New South African Student Housing Fund Aims to Raise $18 Million

(Bloomberg) -- Inkunzi Wealth Group, a South African money manager that has been toying with the idea of investing in student housing for the past two years, said it has now started a fund and plans to privately raise 250 million rand ($18 million) by mid-April.

At 10 rand a share and with a minimum investment set at 5,000 rand, Ithubalethu, as the venture is called, wants to raise money from retail investors before approaching asset managers, Owen Nkomo, the 39-year-old head of Inkunzi and the chief executive officer of Ithubalethu, said in an interview. The investment community is tired of putting money into mutual funds and stocks and Ithubalethu offers an alternative and direct investment, he said in Johannesburg Tuesday.

With the 21-member FTSE/JSE Listed Property Index having plummeted 31 percent last year amid a general equity slide and fears that the government would take away property rights, Ithubalethu doesn’t plan to trade on an exchange for the next one to five years, according to Nkomo. Nonetheless, it has a seven-member board in place, with Investec Plc and Rand Merchant Bank handling its finances. Grant Thornton LLP is auditing the venture.

Once Ithubalethu has raised money, it will buy -- and maybe develop -- properties in towns and cities including Cape Town, Mahikeng, Durban, Johannesburg and Potchefstroom, said Nkomo, who was a Citigroup Inc. trader before he started brokerage Inkunzi in 2011. With the government increasingly cash-strapped and the number of students in tertiary institutions rising, Ithubalethu will profit from servicing a niche market, he said.

South Africa plans to more than double what it spends on post-school education and training to 172.2 billion rand by 2022 from 65.4 billion rand in 2017, the World Bank said Tuesday. A skills deficit is contributing to chronically high unemployment levels in the country, where the economy hasn’t grown by more than 2 percent a year since 2013.

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