Our Offering
Vunani Capital Partners and Ditikeni Trust have combined resources to form an commandite investment partnership to invest in assets contributing to transformation, of which environmental transformation to a low carbon future will be a large component. Vunani and Ditikeni have each committed R20 million to the Ditikeni Vunani Transformation Fund Partnership.
One investment has been concluded pre-close and will be injected into the Fund at the First Closing; a second is nearing completion. Both initial investments are in renewable energy. There is a pipeline of other potential opportunities.
Introduction
The global private equity sector is constantly facing new demands and evolving challenges. According to the Global Impact Investment Network, impact investment does not only match, but often outperforms traditional investment approaches. Impact investing is one new approach to investing. Investments are made to derive a positive, measurable social and environmental impact in addition to a financial return. Climate change, education, agriculture, hunger, poverty, homelessness, and the Covid-19 pandemic are all examples of social and environmental issues that impact investing can help to address.
The Government of South Africa and the United Nations in South Africa have finalized the United Nations Sustainable Development Cooperation Framework (UNSDCF) for the years 2020- 2030 and the Ditikeni Vunani Transformation Fund (“Transformation Fund” or “The Fund”) aims to target at least 8 out of the 17 sustainable development goals. These sustainable development goals are the targets of the transformation fund.
Energy: The Big Impact Opportunity 1
In South Africa, there is an ongoing energy supply crisis and simultaneously increased demand for cleaner sources of energy. These two vectors combine to create a massive demand for renewables. Moreover, the South African government has set a target to increase the share of renewable energy in its energy mix from 11% to 41% by 2030.
Growth in the renewable energy sector is influenced by:
- National Renewable Energy Targets
- Coal Plant Decommissioning:
- Eskom plans to decommission between 8,000 MW and 12,000 MW of coal over the next decade. South Africa currently relies on coal for 83% of its power needs. The country currently ranks as the 14th largest emitter of greenhouse gas emissions worldwide.
- The private sector drives renewable energy and has expanded with the lifting of the caps
- Market-Driven Regulation:
- The Renewable Energy Independent Power Producers Procurement (REIPPP) program and the Risk Mitigation IPP program, continue to expand renewables penetration in the country.
- Green Hydrogen advances
- Declining Costs of renewable energy
Energy: The Big Impact Opportunity 2
Investors now have opportunities to enter the space and invest in clean energy companies, and even in green energy projects directly.
- Solar and wind energy are expected to dominate the market: The growing energy crisis in South Africa has caused increased private investment into renewable sources of energy to add supply and replace fossil fuel.
- Supportive government policies and programs will drive growth in the market: With load shedding significantly affecting South Africa’s economy, a target set by the government to deploy 11.8 GW of large-scale renewable energy capacity by 2030 is driving market interest for investors, independent power producers (IPP) and international energy companies.
South Africa Renewable Energy Market: Total Renewable Energy Installed Capacity, In GW, South Africa, 2016 – 2021
Our Thesis
Investments in renewable energy are commercially attractive due to the high demand for alternative sources of energy AND their high ESG impact due to their low-carbon technologies. There are many ways of investing in renewables. A thorough knowledge of industry dynamics is needed to navigate these complex market segments. Diversification is a sound principle of portfolio construction; hence a savvy investor will not invest in only one market segment but engage with the sector at different levels. We conclude therefore that investors seeking impact should go wider than renewables and consider other market segments such as training, non-energy infrastructure, and so forth. It is possible that South Africa, will in time have surplus power if all current plans are executed.
Key Fund Features
- Ditikeni Vunani Transformation Fund (the “Fund”) is a vehicle created to build a portfolio of privately negotiated equity and equity-related investments in companies whose primary business activities are located in Southern Africa.
- The Fund aims to promote the transformation of the South African and regional economy by backing well-managed businesses looking for growth capital.
- Aimed at transformation, the Fund offers more than just capital and will partner and support the acquired businesses through active involvement on the board and in strategy.
- The Fund is seeking investors that align with its investment mandate to fund a significant and attractive pipeline of executable opportunities.
- Return target is CPI plus 15% on the contributions made by a Limited partner.