SAVCA 2018 · SAVCA was founded in 1998 with the guiding purpose of playing a meaningful role in...
Transcript of SAVCA 2018 · SAVCA was founded in 1998 with the guiding purpose of playing a meaningful role in...
SAVCA 2018 Private Equity Industry SurveyThe Beat of the Southern African Private Equity
Industry covering the 2017 Calendar Year
Proudly championing private equity and venture capital
www.savca.co.za | +27 (0)11 268 0041 | [email protected] | @savca_news
SAVCA is proud to represent an industry exemplified by its dynamic and principled people, and whose work is directed at supporting economic growth, development and transformation.SAVCA was founded in 1998 with the guiding purpose of playing a meaningful role in the Southern African venture capital and private equity industry. Over the years we’ve stayed true to this vision by engaging with regulators and legislators, providing relevant and insightful research on aspects of the industry, offering training on private equity and venture capital, and creating meaningful networking opportunities for industry players.
We’re honoured to continue this work on behalf of the industry.
2018 Private Equity Industry Survey | 1
Contents
Rhythm of the Beat…Private Equity Reinvigorating Economic Growth
Reflections: 2017
Re-energising Capital – Investment Activity
Realising Potential – Exits
Raising the Roof – Fundraising Activity
Review of Funds Under Management
Reaffirming Transformation
Resilient Performance
Representing the Sector: Private Equity Investment Professionals
Recap: Data Tables
Respondents
Research Methodology
Review of Terms
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The TeamEditor: Tanya van LillManaging Editor: Buhle NdweniResearch Partner: DeloitteProduction and Sales: Buhle Ndweni, Pule BorokoDesign: Aucourant Design and Reproduction
We are delighted to bring you the 18th SAVCA Private Equity Industry Survey encapsulating the changing rhythm of the sector during the 2017 calendar year. This year’s theme is The Beat of Private Equity: Resilient, Resourceful and Resolute, refl ecting the steady performance of the private equity asset class against the backdrop of challenging and uncertain economic and political conditions. Private Equity consistently creates value for investors and portfolio companies, whilst driving socio-economic development and economic sustainability. Despite stormy conditions, the rumblings of ongoing growth are still sounding across the industry. Aspects of resilience, resourcefulness and resoluteness have been demonstrated by the performance of the asset class over a ten-year cycle compared with listed equities. The private equity industry delivered a ten-year internal rate of return (IRR) of 11.6% compared to the 10.7% from the JSE All Share Total Return Index (Alsi TRI) over the same period.1
Like the African drum, the sector comprises a number of critical and resilient components skilfully crafted together to make one unifi ed, impactful sound. Drums are also used in African culture to signify times of celebration. Based on the data collated there is are a number of successes to celebrate – as at the 31st of December 2017, Southern Africa’s private equity industry had R158.6 billion in funds under management; the industry has also grown by a com-pound annual growth rate of 9.4% since the fi rst edition of the SAVCA PE Survey, published in 1999. Added to this, there was a big jump in investment activity over the year, with the cost of investments made during 2017 equalling R31.3 billion.
Drums have also characteristically symbolised times of transformation and the chronicling of ongoing journeys. As you may know, SAVCA’s transformation strategy is well under way – we continue to be committed to ensuring that the players who contribute to the promotion and growth of the private equity asset class come from all sectors of
South Africa’s diverse society, and are empowered to drive the realisation of continuous development within the industry. Our research shows that great strides have been made already, with the percentage of female professionals in the private equity industry increasing to 21.8% in 2017 and 36.9% of investments recorded being made in businesses with BEE rating levels of 1 to 4.
Drum beats also spur inspiration and signify the start of new chapters and the anticipation of things to come. Never has this been more pertinent within the private equity sector than now – while there are still a number of signifi cant challenges to be solved, there is still renewed sentiment around a shifting operating landscape and refreshed South African political leadership, this supplemented by President Ramaphosa’s concerted effort to raise capital for investment in South Africa and revive investor confi dence. There is no doubt that the industry will continue to be resilient, resourceful and resolute; epitomising the pulse of economic growth and societal change.
SAVCA could not have put this concerto together without the support of our members who participated in the survey and who makes it possible for us to publish meaningful research. SAVCA also wishes to thank our research partner, Deloitte, who allocated a committed team of professionals who spent endless hours collating, processing and analysing the large volume of data.
