Africa’s first tokenised financial assets exchange, Mesh.trade, has in the past four months received its Crypto Asset Service Provider (CASP) licence and raised over R100 million in the continent’s first tokenised corporate bond.

Backed by renowned economist Dawie Roodt, who also serves as an advisor, Mesh has ambitions to revolutionise capital markets globally by making them more accessible.

While instruments like debentures often require investors to put up at least R1 million or prove that they are professional investors, Mesh allows ordinary people to invest for much less.

Last year, Andile Ncgaba’s investment firm Convergence Partners bought a strategic stake in Mesh’s parent company, 42Markets Group.

The acquisition was part of a R182-million funding round that included development finance institutions in the UK, EU and Africa.

42Markets was co-founded by Andries Brink and Connie Bloem, with Mesh starting as a project within the company in 2019.

In 2020, Mesh launched as a separate company, with Bloem as managing director. Brink is CEO of the 42Markets Group.

Mesh runs on the Stellar blockchain. However, the company recognises that blockchain technology is not the solution to every problem.

“We are on a mission to become the de facto standard for capital markets,” Bloem told MyBroadband in an interview.

“That means we dream of capital markets that are simple to use, easy to access, and transparent.”

To realise that dream, Bloem said they had to choose a system that offered a lot transparency and trust.

“We couldn’t get that with any other technology that could scale globally other than the blockchain,” she said.

“We know that the blockchain is not the answer to all the questions. But it is the answer to a very specific question: trust, transparency, ownership.”

Connie Bloem, Mesh.trade managing director

The Financial Sector Conduct Authority (FSCA) recently awarded Mesh a Category 1 and 2 CASP licence.

Bloem was full of praise for the FSCA, saying South Africa’s regulator was a pleasure to work with.

“Our license means we are a fully regulated crypto asset platform that can facilitate the issuance, trade, and management of tokenised financial assets,” Bloem said.

One of the first capital raises Mesh facilitated was for Die MOS-Inisiatief, a private company established by Trust vir Afrikaanse Onderwys.

It is a fast-growing network of Afrikaans-medium schools powered by the latest technology and virtual teaching capabilities. Roodt also serves on its board.

After Mesh selected Die MOS-Inisiatief as its first corporate bond candidate, a prospectus for a 10-year prime +2% floating rate bond was drawn up and approved.

Mesh explained that the R100-million target was underwritten by education, arts and culture trust TAKKE.

A two-week book-building window with a minimum investment of R5,000 attracted a diverse pool of investors, the youngest of whom was just a few days old.

“I am very pleased to be part of this initiative to build more schools offering mother-tongue education,” Roodt said.

“A tokenised bond is a financial tool that is issued and that interest is paid on. In this case we pay 2% above the prime interest rate,” he explained.

“So it’s a very good investment. The idea is that this will be a very tradable tool.”

This means you can buy and sell it before its expiration date, Roodt said.

“Of course, there will be big investors who would also like to purchase these tokenised bonds, but we decided to make it possible for the man on the street to invest in these and be a part of this initiative.”

Bloem explained that many companies are excluded from raising money in traditional capital markets because of a complex web of exclusionary costs and compliance obligations.

“Companies seeking to raise funds face a complicated web of banks, law firms, and service providers, each adding to the overall cost,” she said.

“This cumbersome process is the antithesis of flexibility, with smaller, yet high-potential, enterprises struggling to find willing underwriters and larger issuers beholden to investment banks’ timelines.”

Bloem said that what they’ve built as they move towards ‘finance 3.0’, is the ability to leverage their extensive industry financial expertise.

This includes a wide network of attorneys and other legal brains, and Mesh’s Stellar blockchain technology.

With these, Mesh can offer companies with good value propositions and attractive growth potential an affordable and much faster route to raising capital.

Regarding Mesh’s global expansion plans, Bloem told MyBroadband that the European regulatory regime, with its MiFID licence, looks very favourable for them.

“Being regulated is not bad, but I am worried about the cost of compliance that will start stepping into our business,” Bloem said.

She said compliance could significantly increase the cost of trading and settling, even on a blockchain where transactions are cheap.

However, where regulations are harmonised and cost-effective, it could unlock great benefits.

“An investor in the EU could, with the single click of a button, invest in assets in South Africa and vice versa,” she said.

Bloem chuckled when asked how Mesh sees itself competing against cryptocurrencies for investors’ attention using more traditional assets that have been tokenised.

“You feel a bit like a zebra. When you’re with the crypto kids, you’re not cool enough, and when you’re with the traditional people, we’re too crypto,” she said.

“But I love it. I love the space we can occupy in the market because we combine the best of both worlds — while facing their realities too.”

Bloem said they don’t want to be a high-stakes cryptocurrency-only protocol business.

“We can and do also offer some of those things, but we also don’t want to be a securities exchange that’s just domiciled in a single jurisdiction.”

As for what’s coming next, Bloem said they will be announcing a host of new tokenised alternative financial and private capital assets, including tokenised debt instruments, equities, and a range of funds.

“Ultimately, the Mesh platform is designed to offer investors multi-asset portfolios, as well as a regulated alternative avenue for entrepreneurs looking to raise capital to fund their growth,” she said.

SOURCE:Dawie Roodt-backed crypto asset platform going big – MyBroadband