2021 marked the second year of a strained trading environment due to the impact of the Covid-19 pandemic. Despite the pandemic effects, the finance and investment landscape has seen an influx of investments as reported by SAVCA’s Venture Capital Industry Survey.

 

The year 2020 saw a 13% increase in investments, from R1.23bn in 2019 to R1.39bn in 2020. A similar trend was expected in 2021.

 

The past year was special for IDF Capital, stretching the company to adopt new routines and improve our processes and ways of working. We continued to drive investments into several notable companies with commitments exceeding R140m (up from R116m in 2020).

 

To date, we have deployed more than R700m into the economy enabling the growth and scaling of entrepreneurial businesses. These investments would not have been possible without the support of our key investors including Telkom, AECI, Gibela, Shell, IDC, Liquid Telecom, SASRIA, and sefa. IDF pays particular attention to the entrepreneurs behind the businesses.

 

The quality teams that run each of the investee companies are commended for their great resilience and drive.

 

Special gratitude must also be given to IDF’s entire team for living up to IDF’s values of Excellence, Respect, Diligence, and Integrity.

2021 Sector Highlights and Transactions

The changes and challenges to the macro landscape had presented the following opportunities for investment. Some of the highlight sectors and transactions closed over the past year include:

Technology

Technology, Media, and Telecoms: South Africa has one of the largest information and communications technology (ICT) markets in Africa and is an increasingly important contributor to the economy, contributing around 8% to South Africa’s GDP.

 

The country has clear constraints within the sector including high data costs, low tax incentives (Section 12J being killed), tech skills gaps, digital inequality and exclusion in remote areas, and increasing cyberattacks.

 

During the pandemic, technology and internet connectivity have helped to sustain business continuity, keep children in education and ensure online access to essential goods and services.

 

The covid-19 lockdown increased the adoption of online business processes, remote working, e-learning, e-commerce, e-banking, epayment services, e-insurance, telemedicine, and virtual events.

 

This resulted in a higher demand for technologies and IT services that support these activities, some of which are here to stay. The lockdowns propelled e-commerce forward by at least five years according to some sources.

 

Further, the value of e-commerce transactions in South Africa is expected to surge c.150% to R225bn by 2025 in response to the shift in consumer behaviour brought about by the Pandemic, with 37% of consumers already having increased their online shopping activity.

Key Investments Made In The Sector

Mortgage Market, run by Tim Akinnusi, aims to disrupt the bond origination market. Bond origination is the process which involves a bond originator submitting home loan applications to multiple banks on behalf of their clients to secure the best deal. Mortgage Market has fully automated the origination process that still aims to be highly customer-centric, bringing additional value beyond just standard origination. Further, the company has partnered with Ooba, South Africa’s leading bond originator, which has accelerated Mortgage Markets route to market substantially. IDF’s investment was growth capital aimed at building the company’s position in the market. (https://www.mortgagemarket.co.za/) (https://za.linkedin.com/in/timakinnusi)

EMGuidance, run by Yaseen Khan and Mohammed Dalwai, is a provider of mobile and webbased drug reference tools to more than half of healthcare professionals (HCPs) in South Africa. EMGuidance’s product helps HCPs make more informed prescribing decisions, enhance patient safety and improve practice productivity. EMGuidance has commercial relationships with almost all the pharmeutical companies in South Africa. IDF’s investment into EMGuidance is aims to scale operations into the rest of Africa. (https://emguidance.com/) (https://www.linkedin.com/in/yaseenkhan-4182364b/) (https://www.linkedin.com/in/mohamm ed-dalwai-7318476b/)

TVA, run by Terence Sewraj, services estate agents in South Africa byproviding real-time interaction with consumer data and a bespoke CRM tool. TVA aims to become a “one-stop shop” for agents to source and proceed to sell identified stock while adding the ability to do simultaneous bond origination and conveyancing activity. The business has been in the market for almost 4 years and has already captured c. 10% of the estimated real estate agent market. IDF’s Investment enabled the sustained growth of the company and is expected to further entrench their position in the market. (https://www.thevirtualagent.co.za/) (https://www.linkedin.com/in/terence -sewraj-4768928a/)

cARscan, run by Obins Choudhary, Uses Augmented Reality and AI technology to enable customers (existing and potential purchasers of cars) to have complete record of their car’s conditions throughout its lifecycle. The platform reduces industry risk, governance risk and fraud risk associated with a lack of accurate, reliable information. The problem is identified as inefficiency in the automotive and insurance value chains. cARcscan App launched in April 2020 and since then the business secured numerous earlystage partnerships with Insurers (M-sure, The Unlimited, CTU), financial institutions (Nedbank, Motus), Car hire and service centers (Kia, Europcar) and auction houses. IDF co-invested alongside Kalon Venture Partners and Launch Africa to drive the company’s platform development and expansion into multiple regions globally. (https://www.carscan.ai/) (https://www.linkedin.com/in/obinsc/)

Droppa, run by Khathutshelo Mufamadi, is a last mile delivery platform with its awardwinning in-house developed, technology platform. Droppa operates two business models including: Droppa to Consumer – provides an on-demand transport service that makes it easier and safer to transport household goods, furniture and parcels. The platform connects customers (people who need a roadworthy/reliable bakkie or a truck to transport goods and furniture) to vetted drivers that have spare capacity. Droppa for Business – a solution which allows businesses, retailers and online platforms to manage their shipping and have access to Droppa vehicles and Skynet warehouses through an Online Platform.