Tanya van Lill CEO: SAVCA
2 | SAVCA 2018 Private Equity Industry Survey
1 RisCura, 2018. Private Equity Performance Report – Quarter ended 31 December 2017. Available [online]: http://www.riscura.com/wp-content/uploads/2018/05/RisCura-SAVCA-South-African-Private-Equity-Performance-Report-Q4-2017.pdf
Rhythm of the Beat…Private Equity Reinvigorating Economic Growth
SAVCA 2018 Private Equity Industry Survey | 3
Refl ections: 2017
4 | SAVCA 2018 Private Equity Industry Survey
Refl ections: 2017The Southern African region in 2017 was certainly characteristic of a dynamic musical arrangement. Looking back on some of the notable developments during 2017…
• Zambia, in the fi rst quarter of 2017, was able to attract foreign direct investment (FDI) worth $1.7 billion.
• March 2017: President Jacob Zuma replaced Pravin Gordhan with Malusi Gigaba as the country’s new Finance Minister.
• August 2017: The 8th motion of no-confi dence in President Zuma failed.
• November 2017: Emmerson Mnangagwa was sworn in as Zimbabwe’s President, toppling Robert Mugabe’s 37-year autocratic reign.
• December 2017: Shares in Steinhoff, one of Africa’s biggest retailers crashed from R45.60 to around R17.50 and Cyril Ramaphosa was sworn in as the ANC’s 14th President, becoming South Africa’s new leader.
• Malawi’s economy grew by an estimated 4%, compared to the 2.3% growth in 2016.
In terms of sector developments, Southern African private equity ended the 2017 calendar year with a considerable increase in investment activity. This was refl ected in both volume and value terms, with the value of new investments and follow on investments reaching R31.1 billion in 2017, compared to an annual average of R14.7 billion over the preceding 10 years. Funds returned to investors in 2017 remained strong at R17.6 billion, while Southern African private equity funds raised a total of R7.5 billion during the year.
The Private Equity highlights of 2017 include:
• Southern Africa’s private equity industry, (including private sector and government funds), had R158.6 billion in funds under management (FUM) at 31 December 2017, representing a compound annual growth rate of 9.4% since 1999, when the survey fi rst began.
• Of FUM at the end of 2017, R35.9 billion was in undrawn commitments. R15.5 billion was available for future investments exclusively in South Africa and R20.4 billion for Pan-Africa (the latter includes the mandate to invest in Southern Africa and the rest of Africa).
• Of the R35.9 billion in undrawn commitments, 90.4% is committed to Independents (R32.5 billion), 6.5% to Captives – Financial Services (R2.3 billion), 2.9% to Captives – Other (R1 billion) and 0.3% to Captives – Government (R0.1 billion).
• R7.5 billion was raised in 2017, with the bulk of the funds ear-marked for late-stage investments (R6.1 billion or 81.2%).
• Of funds raised during 2017, 49.9% were from South African sources (2016: 73.5%). South Africa has been the source of 50% of cumulative funds raised to date and not yet returned to investors (2016: 43.2%).
• South Africa’s private equity capital penetration was equal to 0.7% of GDP in 2017 (2016: 0.4%). This compares with 0.06% for Nigeria, 0.05% for Mexico and 0.1% for Brazil.
• The cost of investments made during 2017 totalled R31.1 billion, of this R12.2 billion was for follow-on investments and R18.9 billion for new investments.
• Funds returned to investors in 2017 totalled R17.6 billion, while the value of disposals totalled R10.5 billion.
