27four Investment Managers has joined the government’s fight to reduce South Africa’s unemployment rate, which stands at about 29%.

The South African independent black-female-owned multimanager has signed a deal that will see the National Treasury’s Jobs Fund contribute R200-million to 27four’s Black Business Growth Fund, to be used to create jobs through providing funding to black private equity fund managers focussed on investing in midmarket, privately owned companies for growth.

27four has, in turn, committed to raising more than R1-billion in matched funding.

“The Jobs Fund contribution will help catalyse and accelerate investment from other investors into black private equity.

“All of the capital committed to our fund will be invested by six to eight black-owned asset management firms and it will, ultimately, reach between 40 and 60 companies in total, helping them grow, transform and create jobs. Everybody wins,” says 27four unlisted investments principal Chad Potter.

It is estimated that between 3 000 and 4 000 jobs will be created over the next seven years.

27four’s Black Business Growth Fund pools investor capital and provides investors with access to a number of managers and a broadly diversified underlying investment portfolio. It also manages the selection and monitoring process and the allocation of capital to black managers.

“The Jobs Fund investment of R200-million will help to catalyse more than R5-billion in capital for mid-sized South African companies looking to grow,” says Black Business Growth Fund head Rory Ord.

“This is a sector of the market that can deliver real growth, both financially and in terms of jobs, with the right kind of investment,” he adds.

In addition to the capital injection that the selected companies will receive, they will have access to strategic input, such as assistance with identifying acquisition targets and accessing new markets, he says.

The midsized companies targeted for investment typically have a yearly turnover of between R100-million and R500-million.

The investment goal is to triple these companies’ size in a five- to seven-year period. During the exit phase (years nine to twelve) the returned capital attributed to the R200-million allocated by the Jobs Fund will be used as a legacy fund to support more black private equity managers.

“Our fund life is actually 12 years,” says Ord. “A lot of the input will be strategic. Many of these companies don’t have the level of governance and systems to position themselves successfully for growth.”