Project Outcomes:

While the country has several accelerators/incubators and early stage Fund Managers, access to equity at later stages of the life cycle is scarce. It should also be noted that the Africa region more broadly has some of the lowest VC penetration rates compared to other emerging markets and South Africa can serve as a hub to incubate startups and then scale them to serve the broader African markets. Hence, this Fund will increase access to equity and operational value add for startups in South Africa that will expand into other African countries. Further, most of the investees of the previous fund have successfully expanding into neighboring countries or have a clear business plan to do so over the next years as well.

Contribution to Market Creation:

The largest contribution to market creation is expected to come from the sector specific impacts of digital investees.

Increased competitiveness of key markets through the support of market-disrupting digital business models: The Fund is expected to invest in innovative businesses models that strengthen supply chains, improve price transparency and have a demonstration effect by catalyzing replication from new entrants. In markets where investees grow rapidly and become sizeable market players, this innovation at scale can generate large impacts on a market’s competitiveness by pushing traditional players to innovate.

Increased competitiveness of South Africa’s VC market: IFC anticipates the Fund will demonstrate the viability of Series B venture capital in South Africa by attracting more investors and incentivizing more entrepreneurs to start businesses.

IFC’s Own Account Equity: South Africa is one of the main innovation and venture capital hubs in the region and has a relatively higher level of fundraising volume compared to most other countries within Africa, however most of this remains at early stages of venture capital, with limited funding at Serie B or later stages. Knife III is raising a Series B fund that is almost five times the size of its previous fund, as such, IFC’s commitment to this fund would provide patient risk capital to the Manager and help achieve target fund size. In addition, investment from a lifecycle investor like IFC will position the Fund to have better access to co-investment and follow-on capital for its investee companies.

Non-Commercial Risk Mitigation: IFC’s investment in Fund III into its first close is expected to send a signal of support to existing and new investors and enable the Fund to meet its targeted final close of US$ 50m, which is five times larger than its previous fund. In addition, the Fund is moving into a new strategy of Series B investing in a region where investor perception is already high. As such, IFC’s commitment endorses a promising Fund Manager with a new strategy and will provide comfort to new LPs.

This project is classified as FI-3 in accordance with IFC's Policy on Environmental and Social Sustainability, based on the Fund's pipeline. The Fund Manager focuses on high growth, non-manufacturing, innovative technology companies with potential for global expansion in sectors including FinTech, ecommerce, consumer internet, business platforms, online marketplaces, and core technology in South Africa and opportunistically the rest of Africa. The expected portfolio will largely be comprised of business activities that have low E&S risks and negative impacts. This project will not to support coal-related activities or companies involved in higher-risk activities that may include: (a) involuntary resettlement; (b) potential adverse impacts on Indigenous Peoples; (c) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage; or (d) significant occupational health and safety risks. For this project, the Fund Manager will be required to screen the investments against the IFC Exclusion List, and the applicable national Environmental and Social laws and regulations which will be managed through a simple environmental and social procedure to be implemented by the Fund including requirements to address typical labor and working conditions risks in the IT sector in line with IFC's updated guidance on GIG economy.

In accordance with IFC's Access to Information Policy, IFC will periodically disclose the names, locations and sectors of sub-projects that have been supported by IFC investments through private equity funds, subject to regulatory constraints and market sensitivities. The sub-project(s) listed below reflect(s) the status of the portfolio as of January 1, 2025.