Dear SAVCA Members and Friends,

Regulatory changes welcomed

The Draft Tax Law Amendment Bill, published last week by National Treasury, contains the details of the legislative changes first proposed in the National Budget in February this year. The Bill contains a number of elements of relevance to private equity and venture capital in South Africa, and SAVCA will continue to engage with the tax authorities on these aspects, including changes to the tax deductibility of interest, and game-changing improvements in the venture capital company regime. The latter is widely hailed as a welcome step towards boosting funding for the South African venture capital industry.

Keeping with venture capital, have a look at the programme for the SAVCA Venture Capital Foundation Course to be held in Johannesburg on 8-9 September 2014. The course explores ways to unblock constraints and amplify entrepreneurship in South Africa – and is a valuable platform for networking with key players in the South African venture capital ecosystem.

Venture capital is also featured on the programme at the SAVCA-GIBS Three-Day Foundation Programme in Private Equity, set for 6-8 August 2014. This flagship course, unique in its focus on the private equity investment cycle in Southern Africa, features more than thirty speakers, now has over 100 registered delegates and offers the opportunity to network with institutional investors and fund of funds.

The African Union declared 2014 the Year of Agriculture and Food Security in Africa. With this in mind, in this newsletter we feature the South African agricultural sector with perspectives from Herman Marais, Co-founder and Managing Partner of private equity agri fund Agri-Vie.

SAVCA hosted more events this past week; visit our website gallery to see familiar faces at the Legal & Regulatory Briefing to Members, and the presentation of the publication Pension Funds and Private Equity: Unlocking Africa’s Potential.
 
Please keep us updated with your news and visit the SAVCA website to find new research, industry updates and upcoming events.

Regards

Erika van der Merwe
CEO: SAVCA

Regulation

SAVCA Legal & Regulatory Briefing to Members
SAVCA hosted around seventy members in Johannesburg, Cape Town and Durban, at Tuesday’s briefing to members, which was held at Webber Wentzel’s offices. The session highlighted the work done by the SAVCA Regulatory Sub-Committee in areas ranging from FATCA, to tax legislation, tax reporting, FAIS licencing and BEE.

BEE and Private Equity
The abovementioned briefing included an overview by Danny Hatfield, Director at Edge Growth, of both the generic and Financial Sector Charter Codes for BEE. Danny’s slides are summarised as follows:

1.     A process is underway to bring about alignment between the Financial Sector Charter (FSC) Codes and the generic DTI BEE codes. The DTI has indicated that it aims to have this alignment process complete by 1 April 2015, when it will publish the revised FSC codes.

2.     At this stage, the private equity industry is governed by the FSC Codes; the generic codes will govern the majority of portfolio businesses that sit within the funds of the private equity investors.

3.     The new generic BEE codes contain five pillars, compared with the seven pillars of the previous set of codes. Further, there are three priority pillars, namely Ownership, Skills Development, and Enterprise & Supplier Development. Companies that do not meet the sub-minimum standards for these three priority pillars will be penalised under the new generic codes; the effective penalty is by one level.

4.     The BEE rating levels range from 1 (the best) to 8. In order to maintain BEE ratings achieved under the previous generic BEE codes, firms will need to achieve approximately ten more points.

5.     The generic BEE codes contain a section specifically on private equity; it states that investments made by a private equity fund will be deemed an empowered investment only if the fund manager is black owned and controlled. With the alignment of the FSC Codes to the generic BEE codes, it is likely that this component of the generic codes will be incorporated into the FSC Codes.

Draft Tax Laws Amendment Bill: Documents for Public Comment, by 17 August 2014
South Africa’s National Treasury Published the Draft Tax Laws Amendment Bill on 17 July, along with various supporting documents. These are available of the National Treasury website.

AIFMD: Third Country
A simple introduction to the impact of the EU’s Alternative Investment Fund Managers’ Directive (AIFMD), by the European Private Equity and Venture Capital Association (EVCA)

AIFMD Implementation: Fund Marketing
A closer look at marketing under national placement rules across Europe compiled by EVCA.

AIFMD Implementation: Depository
An overview of the depository regimes across Europe compiled by EVCA.

Research

Have a look at the presentation from yesterday’s Pension Funds and Private Equity: Unlocking Africa’s Potential kindly supplied by David Ashiagbor from Making Finance Work for Africa (MFW4A). David was also interviewed on the topic on CNBC Africa’s Business Tonight. 