The Droppa business website allows businesses to execute multiple deliveries to customers (up to 20) in one booking transaction. Also recently launched, Droppa E-commerce is a platform where businesses can have access to Droppa services through: APIs, WooCommerce plugins, Shopify plugins, and, Magento plugin. IDF’s investment has driven Droppa’s integrations in the market, plugging into various e-commerce shops for last mile delivery as well as strategic partnerships with Skynet Worldwide and Elite Truck Hire. (https://www.droppa.co.za/ (https://www.linkedin.com/in/khathutshelo-mufamadi-89747461/)

iTMaster, run by Stanton Pillay, is a 75% black owned IT company that has been in the industry for more than 20 years. iTMaster provides turnkey solutions spanning across all sectors in ICT with a strong focus in education. The client lists include the following blue-chip companies such as Vodacom, Absa, Curro, MTN, EOH and other institutions. It has several notable certifications include Microsoft (Gold), Lenovo (Gold), HP, Global Six, Krone, Molex and more. IDF’s investment was part management buyout and acquisition and part working capital finance to drive contract execution. (https://itmaster.africa/) (https://www.linkedin.com/in/emmanuel-stanton-pillay-abb25817/)

I’M IN is an accelerator programme born out of the I’M IN book, co-authored by the Season 1 Judges of Dragons Den South Africa. I’m In has historically invested in three cohorts collectively at R41.4m supporting 34 start-up businesses. The programme has produced solid businesses so far, with some businesses receiving follow-on funding through IDF and other leading industry venture capitalists. Some of the notable start-ups include Zulzi, Ambani, Linkage, Fixxr, Lightbulb Edtech, Brandbook, Mzali and Lulaloop. In 2021 I’m In launched cohort 4 allocating R12m (over and above the R41.4m) to six startups. (https://www.iminaccelerator.com/)

The Rail Sector (Manufacturing and Engineering)

Rail transport is critical to South Africa’s transport infrastructure. All major cities are connected by rail, and South Africa’s railway system is the most highly developed in Africa. With corruption, lack of investment, vandalism, and neglect of existing assets all having a part to play, the share of passenger rail and rail freight transportation in South Africa has fallen in recent times.

 

With the aim of revitalising South Africa’s rail engineering industry through local manufacturing and ensuring local content, PRASA appointed Gibela Rail Transport Consortium (Gibela) to supply 3 600 new Metro Rail coaches at a cost of R51 billion over a 10- year period (2015 – 2025).

 

With companies competing to use the railway network, logistics and rail services will become cheaper, while generating more employment in the rail industry, as well as upstream and downstream in industries such as mining, agriculture and manufacturing.

Key Companies IDF Has Funded

LED Lighting SA, run by Lindy Lee, Shawn Godfrey, and Cornel Neethling, is a provider of innovative green solutions with the latest technology supplied to commercial, industrial, retail, and public sectors. LLSA provides turnkey lighting (“LED Lights”) and automation solutions. LLSA is a business-to-business (B2B) company that focuses on commercial indoor lighting. This includes large new build projects, retrofits for industrial, office, and the retail market, and lately, an increasing focus on bespoke solutions that will meet a specific customer requirement. LLSA is also a provider of lighting for fridge display cabinets, retail oven display cabinets, and automotive lighting (train and bus). LLSA has seen tremendous growth since its inception 15 years ago. The company started with a production capacity of 5000 units p.a. and employed only 4 people. The company has since grown to a production capacity of 18 000 units per annum and now employees 80 full-time employees. The company has secured major clients including Pick n Pay, MTN, Lamborghini, Spar, Builders Warehouse, Unisa, and several malls and shopping centers including Cavendish Mall, V&A Waterfront, Vaal Mall, and Benmore Gardens Shopping Centre. LLSA also has various manufacturing agreements with non-SA companies such as Woolworths Australia, Target Store Brand (USA), IMS in South America, and AB Group in the UK. IDF’s investment into LLSA was both transformative (through Lindy Lee) and capital to acquire machinery to strengthen LLSA’s in-house capabilities of an already world-class facility. (https://www.ledlighting.co.za/) (https://www.linkedin.com/in/lindydlee/) (https://www.linkedin.com/in/shawn-paul-godfrey11704624/) (https://www.linkedin.com/in/cornel-neethling-77b82322/)

