The South African Venture Capital and Private Equity Association (SAVCA), the industry body for this asset class in South Africa, estimates that South African-based private equity fund managers have increased the collective asset base by at least 10% this year, from the R126bn level measured in 2012.
"The industry is now in a strong position to provide equity funding for expansion and growth, across a range of sectors and regions," says Erika van der Merwe, CEO of SAVCA.
The close of Ethos Fund VI early in 2013, at around R8bn, was followed later in the year by the announcement by Capitalworks that it had raised R2.7bn for its second fund in record time. Subsequently, Phatisa Fund Managers announced the close of its pan-African food and agriculture fund at around R2.5bn, while Convergence Partners reported a first close of almost R1.5bn for its ICT infrastructure fund and is aiming for a final close of R2.5bn. More recently, Metier announced its raising of R690m for its Lereko Metier Sustainable Capital Fund.
It is estimated that more than half of the funds raised were sourced from outside of South Africa. While the bulk of these funds is earmarked for generalist mandates, likely to be deployed across a broad range of industries, there is an emerging trend towards sector specialisation. The most notable area of specialisation is infrastructure, whether in South Africa or across Africa. Within these infrastructure-focused funds, there is specialisation, too, including housing, transport and renewable energy.
Research from KPMG's private equity division reveals funds closed or closing in 2013, for the African region as a whole, amount to approximately R160bn. It estimated that some R40bn of this might be deployed in South Africa. The quantum of South African funds exceeds the previous highs reached in 2007, when R15.4bn was raised by the industry.
The deployment of the capital raised by South African private equity fund managers is expected to increase in pace in 2014. Already, SAVCA members have announced deals in sectors ranging from construction materials, publishing and software, to hospitals, airports and retail property.
