Insights from Private Equity in Southern Africa Conference

The Southern African Venture Capital and Private Equity Association (SAVCA) recently held the annual Private Equity in Southern Africa Conference. The event was centred around “Fruitful Partnerships,” which looks at private equity and venture capital managers partnering with businesses for growth.

“Collaborations between private equity managers and institutional investors mobilise capital from international and local sources for productive deployment; the teamwork between private equity managers and investee companies builds better businesses, which in turn creates new employment opportunities and shapes healthier communities,” says CEO of SAVCA, Erika van der Merwe, in a press release to Ventureburn.

Investments by the numbers

Apart from anything, the event yielded some interesting numbers about the SA private equity landscape.

In conjunction with law firm Webber Wentzel, SAVCA compiled its Quarterly Data Tables, a report on the number of acquisitions and exits in the continent in 2016.

According to the research, 203 reported acquisitions took place in 2016, along with 41 exits, on the African continent. Of these, 99 deals and 14 exits were reported in Southern Africa.

A third of those were in SA, with Nigeria, Kenya, and Namibia having high numbers as well.

“We have seen a fair amount of deal activity across the continent; many of the African deals we have seen have been of companies operating across multiple African jurisdictions,” says head of private equity at Bowmans, John Bellew, in a press release to Ventureburn.

In 2015, the SA private equity industry raised R29-billion. Though the final numbers for 2016 are still being finalised, “there are more than 15 fund managers in the process of targeting funds well in excess of the 2015 total.”

Ethos Capital listed on the Johannesburg Stock Exchange (JSE) in August 2015 with an R1.8-billion ‘oversubscribed public placement.” This allows investment in unlisted SMEs through private equity funds, managed by Ethos Private Equity.

“There has been a growing interest from other private equity managers and investment holding companies looking to do similar transactions and access alternative sources of capital that require liquidity, which can be a challenge for private equity funds,” says partner at Webber Wentzel, Nicole Paige.

Volatility isn’t deterring investment

Even with volatility in the local and international markets, there is still competition for deal flow among private equity managers, financial buyers, and trade buyers.

“The underperforming South African economy is negatively affecting deal flow as low GDP growth creates risk in return expectations, plus there is regulatory uncertainty in some sectors,” comments partner and head of investor relations at Ethos Privat Equity, Rohan Dyer.

“However, we are still finding attractive opportunities to invest in entrepreneurial companies with good growth potential, which can be accelerated by supporting them with our Value Add capability.”

Erika van der Merwe added to this sentiment, saying: “Contbrasted with the global trend being reported, of investors now increasing their private equity allocation, local investors remain relatively underexposed to the asset class.

She also stated that SAVCA will continue to work at growing the local landscape.

“SAVCA continues to work towards a more balanced appreciation amongst Southern African investors for the role of the asset class in boosting returns, mitigating risk and in bringing about environmental, social and governance improvements in businesses.”