SAVCA Events

SAVCA-GIBS Three-Day Foundation Programme in Private Equity
Dates:  6-8 August 2014
Venue: Gordon Institute of Business Science (GIBS), 26 Melville Road, Illovo, Johannesburg
Cost:    R8 500 for SAVCA members; R9 500 for non-members
Click here for further information and to register

SAVCA–Edge Growth Enterprise Development Breakfast 
Date:    20 August 2014 @ 8:00 am – 10:30 am
Venue: The Venue, 17 The High Street, Melrose Arch.
RSVP:  Booking is essential: The SAVCA Office on events@savca.co.za or+27-11-2680041
Click here for further information

SAVCA Master-Class in ESG: “Calculating non-financial ROE” (Johannesburg and Cape Town) 
Johannesburg:
Date:    25 August 2014
Time:   Arrival at 8:00 am and course to end by 1:00 pm
Venue: Bowman Gilfillan, 165 West Street, Sandton, Johannesburg
Cape Town:
Date:    8 September 2014
Time:  Arrival at 8:00 am and course to end by 1:00 pm
Venue: Bowman Gilfillan, 22 Bree Street, Cape Town
Click here for further information

Ensuring Successful Private Equity Fundraising in the US and Europe | Presentation by Solomon Wifa, Managing Partner of O’Melveny & Myers
Date:    18 September 2014 @ 4:45 pm – 6:30 pm
Venue: GIBS Mini Auditorium
RSVP:  Booking is essential – contact the SAVCA Office on events@savca.co.za  or +27-11-2680041
Click here for further information

Keep up to date with all our events and courses on our online calendar.

Industry Events

The Latin America Africa Investors Summit
Date:    12 August 2014
Venue: The Hyatt Regency, 191 Oxford Road, Rosebank, Johannesburg
Click here for further information

SAVCA members in the news

OPIC board of directors approves new financing commitments | OPIC press release
This past June, the board of directors of the US-based organisation Overseas Private Investment Corporation (OPIC) convened in Washington to approve emerging markets projects.  SAVCA member International Housing Solutions  received funding of up to $80 million to develop affordable housing across Sub-Saharan Africa.

Investing in private equity: popular choice for wealthy South Africans | Biznews.com
Weitz Botes, a Wealth Manager at Maitland gives an overview of private equity, its performance and risks and its increasing popularity as an investment option for ultra-high net worth individuals, both locally and internationally.

Alexander Forbes IPO pricing gives market value of $915 million | Bloomberg
Alexander Forbes Group Holdings Ltd. placed all the shares in its initial public offering at 7.50 rand, valuing Africa’s largest retirement-fund administrator at 9.76 billion rand ($915 million).

ECP may sell Nigerian reinsurer stake | Bloomberg 
Emerging Capital Partners is exploring the sale of its 50.6 percent stake in Continental Reinsurance, the African insurer said in a filing with the Nigerian Stock Exchange.

Public hearings on Development Bank of Southern Africa Bill | The Citizen
Parliament is to hold public hearings on the bill that seeks to extend the mandate of the Development Bank of Southern Africa (DBSA) across the continent.

Is private equity fuelling Africa’s development | AFKInsider       
Private equity investment on the African continent grew significantly in the past decade, and more and more new entrants are targeting the market. Graham Stokoe, Africa Private Equity Leader at Ernst & Young gives his views on the positive impact of private equity on the continent.

Industry News and Insights

Pension Funds and Private Equity: Unlocking Africa’s Potential | CNBC Africa

David Ashiagbor, from Making Finance Work for Africa discusses the collaboration between the pension fund industry and private equity to unlock Africa’s development.
Jeffreys Bay wind farm up and running | Business Report
A consortium led by Globeleq, owned by Actis, has completed the largest wind farm in sub-Saharan Africa. The 138 megawatt Eastern Cape wind farm is one of about 20 wind projects in the pipeline to cut South Africa’s reliance on coal. Other shareholders include Mainstream Renewable Power, Old Mutual and four local parties.

African equities cause investors to rub hands | Allafrica.com 
Last year, Africa became the most popular destination for private equity according to the Emerging Markets Private Equity Association. Africa came ahead of Brazil, Russia, India and China.  In 2012, Africa was ranked the fifth most popular.

