Impact investing
By Luke
I consider it very valuable that they are able to provide the same returns as any other private equity fund while providing a key service to small to mid-sized business owners in South Africa.
As someone with a background in the investment world, I came in very interested in our first company visit with Secha Capital. Most of my experience was with traditional investment companies, so I was excited to learn about how the mission and tools of an impact investor might differ. The team brought a lot of energy in the room and talked about how they believe that their returns would equal those of any traditional private equity company and their investors wouldn’t need to take a discount by investing in an impactful cause. If that was the case, I was expecting there would be no shortage of investors as they would be able to attract both the profit maximizing and the socially conscious investors. In the US, most impact investment funds deliver a slightly lower return than traditional funds, but their investors aren’t looking for the greatest return, but rather some financial return with a large social or environmental impact.
It became clear to our group that the definition of impact investing we were operating off differed from theirs. They weren’t really providing the exact same services to society that you would see with US impact investors. I thought a lot about this the rest of the trip and came away with the conclusion that they are providing a valuable service to society. With less efficient markets than in the US, small to mid-sized businesses don’t have access to capital as easily as they do in the US. So while a private equity firm that partners with small to mid-sized businesses wouldn’t be considered impact investing in the US because they could easily find another source of money if a Secha-like firm didn’t exist, that isn’t the case as much in South Africa. I consider it very valuable that they are able to provide the same returns as any other private equity fund while providing a key service to small to mid-sized business owners in South Africa. Maybe impact investing isn’t the best label for Secha Capital at this point, and if they choose to expand their scope, there will be no shortage of opportunities for them to do so. However, I considered our visit to Secha Capital to be an excellent one to start out with, highlighting for us the fact that South Africa was not that different a place to operate a business as one might think from the US. The same conversation we were having in that room could’ve been happening in any city in America. For a lot of Americans coming to Africa for the first time, they build it up in their head as a place with a totally different set of rules and customs. This set us off on the right path in considering these visits to be with just as sophisticated a company as you would find in the US, just with a slightly different context.