Private equity investments in South Africa recorded a substantial increase in 2018. The value of new investments and follow-on investments reached a record-high of ZAR 35.4 Bn, compared to an annual average of ZAR 15.2 Bn over the preceding 10 years.
The private equity investments were made in different sectors with services sector taking up 17.4 percent, retail sector 17.0 percent and energy sector 14.3 percent.
This was revealed in the SAVCA 2019 Private Equity Industry Survey which was released on July 17. The survey is released on an annual basis, and it tracks private equity activity in Southern Africa.
SAVCA Chief Executive Officer Tanya van Lill said the increased investments show the resilience of the private equity industry. She further notes that amid the numerous investment opportunities available in South Africa, investors are increasingly looking to private equity.
“Total funds raised increased by 71.6% in 2018. Of the R12.8 billion raised, R7.1 billion (56.6%) was raised locally in South Africa. This is an impressive figure, given the relatively downbeat macroeconomic climate in South Africa (real GDP was recorded at a mere 0.8% in 2018). That being said, the industry also benefitted from initiatives such as the government’s drive for foreign investment and the increased interest shown by local pension funds to invest in real assets, which include private equity.”
The research findings show that Southern Africa’s private equity industry had ZAR 171 Bn in funds under management (FUM) as at 31 December 2018, this represents a compound annual growth rate of 9.3 percent since 1999.
Private equity capital penetration continued to record increase, having risen to 0.8 percent of GDP in 2018.
“This means that although the South African private equity industry as a whole is relatively small in comparison to more developed economies, it is still well-established and significant in the regional market,” said van Lill.
Funds that were returned to investors totaled ZAR 15.6 Bn last year. This involves all cash flows, including the proceeds from realising investments, dividends, interest, and repayment of loans. The average annual funds returned to investors over the preceding five years was ZAR 13 Bn.
In terms of realising investments, trade sales were the most popular by value totaling ZAR 5.6 Bn.
“This is a testament to the fact that emerging markets private equity continues to, not only provide investors with exposure to the private sector via private or unlisted companies and attractive returns, but also the opportunity to truly make a positive impact as investors and investees walk their journey together,” says van Lill
Worthy to note also is that the the percentage of female and black professionals within the industry increased to 29.6 percent and 34.9 percent, respectively, from 21.8 percent and 29.9 percent in 2017.
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