Secha Capital Partners has announced the first close of its second fund, Secha Capital Impact, a Southern Africa early-stage operations-focused impact private equity fund.

The Fund expects a final close in October 2021 and targets 20% IRR.

Secha Capital Fund II will invest up to R12m into established Southern African SMEs for significant minority equity stakes.

Brendan J. Mullen, co-founder and Managing Director of Secha Capital, said: “We are investing across Southern Africa in FMCG, Agribusiness, Health Care, Manufacturing. These are sectors where there is a local need to build a local champion and a robust, defensive supply chain.”

“We've already issued two term sheets in the energy and climate change spac,” he told Africa Global Funds. 

The R400m ($30m) Fund builds off the success of Secha’s highly differentiated inaugural fund. 

Complementing growth capital with human capital, the impact investment model aims to solve key pain points and accelerate growth in the small business sector. 

Rushil Vallabh, Secha Capital co-founder and Managing Director, said: “Fund one was always proof of concept: Can we complement growth capital with human capital to solve SME pain points and accelerate growth? Our portfolio data is a resounding yes. It is now time to replicate and scale this investment model across Africa. We need to grow the Secha team to help more SMEs.”

“We find and fund SMEs that others do not. We write smaller, but more impactful checks and then get Africa’s best and brightest to actually join the SME team,” he added.  

Nombuso Nkambule, Secha Capital co-founder, added: “Our first fund, which established proof of concept, invested in a range of African businesses, from plant-based haircare brand, nativechild, to networking marketing company, WUKINA, which empowers women to start their own businesses selling high-quality wigs. These companies have grown over 10x and created over 100 jobs since we invested.”  

By working alongside entrepreneurs, the Secha team supports SMEs as operators, not investors.

“Our Operator-Investors join the business to offer operational support and strategic guidance. They work closely with the team to help businesses scale efficiently, and as a result, employ more people,” commented Mullen. 

“The Secha model is unique: Our funds are smaller. Our team is younger. We invest in a deeper pipeline of established SMEs in large, “boring”, fragmented sectors founded by previously ignored entrepreneurs. We then provide operational support for execution, channel access and tech-enabled capabilities.”