Hybrid Equity, a division of Old Mutual Alternative Investments funds Enable Capital
Hybrid Equity, a division of Old Mutual Alternative Investments (OMAI), is taking up a significant stake in the capital structure of Enable Capital, a short-term funder that uses innovative technology as a distribution platform.
ybrid Equity, through its Hybrid Equity Fund, will invest ZAR150M through a special purpose vehicle that funds Enable Capital.
Hybrid Equity Co-Head Abdu-Rahman Abrahams says the transaction provides the opportunity to deliver a real, tangible impact on internet accessibility in South Africa.
“Through the hands-on approach adopted by Enable and its deeply entrenched relationships built with its client base, we believe we can impact the market for fibre internet and at the same time assist small and medium South African businesses with funding,” he says.
Enable specialises in providing short-term funding solutions to subcontractors involved in the physical construction and deployment of local, regional and national fibre network infrastructure in South Africa.
“This deal allows Enable to find solutions for specific challenges faced by the subcontractors such as equipment hire, supply of building materials and diesel where Enable deals with suppliers and service providers directly in bulk, to the benefit of the subcontractors.”
Abrahams says several small businesses that used Enable’s products had grown significantly, transitioning from small subcontractors to large primary contractors, creating many new jobs in the process. In addition, there had been a significant increase in the size of Enable’s debtors’ book, which also reflected the growth in the industry and specifically demand for the Enable product from subcontractors in the fibre market.
Abrahams says the investment positively contributes to addressing inequitable access to finance for subcontractors in the fibre market.
“Most of these contractors are generally smaller informal businesses that would not be able to access financing through traditional banking channels. This investment now enables them to grow and employ more people, which will have a direct impact on unemployment,” says Abrahams.
Abrahams adds the deal will support the rollout of fibre network infrastructure, particularly outside of affluent areas where there is unequal access to the internet, thereby increasing access to the internet for all. It will also facilitate additional deal flow expected from the expansion of the Enable Capital business to other locations, such as the rest of Africa, as well as to other categories, such as renewable energy.
Abrahams also added that Hybrid Equity will contribute elements such as governance and human resources, and formalise ESG data collection, analysis and continuous monitoring.
“As proud partners of Enable, we will add value through our expertise in supporting diversity and transformation by encouraging this throughout the operation, including at the primary contractor and subcontractor level. We will also support sustainability of small subcontractors through local economic development and employment opportunities in the communities where fibre is deployed,” concludes Abrahams.
Chairman of Enable Capital, Reuben Olifant, points out that most of the current fibre network deployment is directed at peri-urban and rural areas where unemployment is especially high. Deployment of fibre to these areas has a direct economic impact as most of the labour is sourced locally and SMEs from the area will be subcontracted during the construction phase.
Post-deployment there is a further secondary economic impact as the maintenance of the network will be outsourced to local SMEs while the community benefits from access to modern infrastructure that has shown to uplift the socio-economic conditions of the community.
The partnership with Hybrid Equity will allow Enable Capital to continue to support SMEs involved with the deployment of fibre while impacting economic growth in areas and communities where it is most needed.