In Business Today

Edu-Loan Concludes BEE Deal with Circle Capital and Standard Bank

Edu-Loan, a private finance company focused on education, today announced that it had concluded a Black Economic Empowerment (BEE) deal with Circle Capital Ventures, a black owned investment company of which Dr Mamphela Ramphele is chairperson, and Standard Bank, the country's largest commercial bank. This initiative is a great example of partnerships created between private sector and international development organisations - making education finance affordable and accessible to those who previously had no access to financial support.  Edu-Loan has made more than R1.1 billion of education finance available to more than 350 000 learners since its inception in 1996.

In terms of the deal, a new company - Circle Edu Investments - formed by Circle Capital Ventures and Standard Bank, will subscribe for 10% of new Edu-Loan shares for cash. Standard Bank will sell its existing 45% stake in Edu-Loan to the new company, resulting in it owning 50.5% of Edu-Loan.

"The 10% will be in cash and the purchase by Circle Edu Investments from Standard Bank will be financed by Standard Bank - being a BEE transaction, the value will be at a discount," Johan Wasserfall, Chairman of Edu-Loan said.

He noted that the 10% rights issue would increase Edu-Loan's share capital.

"The agreement will only be implemented once we get the go-ahead from the Competition Commission and the Securities Regulation Panel," Wasserfall said.

"Edu-Loan is supportive of the South African government's BEE initiatives and it recognises the significance of the partnership of empowerment shareholders as a key driver of sustainable economic growth and positive transformation in the country."

"The issue of quality education is at the core of Edu-Loan, given its origins in supporting teacher upgrading in the 1990s.  The focus is now to scale up professional development for teachers and other civil servants in partnership with higher education institutions."

"We feel that Dr Ramphele, with her background in education and Development, and Circle Capital Ventures can enhance Edu-Loan's position as a funder of affordable education finance in South Africa as well as in the rest of Africa," Wasserfall added.

"When Edu-Loan was formed in 1996, it already had 50% black ownership through FBC Fidelity Bank. Real Africa later replaced FBC. After Real Africa lost its BEE position, we  - together with Standard Bank - actively started looking for the right BEE partners, " Wasserfall explained.

"Edu-Loan will now be fully empowered and able to make a significant contribution to the transformation of our society," he added.

Sim Tshabalala, Chief Executive Personal and Business Banking, Standard Bank SA, said: "Standard Bank is delighted to partner with Circle Capital in advancing educational finance and black economic empowerment. We are proud to be associated with Edu-Loan and its effort in providing financing for further education, which is so important in our country."

Edu-Loan's board is expected to change appropriately: "Management and founder directors will still be on the board, while the new company will be represented by some of the current Standard Bank directors, as well as new directors nominated by Circle Capital Ventures," Wasserfall commented.

Standard Bank will be represented by Laurence Rapp, Director, Strategic Investments and Alliances, while Circle Capital Ventures will have three representatives on the board of Edu-Loan: Hlumelo Biko CEO of Circle Capital Ventures, Dr Linda Sigaba, Business Development Manager of Circle Capital Ventures and Dr Ramphele who will become chairperson of Edu-Loan.

Dr Ramphele is well known for her wide contribution to development as Managing Director of the World Bank and to education as Vice-Chancellor of the University of Cape Town and will play a strategic role enhancing the growth and impact of Edu-Loan.  

"As chairperson, her valuable experience in both education and development will enable Edu-Loan to expand its current contribution to education funding even further," Wasserfall noted.

According to Circle Capital's Hlumelo Biko, "the partnership is in line with Circle's strategic intent of acquiring assets in the financial services space."

"Together with co-investors, Circle has identified Edu-Loan as the market leader in education loan financing."

"Executing the Edu-Loan strategy furthers Circle's objective to invest in sustainable private sector solutions for socio-economic problems in Southern Africa."

The planning of the deal took just eight months.  The companies came together as Dr Ramphele and Jan Kitshoff, one of the founders of Edu-Loan, were colleagues at the Independent Development Trust in the early 1990s.   

"This relationship of many years was instrumental in bringing Circle and Edu-Loan together," said Wasserfall.

Disclaimer: In Business Today disclaimerThe In Business Today section is reserved for relevant company announcements and releases. Companies are not entitled to have their announcements published in this section, but from time to time, these may be selected by Moneyweb for publication in the interest of the Moneyweb Community of readers. The copy has not been generated by Moneyweb nor should be attributed to Moneyweb. Nor has the information contained therein been verified by Moneyweb journalists. 29 January 2007