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Enterprise development fund seeks high-growth manufacturers for R20m investment

JOB CREATION
The FNB-run Vumela Enterprise Development Fund seeks to encourage the creation of jobs in the manufacturing sector

JOB CREATION The FNB-run Vumela Enterprise Development Fund seeks to encourage the creation of jobs in the manufacturing sector

Photo by Bloomberg

19th June 2015

By: Bruce Montiea

Creamer Media Reporter

  

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Local banking firm First National Bank’s Vumela Enterprise Development Fund will be participating in this year’s Manufacturing Indaba to identify manufacturing companies with significant growth and job creation potential, with the aim of partnering with some of them to unlock growth with investments of up to  R20-million, says FNB enterprise and supplier development head Heather Lowe.

The Manufacturing Indaba will take place from June 29 to 30 at Emperors Palace, in Ekurhuleni.

Vumela’s mandate is “to invest in high-growth-potential companies that have the ability to create a significant number of new jobs for the South African economy”, says Lowe, adding that this bodes well for a good partnership between the fund and the labour-intensive manufacturing industry.

Lowe explains that the fund targets businesses that require growth capital but fall into what is known as the “missing middle”. To unlock growth, these companies require an amount of capital which is too large to be funded by company shareholders or to be raised from a commercial bank and too small to be interesting to institutional private equity funds.

Vumela takes a venture capital type approach to investing and as such has a forward-looking investment strategy. Vumela therefore only considers funding businesses with strong strategic fundamentals. “This necessitates the presence of a strong market opportunity, the business must be run by a strong team, and it must be able to demonstrate defendable competitive advantage and a strong economic model,” says Lowe.

Vumela Fund Offering
The fund’s offering includes a growth capital contribution of between R2-million and R20-million. “The investment is normally made through a combination of debt and equity instruments, often taking a significant minority stake of between 25% and 49% in the business,” explains Lowe.

She adds that the fund is black-owned and, therefore, invested equity counts towards the black ownership of the companies into which it invests.

Lowe says the fund also concentrates on post-investment business development support through skilled business growth experts. “Our business development services ensure strong corporate governance and financial controls. We also provide growth-strategy advice, and support businesses in overcoming major challenges.

Indaba Significance

Lowe tells Engineering News that the Manufacturing Indaba is significant for the Vumela Fund, as it will enable it to engage with high-growth- and job-creation-potential manufacturing companies seeking to raise growth capital. The fund’s team will man a stand at the indaba to share the relevant information with interested companies, concludes Lowe.

Edited by Samantha Herbst
Creamer Media Deputy Editor

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