Kholo Capital will turn its searchlights on investments of about $3.8 million to $10.9 million in SMEs that have demonstrated a minimum EBITDA of R25 million ($1.4 million USD).
Mokgome Mogoba, Founder of Kholo Capital. Image Credits: Kholo Capital
South African Investment firm, Kholo Capital, has announced the final close of its inaugural Mezzanine Debt Fund I that saw it land ($76 million) to fund its mission to provide much-needed growth capital to small and medium-sized enterprises (SMEs) across South Africa. The Johannesburg-based firm will deploy mezzanine debt, a form of financing that sits between senior debt and equity, offering a flexible and less dilutive alternative to traditional equity raises.
Kholo Capital will turn its searchlights on investments of about $3.8 million to $10.9 million in SMEs that have demonstrated a minimum EBITDA of R25 million ($1.4 million USD). The firm will target sectors like social housing, healthcare, education, renewable energy, food security, information and communication technology (ICT), financial technology (fintech), and infrastructure.
Mokgome Mogoba, Founder and Managing Partner, expressed optimism about the region’s prospects. “We are bullish about South Africa and the wider Southern African region,” he stated. “We see immense resilience and potential here. Our aim is to provide businesses not just with capital, but with tailored financial solutions that support their growth ambitions while generating positive social and environmental outcomes.”
Zaheer Cassim, fellow Founder and Managing Partner, said “Mezzanine debt is inherently non-dilutive, making it an ideal instrument for businesses seeking growth without sacrificing equity. In a market where bank lending to SMEs is contracting, we believe there is a significant opportunity to deploy flexible mezzanine structures to fuel expansion and development.” he explained
Kholo Capital’s fund has proven particularly alluring to leading South African institutional investors, signaling confidence in the firm’s strategy and the potential of the Southern African SME sector. Kholo Capital aims to create over 500 new jobs across its portfolio, with a target of at least 40 net jobs per investment. Furthermore, they aim to allocate over 50% of the fund to black empowered companies. This will directly contribute to South Africa’s ongoing efforts to redress historical economic imbalances.
The deployment of the fund will go beyond job creation and BEE advancement. It will further emphasize broader Environmental, Social, and Governance (ESG) considerations, aligning with SDGs related to decent work and economic growth, reduced inequalities, gender equality, affordable and clean energy, sustainable cities and communities, and climate action. Still, the mezzanine debt market in Southern Africa is still relatively nascent compared to more developed economies. Kholo Capital will have to tow the path of educating SMEs about the benefits and suitability of this financing instrument to build a strong deal pipeline and effectively deploy its capital.
