International wealth and asset management firm Caleo Capital has partnered impact investment firm Secha Capital to establish Secha Capital VCC, a 12J investment vehicle with the aim of accelerating the growth of South African SMEs and creating sustainable jobs.
Caleo Capital and Secha Capital, which provides patient capital to established African SMEs in the “missing middle”, say Secha Capital VCC will take advantage of section 12J, a tax incentive regime implemented by the South African Revenue Service (SARS) to increase funding to small- and medium-sized businesses.
It allows companies, trusts and individuals to deduct 100 per cent of the full amount invested in qualifying Venture Capital Companies (VCCs) from taxable income. The Secha Capital VCC does not collect a management fee or a raising fee.
“It has long been the goal of Caleo Capital to invest in the impact investing asset class. Our clients are excited by the opportunity to have direct exposure to SMEs with positive impact,” said Caleo Capital founder and chief executive officer (CEO) Nicholas Liebmann.
“And we are excited to have found the right partner in Secha Capital, with Rushil Vallabh and Brendan Mullen leading the newly created vehicle. The design of our 12J is both returns and impact focused. Caleo and Secha will allocate investment capital into South Africa’s most promising SMEs and then the team will work side-by-side with the companies to help them grow.”
He said Caleo, together with its clients, was seeking investment opportunities that have positive social outcomes. However, this traditionally meant lower returns.
“Our partnership with Secha Capital upends the traditional model, we do good and expect high returns. And it is just the start – we intend to find more local, high-impact, low-risk, investment opportunities in which to allocate Caleo’s assets,” Liebmann said.
Secha Capital managing director Rushil Vallabh said his firm was “thrilled and proud” to partner Caleo Capital.
“Secha Capital VCC is the perfect platform to serve SMEs that have previously been ignored by the business community,” he said.
“We provide capital, management expertise and market access – solving the top three pain points of most small businesses. We are confident that if we combine our experience from top-tier finance, consulting and industry with the entrepreneurial spirit, market knowledge, and grit of great SME founders, then we can create value for the investors and operators alike.”