Private Equity Investment in Southern Africa Doubles

Updated on 27 July 2018

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SA Business Owners' Sentiments Towards Funding And Mentorship Have ShiftedPrivate equity investment has more than doubled in Southern Africa, according to a survey by the Southern African Venture Capital and Private Equity Association (SAVCA).

The SAVCA 2018 Private Equity Industry Survey reported that the Southern African private equity industry invested a total of R31.3 billion in 2017, which represents an increase of 102 percent from R15.5 billion the previous year and well above the annual average of R14.7 billion over the preceding 10 years.

In addition, South Africa’s private equity capital penetration rose to 0.7 percent of GDP in 2017, which is sizable when compared with the figures for other developing economies (i.e. 0.06 percent for Nigeria, 0.05 percent for Mexico and 0.1 percent for Brazil).

SAVCA, along with its research partner Deloitte, surveyed 47 fund managers, representing a total of 80 funds, all with the mandate to invest in Southern Africa and other select African markets, for the survey which was launched on Wednesday.

Tanya van Lill, SAVCA CEO, said, “The industry exhibited characteristics of resilience, resourcefulness and resoluteness in the past year. It delivered a ten-year internal rate of return (IRR) of 11.6 percent compared to the 10.7 percent from the JSE Alsi TRI over the same period. This shows that as an asset class, private equity has been consistent in its outperformance of listed equity.”

The research showed that Southern Africa’s private equity industry, which is made up of both government and private funds, had R158.6 billion in funds under management (FUM) as at December 31, 2017.

This represents a compound annual growth rate of 9.4 percent since 1999, when SAVCA first began collecting industry data for the survey.

The Southern African private equity industry in 2017 raised R7.5 billion, a decrease from the R10.2 billion raised by the industry in 2016.

Of the R7.5 billion raised, a total of R3.7 billion (49.9 percent) came from South African sources; this is a decline from the 73.5 percent that was sourced from South Africa in 2016.

Van Lill attributed the decrease to the cyclical downturn in fundraising activity which was likely exacerbated by the challenging economic and political environment in South Africa in 2017.

There were 69 disposals made during 2017 totalling R10.5 billion, with the funds returned to investors during the year amounting to R17.6 billion.

In contrast, the annual average funds returned to investors over the preceding five years was R10.9 billion, with disposals averaging R6.8 billion over the 2012-16 period.

The most popular disposals, in value terms, were sales to other private equity firms or financial institutions. By volume, the most popular method of disposal was sales to management. (via African News Agency)

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