Structured Finance

OVERVIEW:

The aim is to meet the CEDA guidelines and to fulfil the mandate given by the Botswana Government.

 

CEDA seeks to achieve these two objectives through its participation in business propositions that are financially viable and sustainable in the medium to long term and provide a positive developmental impact from a socio-economic perspective.

 

Investment Approach

•             Invest in opportunities to create consistent value

•             Active partnership with management of the Investee companies that CEDA invests in.

•             Invest in businesses that have potential for high growth.

•             Nurture portfolio companies, up-skill staff and provide strategic direction to the management team.

•             Well planned exit.

 

Value Creation Strategy

 

CEDA’s value creation strategy is based on a close working relationship with the management team of the investee companies and hinges on four fundamental pillars which include:

 

•             Recruiting and retaining key members of management

•             Enhancing efficiencies within the operations of portfolio companies

•             Fostering growth

•             Realising equity value for the promoters and for CEDA

 

Equity Funding

 

Investment Criteria

CEDA’s selection criterion takes the following into account:

 

Business Plan

A clearly defined and realistic business plan giving a clear strategy for its success.

 

Management

The business should have or provide for a highly skilled and committed management team.

 

Citizen Empowerment

Being an empowerment vehicle CEDA requires that the businesses it finances have citizen participation. This translates to having citizens forming part of both the ownership structure of the business including participation in the management of the business.

 

Owners Contribution

The promoters are required to take personal risk in their projects and will make an equity contribution which equates to a minimum of 15% of the funding requirement.

 

Growth potential and Returns

The Agency is interested in ventures with exceptionally high growth potential capable of providing financial returns commensurate with the level of risk taken. The investment must achieve a minimum internal rate of return (IRR) of 25%.

 

Size of target Company

P4 million to P30 million.

 

Ownership Requirement

CEDA requires that it holds a significant but minority equity stake i.e. a minimum of 26% but not more than 49% of the Investee Company’s ordinary shares.

 

Typical holding period to exit 5-10 years.

 

Types of transactions

•                            Start-ups or green fields.

•                            Early stage investing.

•                            Expansion capital.

•                            Mergers and acquisitions.

•                            Restructuring and turnarounds

•                            Management buyouts and buy-ins

 

Monitoring

As a rule, CEDA seeks representation on the Board of Directors of our Investee companies.

 

Classes of Capital Used

•             Equity capital (ordinary shares)

•             Mezzanine capital (preference shares, debenture notes, options and warrants)

•             Debt (provided CEDA has an equity stake in the company)