Mokgome Mogoba began his career in finance at Standard Bank in 2002. He then joined Standard Bank’s private equity team after qualifying as a Chartered Accountant. He spent nine years at what is usually described as Africa’s largest bank, and spent time working at the bank’s London UK office. He was a founding member of Standard Bank’s Mezzanine Debt finance team in 2005. Mezzanine debt finance is a relatively new asset class compared to other asset classes.<\/p>\n
Unless you are an asset class whizz, you may not be familiar with this term, but it is essentially a hybrid of debt and equity that sits between senior debt and equity in a company’s capital structure. Mezzanine debt financing is usually used to fund growth prospects, such as acquisitions and the expansion of a business<\/p>\n
The basic form of mezzanine debt financing is subordinated debt and preferred stocks. As mezzanine debt financing is subordinated, it carries higher risks, and investors require a higher rate of return than senior lenders. Typically, it pays an investor 15 – 25%, which is higher than the rate of return on ordinary senior debt.<\/p>\n
Mogoba’s Standard Bank’s colleague, Luc Albinski, left Standard Bank in 2006 to join Vantage Capital, to set up one of South Africa’s first independent dedicated mezzanine funds. Albinski tried to persuade Mogoba to join him at Vantage Capital in 2006, but Standard Bank was not prepared to let him go.<\/p>\n
East Africa beckons<\/p>\n
“But in 2011, when the guys started raising the second mezzanine debt fund for Vantage Capital, I was ready to leave. So, on top of my South African responsibilities, I also headed up East Africa for Vantage Capital. This was for a period of nine years. I headed up our investment efforts in markets such as Kenya, Rwanda, Uganda, and Ethiopia. I used to spend on average two weeks every two months in East Africa. So, I know those markets very well and we made a few investments in those markets. I used to travel to East Africa a lot and. It became my second home.”<\/p>\n
However, the idea of launching his own mezzanine debt fund with fellow Vantage Capital partner, Zaheer Cassim, had begun to take shape. “But we didn’t want to set it up immediately,” Mogoba explains. “The plan was to go on sabbatical first. You know, because after working non-stop for 17 to 18 years, we felt we needed a break.” Mogoba’s plan was to travel the world, and he spent a month in Mozambique, a month in Namibia and a month in Botswana. He was also planning on travelling across Europe, Latin America, and Asia. Then the COVID pandemic hit.<\/p>\n
“As we were sitting at home doing nothing during lockdown,” Mogoba recalls, “we decided that we might as well set up the business. Maybe COVID was a blessing in disguise because, who knows, I might have settled in Spain or in Argentina,” he adds with a laugh.Next, it was a decision on the mezzanine debt fund’s name.<\/p>\n
They settled on ‘Kholo Capital’ and they liked the name “Kholo” as it has a number of appropriate meanings in some South African languages and cultures: in seTswana it means ‘growth’; in seSotho, ‘large or significant’; in all Nguni languages (i.e., Zulu, Xhosa, Swati and Ndebele), ‘faith’; and even in the Indian language, Bengali, the word Kholo means ‘to open’.<\/p>\n
“We officially started fundraising for the Kholo Mezzanine Debt Fund in March 2021. We’ve provided some growth capital to the Catapult and also provided them with funding to pay down senior debt as our funding is more flexible than senior debt. We’ve invested ZAR250m (about US$15m) in the business.<\/p>\n
“They are big players in the building materials sector; for example, they own Everite and a popular business called Swartland, a leading South African supplier of window frames and doors.”<\/p>\n
Financial Wellness<\/p>\n
Kholo Capital also made a significant investment in Bayport SA with a ZAR200m investment in the company’s Financial Wellness Solutions Programme. “This is an investment that we were very excited about” Mogoba says. “It’s exciting, especially from a social impact point of view, because Bayport SA partners with employers (i.e., corporates and public sector) to provide financial education to employees. They specialize in debt reduction and debt consolidation and all debt settlement discounts negotiated on behalf of employees are passed to the employees.<\/p>\n
“Over-indebtedness is a big problem in South Africa. What tends to happen is that once people have maxed out on unsecured lending from the banks, they are then forced to turn to the informal sector – they borrow from what we call mashonisas in South Africa.<\/p>\n
“These are dangerous lenders that come with the baseball bat if you don’t pay them,” Mogoba says. “They take your identity document, and they take your bank card and then on payday, they escort you to the ATM to withdraw money to pay them. They charge exorbitant interest rates, as much as 40% per month. It’s a big problem.”<\/p>\n
Bayport SA’s solution is to partner with employers and offer financial education to their employees – helping them to budget. “Where Bayport is very good,” Mogoba says, “is in approaching the employee’s formal lenders and negotiating a consolidated settlement discount. On average they achieve debt settlement discounts of up to 45%.”<\/p>\n
This settlement discount is fully passed on to the employee. And the employee goes from owing multiple lenders to owing one lender – Bayport SA, and Bayport SA structures a repayment profile to pay off the consolidated debt over three years. “They charge their clients a much lower interest rate, and after three years the employee is debt free with a clean credit record. They can approach a bank to get a home loan and get productive debt as opposed to consumer debt. It’s a brilliant, brilliant business,” Mogoba insists.<\/p>\n
Kholo Capital recently announced the provision of ZAR275m in mezzanine debt funding to support the management buy-out of Isambane Mining, a leading mid-tier mining services business in South Africa.<\/p>\n
Isambane delivers comprehensive opencast mining services, including drilling, blasting, loading, hauling, rehabilitation and day-work services to blue-chip mining clients. This is yet another exciting investment. It reflects continued investor confidence in South Africa and highlights the role of structured mezzanine debt in enabling management-led ownership transitions.<\/p>\n
The Isambane management team now owns 100% of the business. Through Kholo Capital, Mokgome Mogoba is leveraging over two decades of experience in mezzanine debt finance to back medium sized businesses with flexible capital solutions that drive growth, transformation, and impact. In doing so, he is helping to shape the evolution of private credit across the African continent.<\/p>\n","protected":false},"excerpt":{"rendered":"
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