest in are 1) Impact investing and 2) Emerging technologies”.
This structure enables investors to invest capital into one of two capital pools co-managed by LionPride and Newtown Partners. It also allows investors to gain balanced exposure to early-stage South African technology businesses, or concentrated exposure into a selected theme according to their desired risk allocation.
A major benefit of a section 12J investment fund is that investors can deduct 100 percent of their investment from their taxable incomes in the tax year in which the investments are made. This benefit effectively translates into an investment discount of up to 45 percent of the total investment amount.
“We believe that we’re taking a bold approach that will catapult economic transformation in South Africa. The tax deductible ‘discount’ that a section 12J Fund provides is a great incentive for investors to invest in projects of a developmental nature that can positively impact employment in South Africa,” adds Govender.
Small and medium-sized enterprises (SMEs) that fall within Fintech, Agritech, On-Demand Services, Business Process Outsourcing, Renewables, Healthcare, 4IR and EdTech will be the focus of the LionPride Agility VCC Fund.
Vinny Lingham, General Partner of Newtown Partners, emphasised that the Fund had enormous potential to build globally successful technology businesses from South Africa. Local investors have not had sufficient exposure to the classic Silicon Valley VC model of asymmetric returns versus capital deployed, this fund will create that opportunity.
“I’m looking forward to giving many more South Africans the opportunity to really make a dent in the global technology markets through this Fund. We’re also excited about the opportunity to positively impact economic empowerment in South Africa and the LionPride Agility fund is an important tool to achieve that”, says Lingham.
The two share classes of the Fund allow investors with varying risk appetites to invest. Impact Investing offers a lower risk profile, targeting SMEs with largely stable, predictable free cash flows and a defensible moat; whereas Emerging Technologies offer a higher risk profile associated with a classic Silicon Valley venture capital investment model and an asymmetric return profile.
“Our Board and the Fund Management team is incomparable amongst technology investors in South Africa. The wealth of experience of the team gives us confidence that the LionPride Agility Fund will perform exceptionally well for both its investors and for South African technology entrepreneurs”, concludes Govender.
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