Coupled with the effects of the COVID-19 pandemic and Moody’s downgrade of South Africa’s credit rating to junk or sub-investment grade, mining companies looking to access finance in this climate are set for an uphill battle. SA Mining recently caught up with Moshe Capital’s CEO Mametja Moshe to chat about how these impacts will influence mining companies.

Paint a picture of the situation in terms of demand for mining-related project financing from small, medium and large enterprises and the availability of finance in South Africa and Africa.

African capital for financing mining projects is typically accessible from banks, developmental finance institutions, trade finance providers and equity investors. That said, most funding into African mining still comes from the international markets. As an example, in 2018, the total mining deals between multinational miners and African partners amounted $48-billion. Demand for capital from mining companies remains high, however 2020 will be a tough year for raising finance due to the global uncertainty posed by COVID-19. Funding by governments will be diverted towards critical sectors such as healthcare and country-level rescue packages, and foreign direct investment will drop as governments focus on investments inside their own territories. Investors will be wary of the lack of clarity and increased volatility in the markets, and choose to park their investible funds in safe havens such as the gold and bond markets due to falling metal prices and inventory pileup.

From a financier’s point of view, what advice would you give potential clients?

The mining industry will be adversely affected by COVID-19 in line with most of the global and local economies. The main impact of ability for mining companies to survive the COVID-19 pandemic will depend on, first, supply and demand dynamics of commodities, and second, access to cash and funding to survive during this period. On commodity prices, recovery of the various commodities will depend on the demand side mainly from the East and Europe as the largest consumers of South African commodities, namely gold, platinum group metals, chrome and coal which make up 38.6% of our commodities exports. As an example, in South Africa 83.7% of our PGM demand stems from Japan, the US, UK, Germany and Hong Kong. With the lower demand from European and Eastern markets in the lockdown periods across the globe, the industry has seen a decrease in the US dollar PGM basket price in 2020, which has however been improved in South African rand terms due to the depreciation of the rand. On the other hand when it comes to funding, the standard “toolbox” of funding mechanisms will not be accessible to all companies and it will depend on the commodities companies are producing, companies’ balance sheets and financial performance. Mining companies will need to be more innovative about how funding can be raised.

How do you foresee the impact of THE Moody’s downgrade on the economy and the mining sector in particular?

The Moody’s downgrade will affect the amount of foreign direct investment into the South African economy and the mining sector will also be affected. Potential international investors that are interested in the mining sector will look for investments in other mining geographies with stronger economies in order to avoid excess exposure to risk. South Africa does not land itself at the top of an investment destination due to the downgrade. For mining companies this is exacerbated by infrastructure issues on electricity, access to ports and rail as well as our rigid labour markets and the global markets’ perception of regulatory uncertainty regarding our Mining Charter 2018. As the Minerals Council South Africa stated, our credit rating downgrade will ultimately have a significant influence on investment in equities and the cost of borrowing, both of which will affect fixed investment in mining. As SA Inc, we need to firstly resolve our internal challenges noted above as well as communicate better with the international markets. Government should consider prioritising resolving the challenges in our state-owned entities – solutions could include partial or total privatisation. This model has been successful in some emerging markets such as Brazil and China. China’s success in privatisation was rooted in partnering local advisers with internationals. This ensures that global best practice is combined with an in-depth understanding of local considerations and that the requirements of all stakeholders are met. The balance of involvement of local players is critical as it allows us to create innovative, locally tailored solutions that promote inclusive prosperity.

Is Moshe Capital involved in funding initiatives for projects in the platinum and innovation and technology space? If so, what was the deciding factor for investing in these projects?

Moshe Capital is engaged in corporate finance work with KellTech South Africa – the developers of the Kell Process. The Kell Process is an innovative, next-generation hydrometallurgical process that provides the platinum group metals (PGM) sector with an alternative to the conventional smelting of concentrates. The Industrial Development Corporation has partnered with Sedibelo Platinum and the founders of the Kell Process (Lifezone Ltd) and is working towards financial closing on the first Kell Process plant. This will be on-site at Sedibelo’s Pilanesberg Platinum Mine and there are discussions under way with the Department of Trade and Industry to incorporate this into their new beneficiation-focused Bojanala Special Economic Zone. This Kell Process presents a low energy intensive, emissions-free process at a critical time for the PGM sector. As Moshe Capital we are supportive and embrace these new technological developments in the processing of PGMs. Ensuring that projects like the Kell Process are initiated will make the industry more competitive while also easing the heavy burden that traditional smelters put on Eskom.

As a black women-owned entity, what are some of the challenges that you have faced and have overcome?

Being a 100% black women-owned business, our advisory and investment businesses face the challenge of the perception that we are in a room because of being black and women rather than on merit. We constantly have to prove that we understand the mining industry although we have worked with the best-in-class blue chip mining companies and have a team of highly skilled and experienced individuals. With mining being a male-dominated industry, we thrive on the opportunity to bring diversity to the boardrooms. It is important to have diversity as it brings diverse thinking, better solutions and strategies for companies resulting in improved financial performance and returns.

