Banking group Rand Merchant Bank (RMB), a division of FirstRand Bank, on Thursday announced the creation of Makalani Holdings — a company dedicated to mobilising capital for empowerment and development investments.
The company is expected to list in May 2005 on the “Investment Companies” sector of the JSE Securities Exchange (JSE), with an expected market capitalisation of about R2,5-billion.
Makalani will contribute to the advancement of empowerment and development in South Africa by offering an alternative source for mezzanine funding, RMB said in a statement.
Makalani will invest in large black economic empowerment (BEE) transactions and other targeted investments, such as infrastructure and affordable housing.
Its diversified portfolio of mezzanine instruments will provide investors with attractive returns. Mezzanine instruments have a risk profile higher than senior debt but lower than equity.
Investments will be Financial Sector Charter compliant and, as a result, will enable investors to earn charter scorecard points.
Institutional investors are usually precluded by regulation or by their investment mandates from investing in the unlisted or unrated securities typically used to fund empowerment transactions. Through the listed entity Makalani, they can do so and fulfil their charter obligations, RMB explained.
Makalani will contribute to the advancement of empowerment and development in South Africa by offering an alternative source for mezzanine funding.
Herman Bosman, head of corporate finance at RMB, commented: “Funding for BEE transactions is difficult to source. A bridge is required to link the strong demand for BEE funding with the latent supply. Makalani will provide this funding solution to the market.”
Vusi Mahlangu, previously head of public sector finance at Investec Bank, has been appointed as CEO and Sydney Mhlarhi, previously director and joint head of the acquisition finance group of Standard Bank, as chief investment officer.
Mahlangu said “this innovative vehicle opens up a new market in South Africa. Our aim is to provide financial institutions with a conduit to easily fulfil their charter investment obligations and originators with an alternative provider of mezzanine finance.”
Makalani Manco, 75% owned by RMB and 25% by BEE partners Tamela, Thesele Group and WDB, will manage Makalani with the support of RMB, thereby providing investors with access to the deal-making abilities of the RMB debt and equity professionals.
The board of Makalani comprises former deputy CEO of FirstRand Bank Viv Bartlett as non-executive chairperson; Mahlangu as CEO; RMB chief investment officer Derek Prout-Jones; senior partner of attorneys Hofmeyr, Herbstein & Gihwala Dines Gihwala; WDB’s Sonja Sebotsa; Sello Moloko, former CEO of Old Mutual Asset Management and now Thesele Group; and directors of companies Ben van der Ross and Len Konar.
“Makalani has independent decision-making ability through its board and management. We have chosen a board with a strong banking, legal and corporate governance background,” Bartlett said.
RMB will provide seed capital of R500-million in cash and assets. Anchor shareholders, including RMB Asset Management, have already committed to invest a further R675-million. R2-billion will be raised through a private placement and R500-million through a public offer.
“Now, for the first time, investors have the opportunity to invest in a listed mezzanine company that offers attractive, commercial returns,” Mahlangu concluded. — I-Net Bridge