WASHINGTON, D.C., Oct. 5 -- The International Finance Corporation (IFC) has approved equity investments of 12.5 million rand (US$3.75 million equivalent) in the South Africa Franchise Capital Fund and 41.6 million rand (US$9.2 million equivalent) in the African Life Assurance Company Limited (Aflife). These are IFC's first investments in South Africa. The Fund will make loans and equity available to members of previously disadvantaged groups in South Africa for the acquisition of franchises in a variety of businesses, including fast-food, dry cleaning, and photocopying chains. The amount of financing to be made available to individuals is expected to range from US$40,000 to US$500,000. IFC structured and arranged the Fund together with Nedcor Bank Limited, a large South African bank. Nedcor Bank, which also operates NedEnterprise, a firm specialized in lending to small and medium-sized enterprises, will take up to a 25 percent stake in the Fund, for 12.5 million rand. The initial offering of the closed-end Fu
nd, estimated at about 50 million rand (US$15 million equivalent), will be privately placed on a best-efforts basis with a small group of international and South African institutional investors. The goal of the Fund is medium- and long-term capital appreciation. IFC will also acquire up to a maximum of 20 percent (US$60,000) of the share capital of the fund management company, South Africa Fund Management Company Limited; Nedcor Bank will hold 50 percent, and other investors will take the remaining 30 percent. Aflife, a life insurance company listed on the Johannesburg Stock Exchange, is undergoing a financial and operational restructuring and is also expanding. As a result of the restructuring, Real Africa Investment Holdings (Pty) Limited, a holding company owned by a consortium representing business interests from previously disadvantaged groups, will acquire a controlling interest in Aflife. Aflife's market is predominantly drawn from these groups. (More) 2 According to Tei Mante, Director of IFC's Sub-Sa
haran Africa Department, "both projects will contribute to the economic advancement of the disadvantaged segment of South Africa's population." Mr. Mante described franchising as "advantageous for owners of small businesses because it gives them access to the economies of scale, accounting and marketing expertise, and research and development facilities of larger organizations." He added that the restructuring of Aflife "is an example of the types of changes in ownership and control that are necessary for increased participation by previously disadvantaged groups in the formal economy." Mr. Mante said the Corporation's strategy in South Africa would initially focus on helping disadvantaged entrepreneurs with project finance and advice on project preparation, and encouraging the flow of expertise and finance from the developed parts of South Africa's economy to the country's disadvantaged groups as they become more active in the economy. IFC will consider larger projects on a case-by-case basis. IFC, a member
of the World Bank Group, is the largest multilateral source of financing for private sector projects in developing countries.
