Levubu Root Business Plan — Funding Requirement and Structure

R36.0m equity for 61.7% of the company, and a seasonal facility peaking at R26.1m to fund the planting season.

Funding Requirement and Structure

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21.1 Sources and uses
21.2 Why this capital structure
21.3 Use of funds in detail
21.4 The seasonal facility is the most important number in this section
21.5 Ownership and dilution

The company requires R36.0m of equity in two tranches, R20.0m of term debt in two tranches, and a committed seasonal production credit facility rising to R40.0m. The three instruments fund three different things and are not interchangeable.

21.1 Sources and uses

	R million	Share
SOURCES
Equity — Tranche A at close	24.00	24%
Equity — Tranche B at FY2028	12.00	12%
Term debt — Tranche 1, FY2027	15.00	15%
Term debt — Tranche 2, FY2029	5.00	5%
Operating cash generated, FY2029 to FY2031	44.76	44%
Total sources	100.80	100%
USES
Capital expenditure	42.55	42%
Operating losses, FY2027 and FY2028	6.54	6%
Working capital build	10.58	10%
Interest	10.07	10%
Taxation	0.75	1%
Term debt amortisation	4.29	4%
Closing cash at FY2031	25.98	26%
Total uses	100.80	100%

Table 48. Sources and uses across the full plan period. Sources equal uses at R100.8m.

21.2 Why this capital structure

Instrument	Amount	Rationale
Equity, Tranche A	R24.0m	Funds the assets and the losses that no lender will fund: land screening, first planting material, the seed block, and two seasons of negative operating cash flow. Equity carries the agronomic risk because that risk cannot be secured against anything.
Equity, Tranche B	R12.0m	Subscribed at a higher pre-money valuation once the first season’s agronomic result is known. Structured so that the second cheque prices the resolved risk rather than the projected one, which is better for the investor and, if the plan works, better for the founders.
Term debt, Tranche 1	R15.0m	Funds long-life infrastructure — irrigation, packhouse, cold store, seed laboratory — with a 3-year capital grace period matched to the period before the business generates cash. Fixed rate at 11.5%.
Term debt, Tranche 2	R5.0m	Funds the second packhouse line and cold store extension in FY2029, drawn when DSCR supports it rather than committed at close.
Seasonal facility	Up to R40.0m	Funds the crop between November and July. This is the instrument most often omitted from ginger business plans and it is larger than the equity cheque. It is self-liquidating within each season and should be secured against the crop and the debtor book.
Supplier credit	45% of field cost	Unpriced, and reduces the seasonal peak by shifting part of the planting outflow into January and February. Not a substitute for the facility but a material reducer of its size.

Table 49. Capital structure and the rationale for each instrument.

Gearing peaks at 51% of total capital in FY2029 and falls to 24% by FY2031. Net debt to EBITDA falls from 3.1x in FY2028 to a net cash position by FY2031. The structure is deliberately conservative on term debt, because a business whose entire annual revenue arrives in four months cannot also carry heavy fixed amortisation.

21.3 Use of funds in detail

Use of Tranche A and term debt Tranche 1	R million	Timing
Irrigation and water infrastructure	3.10	M5 – M10
Wash, grade and pack line	4.10	M5 – M13
Cold store and curing rooms	2.70	M6 – M13
Clean seed facility and laboratory	2.40	M6 – M12
Mechanisation and field equipment	3.30	M4 – M12
Buildings, workshop and systems	1.80	M5 – M14
Capital expenditure, FY2027	17.40
Purchased planting material	4.98	M3 – M7
First season field cost and lease	7.76	M4 – M13
Overheads and pre-operating cost	4.42	M0 – M13
Operating outflow, FY2027	17.16
Total FY2027 application, before revenue	34.56

Table 50. Application of first-round funding. Against this, FY2027 revenue of R11.3m arrives from month 20 onwards.

21.4 The seasonal facility is the most important number in this section

Figure 25. Peak seasonal facility requirement by year against the committed facility limit.

Seasonal facility	FY2027	FY2028	FY2029	FY2030	FY2031
Facility limit (R million)	8.00	14.00	18.00	30.00	40.00
Peak requirement (R million)	0.00	0.00	10.44	21.40	26.11
Peak utilisation	0%	0%	58%	71%	65%
Month of peak	n/a	n/a	June	June	June
Balance at year end	0.00	0.00	0.00	0.00	0.00
Interest on facility (R million)	0.00	0.00	0.48	1.30	1.56
Peak requirement, downside case	0.00	2.69	19.05	31.05	36.90
Peak requirement, stress case	0.00	7.40	23.63	47.00	71.39

Table 51. Seasonal facility requirement against committed limits, including the downside and stress cases.

21.5 Ownership and dilution

Cap table	Investor	Founders
Pre-money valuation, Tranche A	R14.0m
Tranche A subscription	R24.0m
Post-money, Tranche A	R38.0m
Ownership after Tranche A	63.2%	36.8%
Pre-money valuation, Tranche B	R52.0m
Tranche B subscription	R12.0m
Post-money, Tranche B	R64.0m
Ownership before option pool	70.1%	29.9%
Management option pool	12%
Fully diluted ownership	61.7%	26.3%

Table 52. Capitalisation and dilution. The investor holds 61.7% fully diluted after a 12% management option pool.

The investor takes majority ownership, and the plan does not pretend this is a minority position dressed up as control. At 61.7% fully diluted the investor controls the company. That is the appropriate structure for a venture where the sponsor is contributing an idea and an operating plan rather than capital, land or an operating history, and where the great majority of the risk in the first two seasons is borne by the money.

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