South Africa’s Khulisa seeks private-equity investors to lift employment

By David Whitehouse

Posted on Wednesday, 13 October 2021 15:46
South African Rands
South African Rands REUTERS/Philimon Bulawayo

Malcolm Rutherford was bemoaning the state of South Africa’s economy as he drank a beer in early 2020 with Ian Kirk, then CEO of Sanlam.

Kirk asked him what he was planning to do about it. The result was the creation, later in 2020, of private-equity firm Khulisa Investment Partners, which is based in Cape Town and targets investments that can contribute to employment and financial inclusion.

Rutherford, former CFO of Dimension Data, is a co-founder of Khulisa alongside Phumla Mnganga and Chris Lister-James. Most private-equity funds, Rutherford says, want to invest in companies that already have sizable profits. The due diligence needed for investment is at least as great for smaller companies, meaning time is more productively spent on larger candidates. The result, he says, is a “missing middle” of companies, which are too large to qualify for grant funding, but too small to interest institutional investors.

Khulisa, which is 52% black-owned, aims to fill that gap by using an associate network of experienced business people who are close to, or in, retirement. The concept draws on the example of the Teaminvest Private network in Australia, with network members giving their time free of charge. The expertise available means that investors “can be rewarded appropriately for the risk being taken,” Rutherford says.

Most large South African companies were once small and medium-sized businesses, Rutherford says. Today’s SMEs, he argues, face three main obstacles: lack of financing, strategic advice and access to markets.

  • Khulisa estimates that South Africa’s SMEs suffer from a financing shortfall of $30bn.
  • Only 6% of South African SMEs get government funding, and only 9% get funding from the private sector.
  • Banks provide only 40% of SME funding, and 75% of all credit applications are rejected, the firm says.


The firm has two funds: the Fintech Fund and the Thuma Mina Fund. The fintech fund’s investments include the Ukheshe startup, Comcorp, which provides biometric facial recognition, and Smartwage, which seeks to reduce reliance on pay-day loans with a payroll solution that lets employers pay their staff early.

Rutherford spends most of his time on the Thuma Mina Fund. He is currently seeking to raise R500m ($33.5m) for Thuma Mina, which is planned to run for 10 years. He expects that the fund will use the money to make about 15 small investments in labour-intensive sectors such as manufacturing and infrastructure, which have the potential to increase employment.

  • A first close has been planned for June 2022.
  • Rutherford says there has been “very good response” so far. One institution is in a due diligence process with a view to invest, and a second is about to enter due diligence, he says.
  • When he starts investing, Rutherford plans to target “the industries where South Africa has a chance”, such as car manufacturing, automotive components and wholesale tyre distribution.
  • He plans to make mezzanine investments which combine equity and debt, and hopes to raise a bigger fund after closing the first.
  • The aim is to create companies that can become “meaningful contributors to the South African economy.”

Bottom line

Khulisa is banking on its expert network to help neglected small companies achieve scale.

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