CEO at Agile sees a reshaping of the investment landscape

Agile Capital, a black-owned private equity firm headed by Tshego Sefolo, has raised R900m in capital to invest in diverse sectors in companies with a solid presence in their industries. It has already established three funds of almost R1.4bn across sectors such as the engineering and automotive industries.

Sefolo talks to Business Day about its new fund.

You’re disbursing R900m for new investment opportunities. How were the funds raised?

We’ve got a very good relationship with the FirstRand group, so RMB is quite a significant investor in our business and RMB Corvest who are also a significant player in that space. The funds were raised over time. We’re on our fourth fund, which we are currently deploying.

You’ve said you don’t want to invest in particular sectors such as green companies, but what companies are you looking to invest in?

We’re in the market looking for investment opportunities, which makes it very difficult when you’re trying to deploy capital and invest during these Covid times. We’re long-term investors in nature, our investment horizon is anything from five to seven years. So in this context, we’re able to look through economic cycles and economic challenges.

We’re looking at businesses that do cleaning, hygiene control. We have found it to be relatively attractive.

Environmental services as well, we’ve got some exposure to a business called Spilltech, which is in the environmental remediation fight.

Health care, that’s quite a prominent buzzword at this point in time. We saw that there is significant scope to invest in it and even more so now given the challenges that we’re having.

Mining services is one of the sectors to open before everything else, so it clearly indicates to you that it’s quite critical and an anchor sector of the SA economy.

While we have sectors that we understand and deploy capital in, I think the current landscape also justifies a rethink of some of the businesses and areas of investment that one would want to look at. I think the market landscape and investment landscape is getting redefined.

Apart from equity investments, do you get involved in companies that you are invested in?

Yes, firstly we deploy our management teams and in fact in some businesses that we buy into we will replace them and deploy people that we are comfortable can drive that business and ultimately deliver on our growth aspirations.

We would then on a periodic basis spend a lot of time with the management teams and dive deep into the business to make sure that the strategic intent that it had when we put money into the business is what has been executed. We ultimately end up acting as the guardian of the business.

What are your thoughts on the current economic turmoil and bear market?

There are one of two ways to look at it. From a societal impact point of view, this is terrible, it is draconian. You have households that are significantly negatively impacted, unemployment numbers as high as 7-million or 8-million people that are going to be unemployed. It’s doom and gloom.

The scenario I prefer to look at is more of a pretty scenario that says this redefines the landscape from an investment and from a business point of view in the sense that you’ve got traditional areas of business that historically people wouldn’t have ventured into simply because they were dominated by certain players of the market, and now suddenly that’s getting redefined. We’re seeing some businesses that used to flourish but are now in trouble.

Many firms are lamenting Covid-19-related challenges. What have been some of Agile’s own in that regard?

We have quite a big portfolio of companies, about 15 or so. From a business point of view, the No 1 impact has been cash flow and liquidity. That’s the biggest challenge to the extent that you don’t have sufficient cash flow and liquidity in the business to sustain it.

The second issue aligned to that is lack of trading. Trading and being able to do business is the lifeblood of the business. A combination of the two has been the biggest challenge. What compounds it is that we have different levels at which businesses are allowed to open.

We have businesses in the portfolio that are not even at any of the levels. Some challenges include the ability to forecast and plan for different scenarios.