London fund to invest in BEE

2 February 2006

London-based firm Blackstar Investors is to help fund black economic empowerment (BEE) deals in South Africa to the tune of £35-million (R380-million), signalling that foreigners are growing increasingly comfortable with investing in the country and in empowerment financing, Business Day reports.

This is in sharp contrast to five years ago, when a first round of empowerment deals in mining battled to find foreign support.

“It shows foreign understanding of empowerment and the risks and rewards that go with financing it has grown,” says Business Day.

The company’s local arm, Blackstar Managers, is to identify opportunities for investment. Blackstar, listed on London’s alternative AIM market, is the first fund of its type and an “endorsement” of the BEE process by leading members of the international investment community, managing partner Andrew Bonamour told the newspaper.

He said a number of institutions and hedge funds had invested in Blackstar, including Fidelity, Eton Park, Merrill Lynch Schroder and JP Morgan. The company was previously known as Illuminator plc.

Bonamour told Business Day that international hedge funds had a mandate to invest a portion of their capital in emerging markets.

BusinessMap director Reg Rumney said empowerment charters and the Department of Trade and Industry’s recently released empowerment codes had given foreigners a lot more investment certainty. Empowerment deals worth R40- to R50-billion were struck in 2005.

“Certainly there is a role for private equity financing because there is an enormous amount of activity,” Rumney told Business Day.

Blackstar expects to finalise its first transaction later in February, putting forward the capital needed by empowerment partners to buy a stake in a company operating in the resources sector.

Bonamour said Blackstar was aiming at providing a percentage of financing required for empowerment deals up to about R25-million. Blackstar plans to play an active role in managing investments and will help its black partners with due-diligence studies and negotiations. reporter