SAMO, run by Nonhlanhla Moloko, is a black women-owned and led engineering company providing services ranging from electric power solutions, communication solutions, and electrical engineering services. Samo’s clients are a mix of private and public companies and include customers such as Vodacom, Wits University, and PRASA. Samo is one of the few ‘first-mile’ fibre installers in that they connect Seacom’s cable to the major mobile network operators. IDF’s investment enabled Samo to acquire a license allowing Samo to own its own fibre network and address some of the industry’s known shortcomings of poor internet access. (https://www.samoengineering.co.za/) (https://www.linkedin.com/in/nonhlanhla-moloko-936a11209/)

API is a metal piping company that has been trading since 1996. The company is an evolution of a family business that dates back to the mid-90s. API is a level 1 BEE company and has more than 12 employees. The company is headquartered in Midrand with an additional depot in Durban. API focuses on the water and petrochemical sectors supplying metal and alloy pipes and accessories. A typical business year consists of routine maintenance orders and project orders for special activities at clients. A significant amount of business is placed by customers like eThekwini Metropolitan and SAPREF – a joint venture (Shell Refining SA and BP Southern Africa) crude oil refinery in South Africa with 35% of South Africa’s refining capacity. API has defined their customer relationships based on excellence in product, keen pricing, and well-managed logistics. The rest of the customer base comprises various South African industrial companies, water boards, and to a lesser extent, mines. IDF’s investment enabled API to execute higher value contracts with SAPREF in the main. (https://apipiping.co.za/) (https://www.linkedin.com/in/rayvis-naidoo-19315357/)

VSL is a majority black woman-owned business, producing pressed metal components for automotive and rail manufacturers. Established as a subsidiary to a company in the automotive industry called Stateline Pressed Metal (SPM) in 1983; in 2018 the Business was separated from its mother company and has been independently operated by Vuyo Skweyiya and Deon Van Zyl. IDF’s investment into VSL enabled the execution of significant purchase orders from Gibela. (https://vslman.co.za/) (https://www.linkedin.com/in/vuyo-skweyiya-24766833/) (https://www.linkedin.com/in/deon-van-zyl0b45a794/)

Enzani was established in 2007 and is a majority black women-owned and led company by co-founders Landiwe Nene and Bhekumuzi Lembede. An Electrical & Instrumentation Turnkey or Engineering Procurement Construction (“EPC”) contractor, Enzani has also been operating an Electrical and Control Panels Assembly division since 2008. Through our investment Enzani established a steel enclosure manufacturing department to assemble panels using in-house manufactured electrical enclosures for Gibela and other customers. (https://www.enzani.co.za/) (https://za.linkedin.com/in/landiwe-nene-03a83a6)

Lasercraft, run by Paul Dryer (as Executive Director) and Masimo Magerman (as Chairman), is a multifaceted precision sheet metal and plate engineering company based in Gauteng. The Lasercraft facility is regarded as one of the most modern process-oriented operations in South Africa. Lasercraft’s reputation has enabled them to supply several major projects, including the Gautrain, stadiums for the Soccer World Cup in 2010, and most recently a significant project with Gibela. The company is 60% owned by the Mergence Group, a majority blackowned financial services group. Occupying 9,327m² and with a capacity to employ a workforce of 250 people, the Lasercraft facility has wide-ranging potential for expansion over time. IDF’s investment was for machinery to allow efficiency in Lasercraft delivering to customers. (https://lasercrafted.co.za/) (https://za.linkedin.com/in/masimo-magerman-a003b319) (https://www.linkedin.com/in/paul-dreyerb7807b11a/)

Mo’s Crib, run by Michelle and Morongwe Mokone, is a 100% black female-owned, Gauteng-based home décor design company that specialises in manufacturing sustainable handmade décor items using primarily recycled and upcycled polyvinyl chloride (PVC) materials. Mo’s Crib’s innovative creations from these materials are not traditionally used in home designs. The business was started 5 years ago in 2016 by two sisters on a part-time basis. Once the founders came onboard full-time, the business saw high revenue growth with multiple Purchase Orders (POs) from blue-chip companies in South Africa such as Woolworths, Mr Price, Discovery, Sasol, Builders Warehouse as well as international companies like Crate and Barrel. Mo’s Crib currently produces laundry baskets, planters, and utility holders with the business separated into two divisions: textile & basketry. IDF’s investment increased their capacity to fulfill PO’s, create internal efficiencies, and enable their US expansion plans. (https://moscrib.com/) (https://www.linkedin.com/in/michellemokone/)

The Agriculture Sector

The agriculture industry has contributed significantly to the national GDP. Agriculture is critical in the Covid-19 pandemic and as a result, the sector was one of the few to grow and contribute significantly to the country’s GDP, and is expected to grow following the government’s shift to support emerging farmers in the sector.