What is Moshe Capital’s geographical footprint?

Moshe Capital is currently in South Africa and the United Kingdom. We also have a back office in India as well as strategic partnerships in China and the US.

Kindly outline your growth strategy over the next two years and indicate the areas of opportunity that you are targeting?

Our two-year plan is three-pronged. Firstly, we will continue to advise mining companies through our corporate finance business. Secondly, we are looking to acquire or partner with niche mining services and products companies, especially those with Fourth Industrial Revolution technologies that can be implemented in African mining companies, ​and in other mining hubs globally. Lastly, as a black women-owned company with mining experience, we have established a mining investment company through which we will invest in the commodities space. In line with our motto of Inclusive Prosperity, the ethos of our mining investment company is to ensure that we create value for all stakeholders, including communities and employees. Our vision is to ensure that, ​through our investments, ​we are able to improve people’s lives in the communities where we operate, while delivering great returns ​to our investors and stakeholders.

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Funding mechanisms

Our mining industry will seek further investment after Covid-19 is conquered, with a view to attaining economic recovery. The standard ‘toolbox’ of funding mechanisms is always a good starting point, with the caveat that companies will need to be more innovative about how funding can be raised.

Public bourses have experienced a bloodbath and are still difficult places to source any funding. Does this mean that mines can’t raise funding in this environment? We don’t believe so, and Sasol’s recent announcement of a USD2 billion rights offer supports this. That said, raising public equity funding will be more difficult in the coming year as investors go after “safer” assets, including resilient investments and jurisdictions. Rights offers may be attractive as they would not adversely dilute existing shareholders.

Development finance institutions are going to be critical in this period. The Industrial Development Corporation has taken the lead, with President Ramaphosa announcing a R3 billion investment in SMEs. A similar view might need to be taken to invest in mining operations by developmental finance institutions, whose investment criteria lean towards retention and creation of jobs, economic and social development and sustainability goals. Mines that want to access this funding will need to ensure that these criteria are met and weigh this against potential profitability and sustainability goals for their businesses.

Streaming transactions – in recent times, traders have been funding mining companies on the back of their production. This method is becoming popular as it is seen as a win-win solution in the current crisis – miners need capital, and traders are then able to enjoy the upside in commodity prices.

Internal resources – as we know, cash is king. Several companies across the globe, including Gold Fields, have announced that they can withstand the impact of the Covid-19 using internal resources and existing lines of credit.

Can we find more innovation for funding mining companies?

Having advised on some of the most complex mining deals in Africa, including advising Lonmin on Sibanye-Stillwater’s R4.1 billion acquisition of Lonmin’s issued share capital, Moshe Capital’s approach is to focus on the fundamentals for inclusive prosperity in an innovative way.

Mines should seek out pockets of cash earmarked for mining businesses. For example, we are a shareholder in Mining Minerals & Metals plc, a special purpose acquisition company listed on the London Stock Exchange, which seeks to acquire businesses in natural resources exploration. Existing cash shells could provide an attractive cushion, particularly for exploration companies and junior miners.

Internal sources of funding may include the disposal of non-core assets, but it is imperative to attract interest from the right acquirers if this is an appropriate course of action. In the past, we have identified and highlighted attractive cost or revenue synergies for potential investors, which has led to the successful disposal of non-core assets. These include combining contiguous mines which could increase life of mine; disposal of assets to benefit neighbouring mines from existing infrastructure; and disposals of plant and equipment – likely from our neighbouring countries such as Zimbabwe, Botswana and Namibia as they launch low-cost projects.

Clearly there is no catch-all solution in a tough market. However, miners will need us to all come together as advisors, funders, investors, government and other stakeholders to find innovative, unique investment solutions that contribute to inclusive prosperity. Perhaps this is what the Covid-19 pandemic is teaching us – to work together to find inclusive solutions as a united industry.

Moshe Capital is a 100% black women-owned South African advisory and investment company which was the sole South African corporate finance advisor to Lonmin on Sibanye-Stillwater’s R4.- billion acquisition of Lonmin’s issued share capital.

While the company has a global presence, the team has advised and implemented some of the most complex deals in Africa with a winning combination of technical excellence and in-depth understanding of local context and stakeholders. Moshe Capital works in partnership with clients and companies in which it invests to generate sustainable returns on investment and promote inclusive prosperity in Africa.

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The company was established to undertake acquisitions of businesses that are involved in natural resources exploration.

Investment and advisory firm, Moshe Capital, is a founding shareholder in MMM and its two directors serve on the board alongside directors from New York and London.

“The listing of MMM is significant as a vehicle to raise capital for reverse takeover opportunities in mining, as well as oil and gas investments. We are actively exploring a pipeline of potential investments both on the African continent and elsewhere,” said Moshe founder and CEO Mametja Moshe in a statement issued on Wednesday.

There will be no minimum acquisition size prescribed and acquisitions will vary, based on value and expected rates of return.

Both wholly-owned assets and joint venture opportunities will be considered.

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Our Executive Director Kay Asare-Bediako    was recently interviewed on Business Day TV by Alishia Seckam, expressing her outlook on recently released mining production figures.