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Refl ections: 2017Investment Activity | Cost of investment made during 2017, analysed by new and follow-on investments (Rbn)
Fundraising Activity | Third-party funds raised during 2017, analysed by fund stage (Rbn)
6 | SAVCA 2018 Private Equity Industry Survey
2.02.1
3.6
4.7
3.2
5.4
24.7
10.7
4.3
6.2
7.7
6.1
7.67.8
10.1
18.9
0.41.4
0.7
1.8
1.3
1.5
1.4
8.2
2.9
5.6
8.8
5.0
5.8 6.24.7
5.4
12.2
2.43.5
4.3
6.5
4.5
6.9
26.1
31.1
18.9
7.2
11.8
16.5
11.1
13.4 13.912.5
15.5
7.7
20172016201520142013201220112010200920082007200620052004200320022001
New investments
Follow-on investments
0.50.61.1
2.22.22.22.2 0.3
3.33.6
0.2 0.7
1.5
7.0
1.4
11.1 11.1
26.0
3.2
6.1
11.3 11.8
27.5
10.2
7.5
0.21.11.3
14.514.5
0.211.211.4
0.74.24.9
0.115.315.4
0.89.9
10.7
2.18.5
10.6
1.42.23.6
Late stage
Early stage
20172016201520142013201220112010200920082007200620052004200320022001
SAVCA 2018 Private Equity Industry Survey | 7
Exits | Funds returned to investors during 2017 (Rbn)
1.0
9.38.8
20172016201520142013201220112010200920082007200620052004200320022001
1.52.4
4.5 4.0
4.416.0
5.2
10.5
6.2
2.0
20.5
7.0
9.8
8.2
11.0
18.317.6
Pepkor & Premier disposal (R5.2bn)
Total Proceeds
Venfi n disposal (R8.8bn)
Vodacom disposal (16.0bn)
8 | SAVCA 2018 Private Equity Industry Survey
Re-energising Capital – Investment Activity
SAVCA 2018 Private Equity Industry Survey | 9
Re-energising Capital – Investment ActivityWhen it came to sourcing investments, resourcefulness within a challenging investment environment was key in 2017:
South African Private Equity ended the 2017 calendar year with a considerable increase in investment activity, with the value of new investments and follow on investments reaching R31.1 billion in 2017, compared to an annual average of R14.7 billion over the preceding 10 years. The total number of investments reached 750 in 2017, while there was also an increase in the average deal size for both new and for follow on investments.
• The total number of investments increased by 176, from 574 in 2016 to 750 in 2017.
• The cost of new investments during 2017 amounted to R18.9 billion (2016: R10.1 billion) and the cost of follow-on investments during 2017 amounted to R12.2 billion (2016: R5.4 billion).
• The overall average investment deal size increased to R41.7 million during 2017, from R27 million during 2016. The average deal size for new investments was R42.8 million during 2017, compared to R29.5 million during 2016, while the average deal size for follow-on investments increased to R40.1 million during 2017, from R23.3 million during 2016.
• Infrastructure comprises 17.3% of the value of all unrealised investments at 31 December 2017, with mining and natural resources accounting for 11.5%, and manufacturing 10.5%.
• Expansion and development, as a proportion of investments made by cost, decreased from 55.9% in 2016 to 27.5% in 2017. Replacement capital increased from 10.7% of investment by cost during 2016 to 21.3% in 2017.
• In terms of the reported investments for 2017, Business Partners: – Was again by far the most active investor in the Southern African private equity market, contributing 368 (49.1%) of the total number of reported investments made during 2017 (2016: 350, 61.0%); – By value, represents 3.4% of the cost of total investments made during 2017 (2016: 5.4%); and – Reported an average deal size of R2.9 million in 2017 (2016: R2.4 million).
• Excluding Business Partners, the total average deal size of investments during 2017 increased to R79.1 million (2016: R65.5 million), the average deal size of new investments during 2017 increased to R101.4 million (2016: R95.4 million) and the average deal size of follow-on investments during 2017 increased to R59.6 million (2016: R41.7 million).
• Of the investments made during 2017 that exclude those made by Business Partners and classifi ed into sectors by value, 25.9% were in the retail sector, 16.2% in the services sector and 10.1% were in the real estate sector.
