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SA private equity gains despite national economic slowdown

Looking for investment growth in South Africa? Well, private equity seems to be where most of the action is. A recent report by RisCura and Southern African Venture Capital and Private Equity Association (SAVCA) found that private equity continues to outperform listed equity over a ten-year period.

By tracking data from September 2015, the report recently revealed that the South African private equity industry delivered a ten-year internal rate of return (IRR) of 20.7% in September 2015, down from 21.7% in June 2015, net of all fees and expenses. This performance compares with the 14.9% return from the JSE All Share Total Return Index (ALSI) over the equivalent ten-year period.

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Read more: Investors should look to private equity in Sub-Saharan Africa, says CEO of SAVCA

According to Erika van der Merwe, CEO of SAVCA, notes in a press release sent to Ventureburn that the sustained positive rand-based returns tell a story of an industry that continues to grow and deliver.

We expect this trend to continue in 2016 and, although the year is likely to be challenging for equity — listed or not — the hands-on, strategic and patient approach that is characteristic of private equity will likely support a steady performance by portfolio companies.

Over a five-and three-year period, private equity returns to September 2015 have dropped slightly since the previous quarter, to 17.4% and 15.7% from 18.5% and 16.4% respectively.

Read more: SAVCA CEO: we need to be ‘realistic’ about SA’s growing VC sector [Q&A]

According to Rory Ord, executive at RisCura, after five years of strong performance, South Africa’s listed market is finally declining, showing a negative return in 2015.

“by nature, the private equity industry is built on careful deal selection, which is followed by thoughtful, focused and active management of the asset. This process ensures that, despite unpredictable economic growth, the industry will continue to deliver fair returns to its investors,” adds van der Merwe.

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