South Africa\u2019s private equity market may be attracting the attention of the nation\u2019s biggest fund managers, but international investors are giving it a wide berth put off by lethargic output in Africa\u2019s most advanced economy.<\/p>\n\n\n\n
Private equity funds are struggling to raise foreign investment because of assumptions that South Africa doesn\u2019t need development aid and because offshore investors are wary of locking their money in a country experiencing low growth, according to Samantha Pokroy, chief executive officer of Sanari Capital.<\/p>\n\n\n\n
\u201cSouth Africa is middle income only by virtue of averaging,\u201d Pokroy said in an interview. \u201cWe have a tremendously unequal society, and there\u2019s an enormous developmental need to tackle structural inequalities. Private equity is very well placed to focus on structural inequalities because of the level of influence that we have in the economy, in the businesses that we invest in.\u201d<\/p>\n\n\n\n
The International Monetary Fund expects economic expansion of only 0.3% this year and for growth to remain below 2% until at least 2028, with output held back by record electricity outages and logistical constraints. The focus on the topline number blinds investors to pockets of growth, Pokroy said.<\/p>\n\n\n\n
\u201cBecause of the fact that our market is not considered a hot market, there\u2019s actually an enormous amount of untapped opportunities, which are extremely well priced,\u201d she said.<\/p>\n\n\n\n
Private equity funds raised R19.6 billion ($1 billion) last year, a 22% jump from the previous year, according to the South Africa Venture Capital and Private Equity Association. Only 15% of that was from foreign corporations and other PE funds, the industry body said.<\/p>\n\n\n\n
Cash Infusion<\/strong><\/p>\n\n\n\n The Sanari 3S Growth Fund raised R1.25 billion in fundraising from investors, including Africa\u2019s largest asset manager Public Investment Corp. and Alexforbes Investments, which has R450 billion in assets under management and administration. The 10-year fund will have a final fundraising round by May.<\/p>\n\n\n\n In the first round last year, Sanari received R465 million, which it invested in Edulife Group, a network of private schools, technology company LightWare LiDAR, and biometric verification company Identity.<\/p>\n\n\n\n With the cash infusion, the fund can now book bigger deals both at home and on the continent and is increasing deal sizes from R50 million to R250 million from a cap of R20 million. It seeks portfolio returns of at least 25%.<\/p>\n\n\n\n The fund is already targeting four other investments ranging from industrial technology, software and application to health care and another group of schools with a footprint in nine African countries.<\/p>\n\n\n\n
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