10 | SAVCA 2018 Private Equity Industry Survey
Investment activity
2.02.1
3.6
4.7
3.2
5.4
24.7
10.7
4.3
6.2
7.7
6.1
7.67.8
10.1
18.9
0.41.4
0.7
1.8
1.3
1.5
1.4
8.2
2.9
5.6
8.8
5.0
5.8 6.24.7
5.4
12.2
2.43.5
4.3
6.5
4.5
6.9
26.1
31.1
18.9
7.2
11.8
16.5
11.1
13.4 13.912.5
15.5
7.7
20172016201520142013201220112010200920082007200620052004200320022001
New investments
Follow-on investments
Figure 1 | Cost of investments made during 2017, analysed by new and follow-on investments (Rbn)
SAVCA 2018 Private Equity Industry Survey | 11
534
422
403440
503
561599
458
468
359 363319
389 288342
442308
232252
222151
191174188
150
265
235245
227
187
178
229
261 750
574540
501540
510537547
618
723
834806
730
627581
651
795
279
20172016201520142013201220112010200920082007200620052004200320022001
New investments
Follow-on investments
Figure 2 | Number of investments made during 2017, analysed by new and follow-on investments (Rbn)
12 | SAVCA 2018 Private Equity Industry Survey
*Excludes Business Partners
2017
2017
2016
2016
Figure 3a | Cost of investments made during 2017, analysed by type of fund manager*
Figure 3b | Number of investments made during 2017, analysed by type of fund manager*
4.0
74
0.3
16
4.0
83
15.5
179
1.2
23
9.5
106
30.2
382
9.7
114
14.6
224
0.6
11
Captives – Other (excludes Business Partners)
Independents Captives – Government
Captives – Financial Services
Investment activity
SAVCA 2018 Private Equity Industry Survey | 13
*Excludes Business Partners
Figure 4 | Investments made during 2017, analysed by sector (% of total cost)*
Retail
Services
Real Estate
Infrastructure
Banks, fi nancial services & insurance
Media
Mining & natural resources & related
Agri and Agri processing
Manufacturing
Energy and related
Telecommunications
Travel & Leisure
Information Technology
Education
Health care
Infrastructure related services
General/No specifi c focus
Other
2017
2016
10.1
8.24.2
7.23.7
0.17.2
0.14.9
5.94.4
9.54.4
10.74.3
0.81.6
11.20.8
0.30.5
5.6
5.7
0.4
0.3
0.0
11.0
4.8
1.9
14.4
16.210.4
2.03.7
25.98.5
14 | SAVCA 2018 Private Equity Industry Survey
Investment activity
Figure 5 | Unrealised investments at year end, analysed by sector (% of total cost)
Infrastructure
Mining and Natural Resources
Manufacturing
Services
Agri and Agri Processing
Retail
Real Estate
Energy and Related
Banks, Financial Services and Insurance
Telecommunications
Travel and Leisure
Health Care
Media
Information Technology
Infrastructure and related services
Education
Other
2017
2016
12.1
8.93.8
7.62.0
7.17.3
7.17.1
3.25.6
7.65.6
5.05.1
4.12.2
1.31.2
1.50.9
1.6
0.2
0.3
0.2
15.616.0
12.9
13.30.8
3.12.4
20.022.6
SAVCA 2018 Private Equity Industry Survey | 15
Figure 6a | Analysis of investments by stage based on cost of investments during 2017 (% of total)
Figure 6b | Analysis of investments by stage based on cost of investments during 2016 (% of total)
Investments made
Buyout
Expansion and Development
Replacement Capital
Start-up and Early Stage
Investments made
Buyout
Expansion and Development
Replacement Capital
Start-up and Early Stage
21.4%
27.5%
21.3%
29.8%
21.0%
55.9%
10.8%
12.3%
16 | SAVCA 2018 Private Equity Industry Survey
Investment activity
Figure 7a | Analysis of investments by stage based on cost of investments during 2017 (% of total)
Figure 7b | Analysis of investments by stage based on cost of investments during 2016 (% of total)
Unrealised investments
Buyout
Expansion and Development
Replacement Capital
Start-up and Early Stage
Unrealised investments
Buyout
Expansion and Development
Replacement Capital
Start-up and Early Stage
Unclassifi ed
23.9%
46.4%
15.8%
13.9%
23.6%
30.5%
12.4%
13.0%
20.5%
SAVCA 2018 Private Equity Industry Survey | 17
Private equity fund Investee company Total enterprise value (Rm)
Interest Sector focus
Vantage Mezzanine III Southern African Sub Fund
Vumatel (Pty) Ltd 1 948.00 Mezzanine Loan provided + 6.25% equity participation
Information Technology
Vantage Mezzanine III Southern African Sub Fund
Worldwide Landmark Holding Company 1 670.00 Mezzanine Loan provided + 4.6% equity participation
Real Estate
Ethos Private Equity(Pty) Limited
Eazi Access Investments (Pty) Ltd 1 600.00 >50% General
Vantage Mezzanine III Southern African Sub Fund
New GX Capital Holdings (Pty) Ltd 761.00 Mezzanine Loan provided + 8.14% equity participation
Infrastructure related services
Capitalworks Investment Partners (Pty) Ltd
IQ Business (Pty) Ltd 295.00 >25%, <50% General
Sampada Private Equity Euphoria Golf and Life Style 292.00 >50% Travel and Leisure
Nedbank Private Equity Comsol Networks (Pty) Ltd 244.00 <25% Telecommunications
Agile Capital Spilltech 200.00 >50% Services (Cleaning)
Sampada Private Equity Tembisa Megamart 126.00 >50% Real Estate
Figure 8b | Top Southern African investments made during 2016