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We recently had the privilege of partnering up with Investing in African Mining Indaba and VSA Capital on the China Edition. Moshe Capital facilitated the introduction between our African Mining clients and Chinese investors to unlock business opportunities and grow their footprint globally.

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What was your first job?

Straight after matric I sold paintballing tickets on the streets of London — I was on a working holiday for a couple of months. It was an enticing proposition because the commission was 20%. I sold two tickets in three days. I was terrible. Needless to say, I made a firm decision at that point to not be a salesperson.

How much was your first pay cheque, and how did you spend it?

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Absip president Sibongiseni Mbata said in a statement on Monday that as an advocate for inclusive growth and transformation in the financial services sector and the economy, Absip’s awards celebrated progress, success and exemplary leadership by both professionals and institutions.

Moshe Capital, which was founded by Mametja Moshe who serves as the chief executive, has advised and implemented some of the most complex deals in Africa over the past two years. It was the only South African advisor to Lonmin on the R4.1 billion all-share Sibanye Stillwater transaction, which Moshe says provided a platform to showcase black excellence.

“Moshe Capital’s technical knowledge and understanding of the various stakeholders within the market is underpinned by our daily focus on inclusive prosperity. This combination ensures that we bring the right solutions to our clients.

“We believe that taking all key stakeholders on the journey of a deal is key to the successful conclusion of transactions. We value the communities that occupy the land where our clients operate, and we strongly believe that true prosperity must be inclusive,” said Moshe.

Moshe Capital also advised on Siyanda Resources’ acquisition of Union Mine and 50.1 percent of Masa Chrome from Anglo Platinum as well as Mpumalanga Economic Growth Agency on the strategic options relating to its minority shareholding in Nkomati Anthracite.

In line with its focus on inclusive prosperity, Moshe Capital pursues a deliberate transformation agenda and ensures the participation of its employees, most of which are young and black, in the landmark transactions it has advised on in South Africa and the rest of Africa.

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Savca runs the programme — which aims is boost the number of black and women fund managers in South Africa — in partnership with First National Bank (FNB) and the SA SME Fund as lead sponsors.

In a statement yesterday Savca said the 13 — who are made up of participants from seven private equity funds, four infrastructure funds and two venture capital (VC) funds — were selected from over 50 applicants.

FMDP programme manager Melanie de Nysschen said the calibre of the applications received was “extremely high” and selecting just 13 participants was “no easy feat”.

De Nysschen said an even split was obtained between aspirant and growth fund manager participants.

She added that the programme caters to caters to two types of fund managers.

These she described as first-time fund managers who have an investment thesis but who are still in the process of setting up their fund and experienced growth fund managers who are in the process of raising further capital.

“Given that the programme will cater to fund managers that are in different stages of development or growth, there will be customisation of the programme to target relevant areas of development and support for the selected fund managers.

“The intention is not to flood the market with hundreds of new private equity and venture capital firms, but rather to assist the selected high-potential emerging fund managers who can contribute to the broadening of the overall industry,” explained De Nysschen.

Savca declined to reveal the names of the individuals selected for the initiative, but was able to provide a list of the funds that the 13 participants hail from. These are:

• Bloom Ventures’ Bloom Venture Fund
• Heritage Capital‘s Heritage Capital Fund I Partnership
• Infra Impact Investment Managers’ Infra Impact Mid-Market Infrastructure Fund
• Intaba Management Company’s Intaba Impact Growth Fund
• Kazi Capital‘s Kazi Capital Fund
• Khumovest Advisory’s Khumovest Private Equity Fund I
• Mahlako a Phahla Financial Services‘ Mahlako Energy Fund
• Baobab Venture Partners’ Matla Fund
• Moshe Capital Investments
• Sanari Capital‘s Sanari Lower and Mid-Market Fund
• SummerPlace Equity Partners
• Maya Group Capital‘s Sync 22 Affordable Housing Fund
• Bayakha Infrastructure Partners‘ Transformational Infrastructure Fund

The 12-month programme will be conducted through classroom-based teaching, one-on-one coaching, mentoring and support from industry stakeholders.

Savca said programme aims to address some of the challenges typically experienced by first-time emerging fund managers.

These it said include fundraising, access to networks and working capital facilities and most importantly ensuring the fund team has the necessary support to successfully execute on their fund’s investment mandate.

Practically relevant programme

Savca CEO Tanya van Lill (pictured above) pointed out that participants will also receive guidance from dedicated mentors and coaches, along with the added support of shortlisted preferred suppliers who are willing and able to deliver services into these fund managers at preferred rates.

To ensure the practical relevance of the programme, Van Lill said the final quarter is expected to culminate in capital raising presentations to both local and international investors.

She added that she hopes that through the transformation initiative, there will be a substantial increase in the value of assets under management by black and female-owned and managed funds.

A 2019 Savca industry survey revealed that the percentage of female and black professionals within the industry in 2018 increased to 29.6% and 56.9% respectively, up from 21.8% and 50.9% in 2017.

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