Asset manager Ninety-One, in partnership with a private equity firm, has launched a R10 billion fund that will target investments in South African businesses under stress from the coronavirus pandemic, and the resulting lockdown in the country.
The fund’s objective is to support the preservation of the country’s productive capacity and economic recovery from the effects of the Covid-19 pandemic, while seeking an attractive return for investors, the group said.
Priorities for the fund are to protect SA productive capacity during the next 24 months, preserve jobs and protect permanent loss of equity value.
Ninety-One said that the fund will consist of a concentrated portfolio with an appropriate mix of senior and subordinated debt, preferred equity, listed equity and private equity with a deployment time horizon of 18 to 36 months.
“The lockdown, while necessary to protect the nation’s health, has been akin to putting the economy into an induced coma. South Africa faces a once-in-a-generation economic challenge,” said Hendrik du Toit, founder and chief executive officer of Ninety One.
“The SA Recovery Fund is a market-led, impact initiative to mitigate the negative economic impact of the Covid-19 pandemic, while seeking a commercial return.
“With this fund, we would like to support quality businesses and protect the nation’s productive capacity, which will in turn preserve thousands of jobs and support the South African tax base.”
Bloomberg has reported that South Africa stands to lose five years of potential economic output due to the shock from the coronavirus pandemic and measures to curb its spread, citing the central bank.
South Africa fell into a recession even before the first case of the coronavirus was detected in the country. Economic growth-projections deteriorated after the government imposed one of the strictest lockdowns in the world on March 27 that shuttered most business activity, it said.
The SARB expects a GDP contraction of 7% in 2020, the first full-year growth decline since 2009. This represents a substantial shock to the economy, as the worst full-year GDP growth performance in South Africa’s post-World War II history was -2.1% in 1992, it said.