Private equity fund Investee company Total enterprise value (Rm)
Interest Sector focus
4Di Exponential Tech Fund I & various
LifeQ 1 440.00 n/a HealthTech
Capitalworks Petmin Ltd 1 144.00 over 50% Mining and Natural Resources and related
Capitalworks Sovereign Food Investments Ltd 997.00 over 50% FMCG
Ethos Little Green Beverages (Pty) Ltd 847.00 over 50% General/No specifi c focus
4Di Exponential Tech Fund I, Quona Capital, Omiyar Group, Accion Africa, Asia Investment Company, International Finance Corporation
Zoona 660.00 n/a FinTech
Novare Africa Property Fund I
Urshday Limited 611.76 over 50% Real Estate
Novare Africa Property Fund II
Matola Mall Limited 421.24 over 50% Real Estate
Purple Capital Purple Retail Limited 369.01 0% - 24% Real Estate
Novare Africa Property Fund II
Woodside Mall Zambia Limited 309.35 over 50% Real Estate
Trinitas Private Equity en Commandite Partnership
AutoX Proprietary Limited 280.00 over 50% Manufacturing
Figure 8a | Top Southern African investments made during 2017
18 | SAVCA 2018 Private Equity Industry Survey
Realising Potential – Exits
SAVCA 2018 Private Equity Industry Survey | 19
Realising Potential – ExitsExits in 2017 remained resolute, particularly when compared to the fi ve-year average:
Funds returned to investors in 2017 totalled R17.6 billion, with the 69 disposals during the year amounting to R10.5 billion.2 In comparison, the annual average funds returned to investors over the preceding fi ve years was R10.9 billion, with disposals averaging R6.8 billion over the 2012-16 period.
• Disposals in the form of sales to another private equity fi rm or fi nancial institution was the most popular in value terms in 2017. By volume, the most popular method of disposal was sales to management.
• The average proceeds per disposal in 2017 was R152.3 million, compared with R176.3 million in 2016.
• A total of 79 investments were written off during 2017, inclusive of sales for nominal amounts (2016: 21 investments). The net loss on these investments (cost less proceeds) was R14.3 million in 2017 (R779.3 million in 2016).
• There were no cancelled/expired funds reported during 2016 or 2017.
2 Funds returned represent all cash fl ows returned to investors including the proceeds of an asset realisation (i.e. an exit), dividends, interest and repayment of loans. The term “disposals” refers only to proceeds from the realisation of an investment.
1.0
9.38.8
20172016201520142013201220112010200920082007200620052004200320022001
1.52.4
4.5 4.0
4.416.0
5.2
10.5
6.2
2.0
20.5
7.0
9.8
8.2
11.0
18.317.6
Pepkor & Premier disposal (R5.2bn)
Total Proceeds
Venfi n disposal (R8.8bn)
Vodacom disposal (16.0bn)
Figure 9 | Funds returned to investors during 2017 (Rbn)
20 | SAVCA 2018 Private Equity Industry Survey
Exits
Figure 10 | Nature of funds returned during the year (Rbn)
Dividends and interest payments
Other / unspecifi ed
Repayment of preference shares / loans
Sale of listed shares
Sale to another private equity fi rm or fi nancial institution
Sale to management with no equity involvement of another
fi nancial institution
Share buy-back by portfolio company
Trade sale
Write-offs – including sales for a nominal amount
2017
2016
0.59
0.37
0.42
6.41
0.03
0.02
0.04
0.91
0.59
3.59
6.91
0.10
0.26
0.59
12.36
0.03
0.02
2.73
SAVCA 2018 Private Equity Industry Survey | 21
0.3
0.10.3
0.3
2.9
17.2
1.6
0.1
0.1
1.7
0.1
0.1
0.20.3
0.5
0.3
0.2
0.1
0.4
0.4
3.0
12.4
1.8
0.80.2
1.5
1.9
0.9
0.1
2.7
2.96.9
3.6
1.1
3.63.1
0.6
11.3
1.6
0.4
0.3
4.0
0.6
0.3
0.7
0.90.9
0.2
0.8
0.5
0.1
1.4
0.1
10.5
16.4
4.0
5.64.8
3.1
4.8
0.8
4.9
9.1
2017201620152014201320122011201020092008200720062005200420032002
Figure 11 | Analysis of disposals made during the year based on proceeds (Rbn)
Trade sale
Share buy-back by portfolio company
Sale to management (Buy-back)
Sale to another private equity fi rm or fi nancial institution
Sale of listed shares and IPO’s
0.81.00.5
0.7
0.80.50.6
0.3
0.3
0.50.30.7
0.5
0.4
1.01.31.6
0.2
0.1
0.1
0.3
3.13.23.4
2.0
0.8
22 | SAVCA 2018 Private Equity Industry Survey
2017201620152014201320122011201020092008200720062005200420032002
Figure 12 | Analysis of number of disposals made during the year based on proceeds*
Trade sale
Share buy-back by portfolio company
Sale to management (Buy-back)
Sale to another private equity fi rm or fi nancial institution
Sale of listed shares and IPO’s
1
2
15
4
9
10
10
3
2
8
7
419
16
640
53
5750
73
51
40
44
44
80
90
86
8578
62
3514
20
1413
10
16
11
11
6
4
24
8
816
16
28
7
14
411
11
6
12
12
5
2
11
6
2818
7
37
4
77
8
5
4
9
4
2
2
1
42
4
69
93
8386
106
87
77
86
62
90
135
108
129133
105
72
* Excludes the Vodacom disposal during 2006, the Venfi n disposal in 2010 and the Pepkor & Premier disposal in 2011.