Private equity, venture returns are best since buyout, dot-com booms | WSJ
In the USA, the Cambridge Associates LLC U.S. Private Equity Index rose 20.6% during the year, while the firm’s U.S. venture capital index rose 27.2%. Private equity firms in the U.S. returned more than twice the money they called down from investors in 2013. Fund managers returned some $134.6 billion to investors, the largest amount since the index’s inception.

National Empowerment Fund looks to other bodies for funding | BDlive
THE National Empowerment Fund (NEF) is looking to tap into the financial reserves of development finance institutions as a solution to its lack of funding. The organisation is in discussions with the Industrial Development Corporation (IDC) to set up a joint fund for the financing of black-empowered businesses, an area in which the IDC is no longer active.

‘Boom time in Africa’ says private equity leader – RFI 
Radio France Internationale interviews Lionel Zinsou, head of PAI Partners, one of France’s biggest private equity companies and a leading member of the Franco-African Foundation for Growth about the role of private equity in Africa.

M&A activity – treads quietly but active | Moneyweb    
Industry experts give their views on the merger and acquisition activity for the first half of 2014 with predictions for the remainder of the year. An area of consensus amongst practitioners is that conditions remain tough.

Latin American private equity on the rise | Mondaq 
Data released by Latin American Private Equity and Venture Capital Association indicates that  2013 was a record year for private equity in the region, with $8.9 billion  funds under management – a 13% increase on the previous year. While Brazil still dominates, activity in Mexico, Colombia, Peru and Chile continue to tick up.

Feature: Spotlight on African agriculture

This past June, in his State of the Nation address President Zuma set the target of one million jobs in agriculture in the next 16 years. With this in mind, we chatted to Herman Marais, co-founder and managing partner of private equity agricultural-focused fund Agri-Vie, on how private equity can create employment and growth in this sector.

What needs to happen for the sector to achieve this job-creation target?
If we are to achieve the 2030 job target set by President Zuma, there has to be far more activity in the agricultural sector. Most notably we will need to stimulate agriculture as well as the rest of the food and agri value chains that are linked to farming. This will in turn lead to direct and indirect job creation.

How can private equity contribute?
Private equity plays a key role in the deployment of growth capital. As with all private equity investments, the mechanisms and discipline of private equity capital, advice and mentoring are combined with the entrepreneurial ability of small business owners, and businesses are then able to grow and expand. We contribute this risk capital and management skills which help to realise the full value of these businesses.

Why is job creation in the agricultural sector so important?
The geographic profile of the agri industry is that it is based in rural areas, which by their very nature do not lend themselves to providing job opportunities for the local communities. Formal jobs in these locations are a scarce commodity. So the creation of direct as well as indirect employment through agricultural expansion can be very meaningful to the people living in these areas.

What is Agri-Vie’s contribution to employment in this sector? 
With an R800 million portfolio of interests in twelve agricultural companies across Africa, the companies in which we are investing are directly employing more than 6 000 people. This is significant, and more so if one considers the indirect employment opportunities created.

Where are your investments? 
Agri-Vie has a diverse range of interests across South Africa, as well as Africa, including areas where formal employment opportunities can be rare. Our South African operations include Dew Crisp, a leaf salad business in Muldersdrift, Gauteng, our on-land abalone farm near Hermanus and Fairfield Dairy based near Howick in the KwaZulu-Natal midlands.

SAVCA CEO Erika van der Merwe comments on the contribution that private equity and venture capital can make towards the growth of the agricultural sector in South Africa:

As with most economic aspirations, government certainly cannot do this alone. The target, while admirable, is ambitious. However, we are certainly seeing private equity players interested in this sector, with investments being made in South African and Africa. These portfolios, as well as funding contributions from other forms of investment vehicles and financiers can play an invaluable role in promoting the agricultural sector, creating jobs and ensuring food security.

The 2013 SAVCA-DBSA Economic Impact study points to how private equity investments invigorate portfolio companies. A sample of portfolio companies reported that, with the assistance of private equity funding, their employment has risen by up to 40% in the two-year period covered by this survey. Such outcomes would be most welcome for the agricultural sector in South Africa.

Advertising with SAVCA

SAVCA welcomes the opportunity of working with members and stakeholders in promoting the Southern African private equity and venture capital industry. The organisation constantly seeks creative ways of doing so, including through the marketing member firms’ activities. Should you wish to find out more about various marketing and advertising opportunities with SAVCA, contact the office on info@savca.co.za. Please also drop us a line if you would like to advertise an opening at your firm on our online jobs portal.