The Southern African Venture Capital and Private Equity Association (SAVCA) in association with KPMG has released its 2017 Private Equity Industry Survey, detailing the state of private equity in South Africa.
The report surveyed 61 managers, representing 96 funds, with a mandate to invest in South Africa and other African markets.
One of its key findings, and noted throughout the entire report, was the high capital return to investors – increasing by 123.2% from R8.2 billion during 2015 to R18.3 billion in 2016.
CEO of the Southern African Venture Capital and Private Equity Association (SAVCA), Tanya van Lill, said that over the period, trade sales were reported as the most popular exit route in value terms, while sales to management were the most popular by volume.
“The average proceeds per exit was R176.3 million in 2016, compared to R48.1 million in 2015. Realisations (returns to investors) in 2016 reflected a times money multiple of 2.0, an increase of 1.4 times reported in 2015.”
She also noted that the growth in funds under management represents a compound annual growth rate of 11.4% since 1999, when the SAVCA survey first began.
“This growth is reflective of a growing industry and an increased interest from investors to invest in South African private equity.”
Other key findings:
- Southern Africa’s private equity industry, including both government and private funds, had R171.8 billion in funds under management (FUM) at 31 December 2016, an increase from R158.5 billion at 31 December 2015. This represents a compound annual growth rate of 11.4% since 1999, when the survey first began.
- Of FUM at the end of 2016, R58.2 billion was in undrawn commitments. R24.6 billion was available for future investments exclusively in South Africa and R33.6 billion for Pan Africa (the latter includes the mandate to invest in South Africa and the rest of Africa).
- Of the R58.2 billion in undrawn commitments, 94.2% is committed to Independents (R54.9 billion), 2.7% to Captives –Financial Services (R1.5 billion), 2.2% to Captives – Government (R1.3 billion) and 0.9% to Captives-Other (R0.5 billion).
- R10.2 billion was raised in 2016, a significant decrease from the R27.5 billion raised in 2015. The bulk of funds raised in 2016 (R7.0 billion, or 68.6%) is for early stage investments.
- Of funds raised during 2016, 73.5% were from South African sources (2015: 28.4%). South Africa has been the source of 43.3% of cumulative funds raised to date, and not yet returned to investors (2015: 40.1%).
- Investment activity for Independents only, as a percentage of GDP, was 0.26% (2015: 0.27%). This compares with 1.81% for the UK, 1.70% for Israel and 1.54% for the US.
- The cost of investments totalled R15.5 billion during 2016, compared to R12.5 billion in 2015. Of the R15.5 billion invested, R5.4 billion was for follow-on investments, and R10.1 billion for new investments.
- Funds returned to investors in 2016 totalled R18.3 billion, a 123.2% increase from the R8.2 billion returned to investors during 2015.