A new survey released by Southern African Venture Capital and Private Equity Association (SAVCA), in a partnership with research partner Venture Solutions reveals that South Africa’s VC industry experienced significant growth last year with total deals amounting to ZAR 1.5 Bn.
The survey in its sixth edition reported a total number of 181 new VC deals translating to 14 percent growth compared to 159 deals in 2017.
“It is exciting to witness that despite a tough economic climate in South Africa, the VC industry continues to grow, ” a part of the report read.
Businesses located in Gauteng took the lion share of VC investments in 2018, ZAR 658 Mn, a 38 percent increase from the previous year while the Western Cape region had investments amounting to ZAR 433 Mn.
Kwazulu-Natal VC investments during the same period amounted to ZAR 71 Mn. The rest of South Africa has seen an increase of 28 percent year-on-year.
Independent VC fund managers comprise the largest share of active portfolios (35.1 percent), with Captive Government Funds and Angel Investors expanding investment activity fuelling the growth of early-stage investments in South Africa.
“As the industry starts to mature, we may see more fund managers opting to specialise in specific industries or new funds being established as new sources of capital become available from institutional investors such as the public sector, fund-of-fund entities and corporates who want to capitalise on early-stage investments as part of their own product/ service expansions,” the report noted.
About 41 percent of all VC deals closed in 2018 were majorly start-up capital.
The SAVCA report also highlighted that the sectors targeted for investment. The manufacturing sector took up 14 percent of the total value of all deals, food and beverage, medical devices and equipment accounted for 12.3 percent and 10.5 percent respectively. The software sector amounted to only 5.2 percent while consumer products and services took 5.4 percent total value of all deals.
“There has been a significant increase in deals in the Energy sector, with 24 deals reported in 2018 in comparison to four deals reported in 2017. Business Products & Services recorded 18 deals in 2018, closely followed by 17 deals in Software.”
The report reiterated the need to tackle early-stage investment challenges to ensure the sector grows to reach the maturity stage. Overall, the survey notes that exit activity remained low depicting that the VC industry is still in its early stage of growth.
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