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Private Equity: nurturing the green economy

There are rather a large number of constraints impacting on South Africa businesses currently, and while these challenges remain, what has become clear is that there are still growth opportunities for businesses that service infrastructure, like telecoms and water and of course, the big one – energy.

Well-established businesses that have been operating in their relevant sectors for some time will recognise that there is the prospect for slow, steady growth. Often these businesses will not know who to approach for support with this process, and while the banks are often a part of the conversation, it’s worth exploring private equity as an option.

Private Equity mirrors sustainability

Agile Capital is a private equity fund which pursues South African investments. Of particular significance is investing in businesses (and management teams) that are in it for the long haul, as authentic private equity partnerships are mutually beneficial long term relationships.  “We favour acquiring a controlling stake in any sustainable company poised for growth,” says Tshego Sefolo, CEO: Agile Capital. The fund focuses on established business with demonstrable track records and tangible growth prospects.

Private equity can provide you with the finance required and a reliable partner with sound business sense simultaneously. “It allows businesses to find a partner to share the risks and rewards of the business, whilst bringing a vast amount of commercial knowledge and experience to the table,” explains Sefolo.

Creating autonomous businesses

Partnering with a private equity firm can also allow businesses an opportunity to spend on internal and selected external infrastructure to become self-sustaining. Ensuring a steady supply of reliable energy or having sufficient potable water can impact bottom line to a greater or lesser degree. Mitigating the reliance on external sources, also means that your supply chain could become more efficient.

Post-Covid, important insights into the management of supply and demand have been highlighted, these include localisation and innovation. Additionally, prospects outside traditional boundaries have been explored or implemented to solve potential bottlenecks.

Opportunities within the Green Economy

The United Nations Environment Programme (UNEP) indicates that the Green Economy is defined as low carbon, resource efficient and socially inclusive. This is an ethos that many businesses within Sub-Saharan Africa will already subscribe to – not just Agile Capital. Private equity can allow for money to flow into infrastructure and assets that have reduced carbon emissions. Encouraging growth while still being mindful of resources and social impact.

It’s an ideal sustainable partnership as businesses are looking to be resource efficient in this economic climate.  “We are generally sector agnostic, but are interested in the healthcare sector, as well as businesses that manage eco-risks. Waste management, recyclables, the green hydrogen supply chain, water and gas infrastructure, says Sefolo.

In the past, we invested aggressively in the specialised environmental management sector. We think that with increased consciousness towards the environment, this will prove to be compelling.”

Competitive Advantage

Having a structured and measurable ESG strategy within a business can also make it more attractive to funders. It speaks to the both the stability of a business in terms of managing the ecological challenges within commerce, along with the trend towards customers supporting businesses that have an environmental strategy. This means that ESG may be able to drive competitive advantage while mitigating risks within a business.

Private Equity partnerships

It’s vastly important to be clear regards the vision for any business – when looking for investment opportunities, any good PE partner will want to know the growth opportunities the business can offer.  By clarifying and refining business goals, it becomes easier to identify the skills required to bring on board to grow the business – and finding a partner who adds value is vital. The right business partner might have just the skills you are looking for.