Exits
SAVCA 2018 Private Equity Industry Survey | 23
Figure 13b | Proceeds and cost of investments exited during 2016 (Rbn)
Figure 13a | Proceeds and cost of investments exited during 2017 (Rbn)
Cost
Proceeds
Trade sale
Total
3.592.20
0.10
0.03
0.05
0.03
0.260.06
12.363.06
5.4016.33
Sale of listed shares and IPO’s
Sale to another private equity fi rm or fi nancial institution
Sale to management (Buy-back)
Share buy-back by portfolio company
Trade sale
Total
0.020.02
0.040.02
6.911.87
0.590.40
2.950.92
10.513.24
Sale of listed shares and IPO’s
Sale to another private equity fi rm or fi nancial institution
Sale to management (Buy-back)
Share buy-back by portfolio company
Figure 14a | Top disposals/exits during 2017
Private equity fund Investee company
Buyer Total enterprise value (Rm)
Interest Sector focus
Rockwood Private Equity (Pty) Ltd
Tsebo Solutions Group
Capital GapPrivate Markets
5 350.00 >25%, <50% Catering and Facilities management
Rockwood Private Equity (Pty) Ltd
Safripol Holdings KAP Industrial Holdings 4 100.00 >25%, <50% Manufacturing
ETHOS Idwala Industrial Holdings
Investec Equity Partners 4 000.00 >25%, <50% Mining and Natural Resources
Evolution I Fund, advised by Inspired Evolution Investment Management (Pty) Ltd
Renewables Cookhouse Wind Farm 1 (Pty) Ltd
Old Mutual Life Assurance 2 318.00 <25% Renewable Energy
ETHOS Universal Industries
RMB Corvest, RMB Ventures, MIC
2 300.00 >50% Manufacturing
Evolution I Fund, advised by Inspired Evolution Investment Management (Pty) Ltd
Kouga Wind Farm Tri-Alpha Fund Managers and GAIA
2 100.00 >35%, <50% Renewable Energy
ETHOS and Sphere Private Equity
Brandcorp The Bidvest Group 1 900.00 >50% General
Evolution I Fund, advised by Inspired Evolution Investment Management (Pty) Ltd
Slimsun (RF) (Pty) Ltd
Tri-Alpha Fund Managers and GAIA
233.00 >35%, <50% Renewable Energy
Private equity fund Investee company
Buyer Total enterprise value (Rm)
Interest Sector focus
Rockwood Private Equity (Pty) Ltd
Tsebo Solutions Group
Wendel Group 5 350.00 >50% Services
ETHOS Kevro Holdings (Pty) Ltd
Ethos Mid Market Fund I, RMB Corvest, RMB Ventures & Management
1 683.00 >50% General/No specifi c focus
Lereko Metier Capital Growth Fund
Astrapak Limited RPC Group 1 400.00 >25% Industrial FMCG
Evolution I Fund, advised by Inspired Evolution Investment Management (Pty) Ltd
Rustmo1 Solar Farm (RF) (Pty) Ltd
Momentous Technologies (backed by Hulisani)
327.30 Renewable Energy
Exeo Capital Fairfi eld Diary Undisclosed/Private 223.00 FMCG
Lereko Metier Capital Growth Fund
EGH Elementum (Pty) Ltd
Assa Abloy 210.00 >75% Industrial Electrical
Lereko Metier Sustainable Capital Fund (LMSC)
AE AMD African Infrastructure Investment Managers, Katiso Renewable Energy
55.00 15% - 20% Renewable Energy
24 | SAVCA 2018 Private Equity Industry Survey
Exits
Figure 14b | Top disposals/exits during 2016
Over the years, Imbewu Capital Partners has partnered with a diverse range of successful companies, delivering above the market internal rate of returns. As a credible, Black owned private equity company, we have invested, structured and raised funds for MBO’s and LBO’s, and strategic BEE transactions in partnership with management and shareholders. We also have a strong reputation for managing complex equity transactions and consortiums.
