Vantage Capital, Africa’s largest mezzanine debt fund manager, has fully exited its investment in New GX Capital, a leading family-owned investment holding company in South Africa.
The exit achieves returns for Vantage’s Fund III investors of more than 35%. Vantage provided R250 million ($16.55 million) to New GX in 2016 to finance follow-on investments in telecommunications infrastructure, waste management and information technology.
Mokgome Mogoba, Associate Partner at Vantage Capital, said the growth capital given to New GX enabled the group to more than double its net asset value over the two-year tenor of their investment.
“New GX invested in South Africa’s fast-growing fibre and telecoms infrastructure sectors through investee companies Dartcom and DFA,” he explained.
“New GX Enviro built a first of its kind R200 million ($13.24 million) multi-purpose waste recycling plant in Atteridgeville Township in Tshwane providing employment to township residents and boosting the township economy. Our partnership bolstered local manufacturing capacity by constructing a R100 million ($6.62 million) fibre manufacturing plant 1km from Mamelodi township in Tshwane,” said Mogoba.
“New GX invested in a state of the art information technology platform with partners from India that employs over 200 people. We plan to support more talented black industrialists like Khudu Pitje, the founder and CEO of New GX, as we seek to transform the South African economy and uplift the township economy,” he continued.
“Fund III investors have had a bumper ride with strong returns being generated from investments such as Vumatel, Servest and New GX. These results support our view that well-selected and structured mezzanine debt deals can generate returns that rival traditional private equity returns with less downside risk,” stated Luc Albinski, Managing Partner at Vantage Capital, following the announcement.
Mezzanine debt is an intermediate form of risk capital, which is situated between senior debt, the least risky tranche of the capital structure, and equity, the riskiest. It combines elements of both debt and equity thereby providing companies with long-term funding on terms which are less dilutive to shareholders than pure equity.
Khudu Pitje, CEO and founder of New GX said his firm’s partnership with Vantage should be considered as a template for addressing the elusive equity gap in the development of black industrialists.
“Vantage bridged the gap to develop our family business into a much more meaningful industrial group that will play a significant role in creating jobs for the youth of our country. We will in due course announce the next phase of our development,” he added.
On his part, Graham McGregor, CFO of New GX, stated that Vantage encouraged the company to improve its reporting and risk management capabilities.
“The Vantage team worked through two challenging cases that we faced and never wavered in their support and understanding for our vision of building a leading black-owned investment company,” he recalled.
Vantage Capital Group was established in 2001 and is the largest independent pan-African mezzanine debt fund manager on the African continent. It currently manages assets of R11 billion ($730 million) in five distinct mezzanine debt and renewable energy debt funds and has made more than 35 investments across the African continent.
The company has offices in Johannesburg and Cape Town and targets mezzanine debt opportunities of up to R250 million ($16.55 million) across more than a dozen key African markets.