Mergence adds commodity finance to diversified financial services offering

The R32 billion black-owned Mergence group has acquired a majority stake in Riparian, the largest independent trade commodity finance firm in South Africa, now rebranded as Mergence Commodity Finance.

Masimo a badimo Magerman, co-founder and Managing Director of the Mergence group, says that the acquisition is in line with the Mergence vision of becoming a world-class diversified financial services group. Founded in 2004, the group has three subsidiary companies ranging across derivatives trading, property and investment management which now includes commodity finance.

“Trade and commodity finance is a specialist field and the Riparian team has built a strong track record since 2010. There are excellent synergies that can be leveraged through Mergence Investment Managers’ existing platform, which has a fast-growing unlisted investment specialisation in offering debt and equity funding solutions within South Africa and the broader SADC region.

“South Africa has a dual agricultural economy, with both well developed commercial farming and smaller-scale communal farming in the rural areas. Our new acquisition, Mergence Commodity Finance, allows us to strategically play in a niche gap by straddling the two,” says Mr Magerman.

Mergence Commodity Finance has focused to date on grain and oil seed finance traded on the South African Futures Exchange (SAFEX). Given the drought, the agricultural sector has been in particular need of finance.

Dean Scoble, who co-founded Riparian, says that his team liked the Mergence ethos of creating shared value and making an impact, as this resonated with the greater objectives of Riparian’s work in boosting job creation and food security. “By joining forces with an established asset management house, we will benefit from the Mergence infrastructure to offer an enhanced service to existing and prospective clients.”

Deal originator Franklin Williams says that through leveraging the opportunities within Mergence Investment Managers, the commodity finance team will be able to expand its focus to the entire spectrum of commodities, including in the energy, base and precious metals sectors.

The team of five are all professional investment bankers with a combined working experience of 56 years. They have moved from Johannesburg to the Mergence Investment Offices in Cape Town, adding to the diverse team of 39 people who include CAs, MBA’s and quantitative mathematicians.

Mr Williams says that trade commodity finance is set to grow within Southern Africa, especially given the constraints on bank lending in the wake of the Basel III accord. “There is a dire need for corporates to finance working capital. As an efficient team we will work together with banks to offer nimble solutions,” he says.