Choose Imbewu Capital Partners as your investment partner and let’s plant the seed for growth… together.
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53324/PT
26 | SAVCA 2018 Private Equity Industry Survey
Raising the Roof – Fundraising Activity
Raising the Roof – Fundraising ActivityThe sector’s resilience features once again, demonstrating the industry’s capability to accumulate fundraising against the backdrop of challenging macro-economic and political developments. What’s more, according to the data collected, half of funds raised stemmed from non-South African sources:
A cyclical downturn in fundraising activity was likely exacerbated by the challenging economic environment, which saw total funds raised fall by 27.3% in 2017. Of the R7.5 billion raised, R3.7 billion (49.9%) stemmed from South African sources, with the bulk of the funds ear-marked for late-stage investments (81.2%).
• Pension and Endowment Funds were the source of 12% of all third-party funds raised during 2017 (2016: 40.7%). Governments, aid agencies and DFIs accounted for 44.2% in 2017 (2016: 20.9%) and insurance companies/institutions made up 2.6% of funds raised in 2017 (2016: 18.8%).
• Of the cumulative funds not yet returned to investors, South Africa is the main source of funds raised (50%), ahead of Europe (28.8%) and the rest of Africa (5.5%).
SAVCA 2018 Private Equity Industry Survey | 27
Fundraising Activity
20172016
South Africa
Pan-Africa
Figure 16 | Third-party funds raised during 2017, analysed by investment destination (Rbn)
7.5
10.35.74.6
3.64.0
0.50.61.1
2.22.22.22.2 0.3
3.33.6
0.2 0.7
1.5
7.0
1.4
11.1 11.1
26.0
3.2
6.1
11.3 11.8
27.5
10.2
7.5
0.21.11.3
14.514.5
0.211.211.4
0.74.24.9
0.115.315.4
0.89.9
10.7
2.18.5
10.6
1.42.23.6
Late stage
Early stage
Figure 15 | Third-party funds raised during 2017, analysed by fund stage (Rbn)
20172016201520142013201220112010200920082007200620052004200320022001
28 | SAVCA 2018 Private Equity Industry Survey
SAVCA 2018 Private Equity Industry Survey | 29
Fundraising Activity
Figure 17b | Source of third-party funds raised during 2016 (Rbn)
Figure 17a | Source of third-party funds raised during 2017 (Rbn)
Non South African source
South African source
Banks
Corporate
Government, aid agencies and DFIs
Insurance companies/institutions
Pension and endowment funds
Private equity fund of funds
Private individuals
0.261.67
1.77
0.05
0.000.00
0.000.46
4.13
0.38
0.640.34
0.000.57
0.00
0.89
0.20
2.80
0.01
0.050.00
0.270.38
0.53
0.370.89
0.330.81Banks
Corporate
Government, aid agencies and DFIs
Insurance companies/institutions
Pension and endowment funds
Private equity fund of funds
Private individuals
32 | SAVCA 2018 Private Equity Industry Survey
Fundraising Activity
Figure 18b | Geographical sources of third-party funds raised during 2016 (% of total)
Other or unspecifi ed
Rest of Africa
Rest of Europe
South Africa
UK
United States
Other or unspecifi ed
Rest of Africa
Rest of Europe
South Africa
UK
United States
Figure 18a | Geographical sources of third-party funds raised during 2017 (% of total)
30 | SAVCA 2018 Private Equity Industry Survey
5.4%
3.0%
8.7%
73.4%
1.0%
8.5%
0.0%
8.3%
41.6%
49.9%
0.1%
0.1%
32 | SAVCA 2018 Private Equity Industry Survey
SAVCA 2018 Private Equity Industry Survey | 31
Fundraising Activity
Figure 19 | Emerging markets private equity fundraising totals by select markets (US$bn)
India
China
Brazil
Russia
South Africa
2016 201720152014201320122011201020092008
17.80.2
11.81.1
10.00.8
9.84.1
10.31.6
11.42.8
21.67.2
8.62.5
6.90.5
14.52.9
3.8
3.2
4.22.1
1.2
2.6
2.6
3.2
2.3
7.3
0.3
0.6
0.6
0.3
0.1
0.2
0.6
0.6
1.9
0.2
0.2
0.5
1.1
0.7
1.5
0.4
1.1
17.3
23.1
15.2
16.5
14.2
18.5
32.4
15.9
10.3
26.4
The chart above uses EMPEA data from Russia, India, China and Brazil, with South African data collated from the survey.
