The Southern African Venture Capital and Private Equity Association (SAVCA) published its 2020 Private Equity Industry Survey, which provides insights into the activities and trends in the Southern African private equity industry for the 2019 calendar year. Here are the main takeaways from the survey.

Investment activity

1. Decline in overall dealmaking. The value of new and follow-on investments fell to R25.4 billion (about $1.4 billion) in 2019, compared to a record high of R35.4 billion (about $2 billion) in 2018. For context, the average annual value of investment over the 10-year period from 2010 to 2019 was R18.7 billion (about $1.1 billion). The total number of investments decreased by 230, from 818 in 2018 to 588 in 2019.

2. Infrastructure attracted the bulk of private equity capital. Analysed by sector, 34.7% of private equity investment went to infrastructure, followed by energy (14.5%), telecommunications (10.7%), retail (5.6%) and manufacturing (3.8%). One of the prominent retail industry transactions was Old Mutual Private Equity’s acquisition of a majority interest in Footgear, a South African retailer of branded footwear.

Fundraising

3. Significant rise in fundraising. Total funds raised increased by 69.5% to R21.7 billion (about $1.2 billion), in comparison to R12.8 billion (about $754.2 million) raised in 2018. Of the disclosed sources of third-party funds raised during 2019, 32.8% came from private individuals. Pension and endowment funds accounted for 19.9% and government, aid agencies and development finance institutions made up 16.3% of capital raised.

4. Greater focus on the rest of Africa. While funds raised specifically for investment in South Africa fell from R7.1 billion (about $418.6 million) in 2018 to R3.7 billion (about $218.1 million) in 2019, there was a sharp uptick in funds committed for investment in the rest of Africa (excluding South Africa). These funds raised increased from R5.7 billion (about $336.1 million) in 2018 to R18 billion (about $1 billion) in 2019.

5. Majority of funding came from non-South African sources. In terms of geographical sources of third-party funds, non-South African investors accounted for 64.7% of the total funds raised.

Exits

6. Fewer exits. Disposals during 2019 amounted to R5.3 billion (about $312.5 million). In comparison, disposals averaged R8.6 billion (about $507.2 million) annually over the last five years (2015-2019). A standout exit during 2019 was Actis’ sale of South African credit information company Compuscan to Experian for R3.72 billion (about $219.3 million).

7. Management buy-backs the most popular exit avenue. When looking at the method of disposal, sales to management came out tops, accounting for 52 disposals, followed by trade sales (13), sale to another private equity firm or financial institution (10), share buy-back by portfolio company (2) and sale of listed shares and IPOs (2).

This article was originally published on the Africa PE News App, and was shared with SAVCA with permission. For more updates on the Private Equity landscape in Africa, download the app here: http://www.africaprivateequitynews.com/