Kholo Capital Mezzanine Debt Fund I (“Kholo Capital” or “the Fund”) has reached a final close with R1,4 billion in commitments. The Fund aims to provide long-term mezzanine debt investments to small and medium-sized businesses across Southern Africa, including South Africa, Botswana, Namibia, Lesotho, and Swaziland.
The Fund will support economic growth, job creation, poverty alleviation, and transformation in the region. It offers growth capital, BEE financing, and acquisition funding in sectors with high social impact, such as social housing, healthcare, education, renewable energy, food security, ICT, financial technology, and infrastructure. The Fund aligns with the United Nations’ 17 Sustainable Development Goals, focusing on job creation, reduced inequalities, gender equality, affordable energy, sustainable cities, and climate action.
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Mezzanine debt as a growth strategy
Kholo Capital believes mezzanine debt funding is an effective solution for businesses facing equity funding gaps. Mezzanine debt sits between senior debt and equity in a company’s capital structure, offering businesses flexible funding without significant equity dilution.
The Fund invests in businesses with a minimum EBITDA of R25 million, with preferred investment sizes ranging from R70 million to R200 million. Mezzanine debt funding allows for customised terms, such as capital repayment moratoriums, which can ease financial burdens for growing businesses. Unlike equity financing, this approach helps business owners retain control while securing the necessary capital for expansion.
Commitment to economic transformation
Mokgome Mogoba, Founder and Managing Partner at Kholo Capital, highlighted the Fund’s commitment to economic transformation. “We are very bullish about South Africa, the South African economy and the future prospects of this beautiful country and the surrounding region. We are heartened and motivated by the optimism and the resilience of its people. We aim to create in excess of 500 new jobs at a rate of more than 40 net jobs created per investment and we have committed to investing more than 50% of the Fund in black-empowered companies. We are excited at the opportunity to bring creative funding solutions to the Southern African market and to form long-term sustainable partnerships with businesses over a 4 to 7-year investment horizon, realising not only strong commercial returns for our investors but also providing transformational funding that has a positive ESG impact on businesses and surrounding communities as we also look to boost our rural and township economies.”
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Opportunity in a shifting lending landscape
Zaheer Cassim, Founder and Managing Partner at Kholo Capital, explained the attractiveness of mezzanine debt, particularly in the current lending environment. “Mezzanine debt funding is non-dilutive by nature and therefore is an attractive funding option for family-owned businesses, BEE companies or any business that needs to raise capital and hold onto the equity in the business. And with the banks becoming more risk averse due to regulatory requirements, lending to small and medium-sized businesses has reduced, creating a great opportunity for flexible mezzanine debt structures. We are grateful that our investors recognise the opportunity and have shown us tremendous support.”
Positioned for impact
With a strong pipeline of opportunities, Kholo Mezzanine Debt Fund I is positioned to advance its investment objectives. The Fund aims to strengthen the real economy by supporting businesses that create jobs and contribute to economic growth in Southern Africa.
By providing alternative financing solutions, the Fund seeks to bridge the funding gap left by traditional banks while fostering long-term business sustainability. Investors in the Fund, which include leading South African institutional investors, support the mission of driving sustainable impact through innovative financial solutions.