 

IDF and corporate partner AECI aimed to source strong farming businesses that benefited AECI’s supply and/or value chain as well as expanded those very businesses with integrated support.

 

Given the risks associated with primary agriculture, the proposed framework was piloted in 2019 and saw two successful planting seasons of pilot farming business Raletjena saw them more than double production, revenues, and profitability.

 

This success was largely due to the collaboration with key stakeholders to ensure the successful implementation thereof. These stakeholders included the Good Chemistry Fund, mentors, project managers, the Farmers, the product suppliers, and finally off-takers.

The Expanded Programme Now Includes

Farmers Hope was founded by Tebogo Hildah Nyathela in March 2016. The farm is located on a 20 Ha plot in Kgomo-Kgomo, North-West (an hour away from central Pretoria). She started the business through her own contribution by installing electricity, then fencing for 5ha, a borehole, irrigation, shade net housing, and de-bushing the area. The company has specialised in four main crops being peppers (green and habanero), spinach, cabbage, and garlic; and has a small poultry house. IDF invested in Farmers Hope for the purchase of greenhouses, a second borehole, and a dam. The main objective of greenhouses were to

 

  • Control the growing environment – crops are less exposed to pests, airborne fungus/viruses, and weather;
  • Extended growing seasons resulting in increased yields; and
  • Increase the variety of crops – crops can be grown off-season and sold when the market has lower supply and higher prices.

https://www.youtube.com/watch?v=BxRfvJf0CXc

GFG (Ithuba) – Melusi, Sthembiso, Thumelo, Daniel, Moloyi, and Petunia are the six members of the Ithuba based in Balfour, Mpumalanga. The team has been together for more than 10 years and before starting Ithuba, they also underwent training and mentorship at various other farms. Since 2011 Ithuba has specialised into, two rotating crops, namely maize, and soya. The company has also grown into building livestock (sheep and cattle) for the benefit of maintaining the land and for sales to three feedlots in the area. These diverse revenue streams assist the company in achieving more consistent revenue streams especially during the months where maize crops take 8 months and 6 months for soya from planting in October/November to harvest.
https://www.youtube.com/watch?v=hGR01RNg0zo

HempVest Africa (HempVest) -HempVest, run Zunaid Mayet and Zaid Mohidin, was established in 2019 with the vision of becoming a leading, vertically integrated cannabis/hemp business in South Africa. The focus area over time will be the lucrative production of hemp extract; and to develop, produce and distribute a range of CBD products to the South African, African, and international markets. HempVest’s CBD products are produced from the high-quality medicinal cannabis-hemp grown in the commercial cultivation facilities of HempVest.

 

The company’s focus is two-fold:

  • Fresh produce farming of crops including lettuce, broccoli, peppers, tomatoes, cucumbers
  • Cannabis farming of high CBD (cannabidiol), low/no THC (tetrahydrocannabinol) cannabis crops

 

Cannabis crops are relatively new to South Africa. However, the industry is expected to grow to R107bn over the next 4 years. Cannabis growing has attracted significant investment due to changing legislation. IDF’s investment into HempVest was to expand crop production and create agro-processing capacity on the farm. (https://hempvest.africa/) (https://www.linkedin.com/in/zunaid-mayet-96a8704/) (https://www.linkedin.com/in/zaid-mohidin-266a9439/)

ALITHEIA IDF ANNOUNCES FINAL CLOSE OF $100 MILLION GENDER-LENS INVESTMENT FUND

Lastly, our Africa Fund, Alitheia IDF is one of the most significant milestones of a growing investment network across the continent. The Fund reached Final Close at $100m in 2021. The Fund is a partnership between IDF Capital and Alitheia Capital, led by principal partners Polo Leteka and Tokunboh Ishmael. Alitheia IDF is Africa’s first women-led and women-focused private equity fund and is similarly aimed at reducing the plus $42 billion investment gap between male and female entrepreneurs through gender lens investing (GLI1). The Fund invests in growth-stage companies across six African countries: Nigeria, South Africa, Ghana, Zimbabwe, Lesotho, and Zambia.

2022 STRATEGIC INTENT

Our organization is aiming for a more significant 2022 as we drive Value Creation across our portfolio of companies. Value Creation for IDF is positively influencing the strategies of each business we hold shares in through targeted activities. Through this Value Creation, we aim to grow each of our investee companies to ultimately drive our return expectations and more importantly create a burgeoning and transformed entrepreneurship eco-system for high job creation and skills development. We would like to thank all our stakeholders for your trust, your patience, and your support. We wish you a healthy, happy new year. Here is to 2022. https://thegiin.org/gender-lens-investing-initiative