The South African Private Equity Industry (Including SME Funding)
Southern African private equity funds under management grew at a compound annual rate of over 9% over the past two decades. Private equity investments generate financial returns for investors and play a role in stimulating the economy and job creation. Although private equity continues to attract investors seeking access and exposure to unlisted companies with high growth prospects, the asset class remains under-utilised.
While investment opportunities are plentiful in South Africa, the fundraising environment remains extremely challenging, particularly for early stage funds. Role players say that in addition to the unfavourable economic environment, many prospective investors still have a relatively limited understanding of the value of private equity and venture capital. Local pension fund allocations to private equity funds are around 5%, well below the 10% threshold.
Section 12J legislation aimed at stimulating private investment in startups and SMEs by providing tax relief has seen a marked increase in approved 12J venture capital investments. The legislation, which contains a sunset clause ending tax deductions in 2021, is under review. The industry is lobbying Treasury for an extension as these investments have incentivised investment into SME development, which stimulates the domestic economy and helps to create jobs.
This report focuses on the South African Private Equity Industry and includes comprehensive information on the state and size of the industry, influencing factors, corporate actions and issues affecting SME funding. There are profiles of 45 companies including private equity players such as Ethos, Actis, African Rainbow Capital, Brait and Metier. Other profiles include government-owned Industrial Development Corporation and the National Empowerment Fund, industry participants in the SME space such as AngelHub Ventures and Newtown Partners, and Section 12J companies such as Westbrooke and Grovest.