19 October 2012
Financial services group Cadiz Asset Management has partnered with the US Agency for International Development (USAid) in launching a new job creation fund targeting small and medium enterprises (SMEs) in South Africa.
The Cadiz Protected High Impact Fund, launched in Johannesburg on Wednesday, aims to create tens of thousands of jobs in the next eight years by increasing access to finance for South African SMEs.
US govt guarantees for SME funding
USAid, under its development credit guarantee programme, is providing a risk-sharing agreement for Cadiz to raise over R1-billion (US$150-million) of South African private capital for the fund.
“The USAid risk-sharing guarantee has the full-faith of the US government, and compared to our grant funding activities, it has a relatively lower cost for the US government and significant leverage potential by aiming to move and place local private capital to work,” Cadiz said in a statement.
“SMEs are the backbone of economic activity, and the financing gap for SMEs limits growth and opportunity. As a result, the generation of private-sector led jobs that comes from these SMEs is limited if they lack the financing to grow.
“By mobilizing private capital to support intermediaries that are lending to SMEs, the USAid-Cadiz partnership is directly addressing this constraint.”
Private-sector led solution to job creation
US deputy chief of mission Virginia Palmer said the partnership was an example of a private-sector led solution to tackle the challenge of job creation in South Africa.
“It is also an example of how the US government can work with the South African private sector to help advance the development goals of the government of South Africa,” Palmer said.
Cadiz Asset Management CEO Frank Cadiz said the partnership would enable Cadiz to access pools of capital “that to date were unavailable previously due to the perceived level of risk in this area of investing.
“The fear of capital loss has been one of the factors limiting capital rising historically, and the mitigation of risk through the introduction of the USAid guarantee will explicitly remove one of the hurdles preventing capital allocation in this area”.