Sub-Saharan Africa still under-represented in PE despite strong recent returns, SAVCA says


The Southern African Venture Capital and Private Equity Association is talking up investment in the region through 2016 on the back of strong ten-year return figures.

SAVCA chief executive Erika van der Merwe says that despite good results from the asset class in recent years it is still under-represented in sub-Saharan Africa, presenting investors with an opportunity to access a region experiencing strong economic growth and generating robust returns.

Research by the industry group and RisCura in 2014 said 80 per cent of investors responding expected African private equity to outperform African listed equity over the coming decade.

 Van der Merwe said the South African private equity industry in particular has delivered healthy returns for investors. She believes that the industry, which has a thirty-year track record of deal-making, exits and fundraising, and which now has an expanding regional reach, is set to play an important role in the continued growth of the asset class in other African markets.

The latest RisCura-SAVCA South African Private Equity Performance Report showed that by mid-2015 the South African private equity industry delivered a ten-year IRR of 21.7 per cent, up from 20.5 per cent in March 2015.

That performance compares with the 17.1 per cent return from the FTSE/JSE All Share Total Return Index (ALSI) over the equivalent ten-year period.

Van der Merwe said the South African private equity industry, representing more than ZAR170bn ($10bn) in assets under management, is gradually maturing.

“This is demonstrated by the emergence of specialist funds, dedicated to focused sectors, as well as by the trend towards the establishment of funds with a multi-country focus, with many new South African-managed funds now having a mandate to invest outside South Africa,” she said.

“Both of these factors are characteristics of a more developed industry.”

Van der Merwe added that South Africa also has a proven track record in exits, and has demonstrated to investors that there are a range of viable exit options in this market – and thus a way to realise returns.

She said ,”With this track record, and the ability to attract funds from institutional investors from across the globe, the industry is becoming a notable role-player in drawing capital into the broader sub-Saharan Africa region.

“South African private equity fund managers are deploying capital for deals in Southern, West and East Africa, for instance, and moreover are providing the strategic, financial and operational support to their South African-based portfolio companies to expand into new African jurisdictions.”

“By partnering in capital-rich projects ranging from power plants, renewable energy and water infrastructure, private equity is helping to boost productive capacity and economic potential.  Further, on a continent where capital markets are still in the early stages of development, private equity is an important source of capital and of strategic guidance to small, medium-sized as well as large businesses, across industry sectors.”

More information about SAVCA is available here.

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