Knowledge

Author: Mohamed Khan

Category:

Date: 2 October 2017

Futuregrowth Investment in Retail Capital

retail cap

In September 2017, Futuregrowth Asset Management (a specialist investment company within the Old Mutual Investment Group) acquired through its Development Equity Fund, a minority shareholding (39.4%) in Retail Capital after receiving approval from the Competition Commission of South Africa.
Development Equity Fund has a long and successful track-record of making investments with a social and developmental focus. Having previously invested in the education and healthcare sectors among others, the fund hopes to increase their exposure to SMEs.
Retail Capital was founded in 2011 and is headquartered in Cape Town with other offices in Johannesburg and Durban. Retail Capital funds SMEs through Merchant Cash Advances (“MCA”). The MCA is a buy / sell agreement and not a standard loan product. The key feature of which is linking customers’ advance repayments and a portion of card turnover (12%). The MCA product tenor ranges from 6 to 12 months.
Retail Capital has advanced more than ZAR 1 billion to date and it aims to create a positive impact on the South African economy by providing easy access to funding for entrepreneurs. The company has created over 1 400 jobs since inception.
The key sectors funded by Retail Capital are general retail, restaurants / takeaways, FMCG and medical / wellness, with these sectors making up approx. 73.5% of their loan book.
Retail Capital is dedicated to establishing relationships and preferred supplier arrangements with franchises including Cash Converters, Mica and Spur. It has channel partners who possess large total base of merchants offering “low touch” origination (eg. Pre-approved facilities communicated to the customer by the partner). These channel partners include iKhokha, SureSwipe, SnapScan and Yoco.
Retail Capital has a balance sheet size of ZAR 236.8 M (approx. USD 17.9 M) and a loan book of ZAR 232.7 M (approx. USD 17.6 M) as of July 2017. In May 2017, Global Credit Ratings gave Retail Capital a long-term national scale credit rating of BB.
Verdant Capital is mandated by Retail Capital to raise debt financing for its ongoing loan book growth, and expects to make an announcement before year-end with respect to the outcome of the first debt funding round.

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