At a Glance
- Founders advance capital as loans, not equity, avoiding banks and restrictive covenants.
- Debt forgiveness books accounting profit, strengthens balance sheets and triggers ownership earn-outs.
- Debt-to-equity swaps deepen control, dilute minorities and fund listings without cash outflows.
Africa’s corporate elite increasingly borrow money from themselves, not out of necessity, but as a calculated strategy to consolidate ownership and reshape corporate balance sheets in their businesses. In capital-constrained markets, related-party loans offer founders flexibility that banks and external investors rarely provide.
Why African billionaires lend themselves money
At the center of this approach is a simple structure. The founder controls both the operating company and a private investment vehicle.
Capital is injected as shareholder loans rather than equity, avoiding dilution, external covenants and repayment pressure. Crucially, these loans can later be forgiven or converted into shares when strategically convenient.
Quinton van Rooyen and the Trustco playbook
Quinton van Rooyen’s use of Next Capital within the Trustco Group illustrates how the model works in practice.
In October 2018, Next Capital extended a NAD1 billion ($59.62 million) loan to Trustco Resources. A year later, the loan was forgiven. Trustco booked the write-off as profit, instantly improving its balance sheet ahead of an IPO process. The move also activated an earn-out mechanism that increased Van Rooyen’s effective shareholding.
The strategy resurfaced in September 2023, when Next Capital proposed converting NAD1.4 billion ($76.24 million) in outstanding loans into equity at NAD1.41 per share. The transaction, subject to shareholder approval, would lift Next Capital’s stake to 69.8 percent. No cash changed hands. Debt disappeared. Control deepened.
By June 2024, Trustco finalized a broader NAD4.4 billion ($235 million) debt-to-equity conversion. The deal covered NAD1.48 billion ($80.6 million) in related-party loans and NAD2.95 billion ($160.64 million) in mining asset obligations. Shares were issued at NAD1.17 per share, boosting net asset value by NAD1.5 billion and positioning the group for a planned $100 million U.S. capital raise.
Control versus governance risks
Technically, the process is balance-sheet engineering. Strategically, it is control consolidation. Founders can recapitalize businesses, meet regulatory thresholds or present profitability without relying on banks or diluting influence through third-party investors.
Critics argue the practice blurs the line between financial discipline and self-dealing, particularly when minority shareholders face dilution. Supporters counter that founder-backed loans reduce insolvency risk and signal long-term commitment.
Van Rooyen’s case shows that borrowing from oneself, and never paying it back, is less about avoidance than about mastering corporate mechanics in Africa’s capital markets.
