How the Novare South Africa Impact Fund will target financial returns, and seek to attain measurable social impact during the devastating Covid-19 pandemic
The launch of the Novare SA Impact Investment Fund is quintessential to help South Africa and its people recover from the devastating social and economic consequences of the Covid-19 pandemic. Benedict Mongalo, MD of the Novare SA Impact Investment Fund (a fully-owned subsidiary of Novare Holdings) is excited about this new introduction. In this issue he passionately talks to BBQ, about, among others, how the new fund will impact the South African investment scene.
Can you please tell us what exactly an impact fund is, and what sets it apart from a normal private equity fund?
One of the main differences between an impact investment fund and a private equity fund lies in its primary goal. By pure definition, the primary goal of a private equity fund is to maximise financial returns. The primary goal of an impact investment fund, however, is to generate optimal ROI and achieve measurable, positive impact on both the environment and our society. A normal private equity fund could, for example, invest in a transaction that yields positive financial returns, but delivers no social or environmental returns. An impact fund on the other hand, has the dual objectives of achieving both financial and social and environmental returns.
Is this Novare’s first impact fund?
It is important to clarify this upfront: Historically, Novare has raised numerous private equity funds. Even though we have not labelled them as ‘impact funds’ per se, ‘making an impact’ has always been central to any of Novare Holdings’ investment strategies. As a result, our various investment funds have, over the years, been making significant positive impacts on the African continent. These results are measured and reported to our investors on an ongoing basis. The main variance is that ‘making a positive impact’ will be one of the strategic drivers of this new impact investment fund.
Is there a financial trade-off in this process?
Contrary to popular belief, there is absolutely no financial trade-off in such an impact investment fund. It simply means that the predetermined KPIs allocate equal weighting to the return-seeking objectives and the impact-generating objectives of the fund.
How will the impact projects be selected?
The impact projects of this fund will be strategically earmarked to help drive and support the priorities of South Africa’s economic blueprint, our National Development Plan. In particular, these projects will address some of the most critical targeted sectors such as agriculture, manufacturing and economic infrastructure.
How will the success of this fund be measured?
Apart from its financial performance, the success of the fund will also be measured by the social and environmental returns generated. These metrics will be in line with three selected key pillars of the United Nations’ sustainable development goals: They are:
- poverty eradication and inequality,
- environmental sustainability, and
- creating of sustainable economic infrastructure.
What strategic approach will your team follow to ensure the fund’s success?
The three cornerstones to help achieve the objectives of our strategy for this impact investment fund are: utilising a blended investment approach, ensuring a strong deal pipeline and leveraging the strength of a multidisciplinary team.
What other factors have an impact?
The fund’s vintage year is marked by a highly volatile economic environment and corporate distress in various sectors. However, a major plus is that there is an abundance of good assets available at ultra-attractive prices. All indicators therefore point to a substantial influx of investment capital and sufficient reasons to have a positive outlook.
Who should ideally invest in this impact fund?
We have no doubt that the Novare SA Impact Investment Fund is ideally poised to become an investment-of-choice for both institutional investors as well as high-net-worth individuals. And especially by those who are inspired to invest responsibly by gaining optimal financial yields, while making a difference for our societies and our planet.
What is the higher purpose of this impact fund?
There is a finding in the 2021 Edelman Trust Barometer Report that specifically caught our eye, which is yet another confirmation that our higher purpose for this impact fund is right on point. Their study shows that 68% of people believe that business must step in to fix societal problems. Looking at that, it becomes very clear that in this current Covid-19 landscape, the world has one burning question: “How is your business going to help us to rebuild as a society and as a people?” The Novare SA Impact Investment Fund has been developed with exactly that question in mind.
What is the conclusion you wish for us to draw from this introduction of this new fund?
As investors, and as an investor community, we have a unique opportunity to collectively invest our money where it counts most. The Novare SA Impact Investment Fund is an enabler for this, which has the potential to create a win-win for all involved. You can help us grow your own money, whilst solving some of the most critical issues for mankind, and for Mother Nature. We invite you to go to www.novare.com to start investing today. 
Lindsay King
Key objectives
The Novare SA Impact Investment Fund has been purposefully structured to effectively address four key objectives. It…
• aims to consistently generate outstanding financial returns;
• wants to predominantly invest in socio-economic and environmental impact projects in South Africa. (However, it also wants to invest around 25% of the available funds within the Southern African Development Community region. The idea with this, is to help to support regional integration and possible expansion for our investee companies.) And finally;
• it aims to place great focus on helping to counteract the effects of the current economic downturn through proactive initiatives such as job creation.
More about… Novare SA’s multidisciplinary fund management team
The Novare SA Impact Investment Fund will be driven by a uniquely diverse team, consisting of veterans in both impact and privately negotiated investments. The team also comprise transactors; specialists in environmental, social and governance; and technical professionals such as engineers. On top of that, the team has the full and unconditional support of the well-established back office of Novare Holdings. In terms of achievements, it is worth noting that collectively, the team has extensive experience in the unlisted investment space. Novare as a group has also raised and invested no less than two successful private equity funds which were largely deployed in greenfield projects.
