Private Debt needs to size-up quickly in South Africa

Private Debt is an asset class that will ensure that private equity firms have strong balance sheets that can withstand the cycles of equity investments while providing a consistent return to investors. Private Debt is a less risky asset class as it generates cash flows consistently over the investment period as compared to a more illiquid equity asset class. The structure attracts more investors (or Limited Partners) to invest in larger funds as compared to the current investment appetite. Private Debt is typically provided to companies on a bilateral negotiated basis outside of traditional banks and takes various legal forms including loans, mezzanine (“Mezz”) or preference shares.

New entrants in this investment asset class are few, such as the recent announcement by Tamela Capital Partners which raised R420 million for the Tamela Mezz Fund. Longstanding players in the Private Debt asset class are companies such as Vantage Capital which raised US$150 million in Mezz Fund 1, US$240million in Mezz Fund 2 and US280 million in Mezz Fund 3. Vantage Capital is well-positioned as Africa’s leading Mezz financier, capitalising on its strong position in the South African mezzanine market and building a portfolio of income generating mezzanine assets in South Africa and in the rest of Africa.

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