Review of Funds Under Management
32 | SAVCA 2018 Private Equity Industry Survey
Review of Funds Under ManagementFunds under management (FUM) is the total amount of funds available to fund managers for future investments plus the amount of funds already invested (at cost) and not yet exited from.
Southern Africa’s private equity industry recorded R158.6 billion in funds under management at the end of 2017 (showcasing resilience in uncertain times), marking a compound annual growth rate of 9.4% since the fi rst edition of the SAVCA Private Equity Industry Survey which was published in 1999. In 2017, 77.3% (R122.7 billion) of funds under management were unrealised investments, with the remaining R25.9 billion classifi ed as undrawn commitments.
• Total FUM by Captives – Financial Services increased by R3.5 billion in 2017.
• The Captives – Government category recorded R28.2 billion under management in 2017, unchanged from 2016.
• FUM by Independents decreased by R19.5 billion, from R108 billion at 31 December 2016 to R88.4 billion at 31 December 2017.
• Total undrawn commitments at 31 December 2017 reached R35.9 billion (2016: R58.2 billion), of which R32.5 billion (2016: R54.9 billion) refl ects the undrawn commitments of independent fund managers.
• Private equity fund managers predominantly have a generalist mandate, with some 65% of the FUM at 31 December 2017 in the Generalist category (2016: 61%).
SAVCA 2018 Private Equity Industry Survey | 33
34 | SAVCA 2018 Private Equity Industry Survey
Figure 20b | Composition of total FUM in 2016 (% of total)
Figure 20a | Composition of total FUM in 2017 (% of total)
Independents
Captives – Financial Services
Captives – Government
Captives – Other
Independents
Captives – Financial Services
Captives – Government
Captives – Other
Funds Under Management
62.9%
18.1%
16.4%
2.6%
55.7%
21.9%
17.8%
4.6%
SAVCA 2018 Private Equity Industry Survey | 35
Figure 21 | Composition of total FUM (Rbn)
Captives – Financial Services
Investment Holding Company
Captives – Government
Captives – Other
Independants
88.4
108.0
97.590.5
59.0
58.757.654.848.353.7
42.9
24.5
13.914.215.212.013.3
7.3
4.4
3.28.9
11.4
9.410.312.35.310.5
6.4
6.2
7.77.88.710.510.3
28.2
28.2
26.618.3
19.0
17.624.021.112.114.0
12.3
10.1
7.05.85.26.27.1
34.7
31.2
31.232.6
30.3
27.621.724.039.731.2
24.7
18.4
13.911.910.28.35.2
158.6
171.8
158.5150.3
7.3127.0
0.7114.0
0.9114.5
2.0114.2
105.4109.4
86.3
59.2
42.539.739.337.035.9
20172016201520142013201220112010200920082007200620052004200320022001
36 | SAVCA 2018 Private Equity Industry Survey
Figure 22b | Composition of total FUM at 31 December 2016 by focus of the fund (% of total)
Figure 22a | Composition of total FUM at 31 December 2017 by focus of the fund (% of total)
Agri and Agri processing 1.7%
Energy and related 4.0%
7.4%
61.1%
1.3%
8.7%
0.1%
0.4%
9.8%
5.5%
Financial Services
General
Healthcare
Infrastructure
Manufacturing
ICT
Other
Real Estate
Agri and Agri processing 2.9%
Energy and related 2.5%
0.3%
64.9%
0.1%
21.9%
1.7%
0.3%
0.2%
5.2%
Financial Services
General
Healthcare
Infrastructure
Manufacturing
ICT
Other
Real Estate
Funds Under Management
SAVCA 2018 Private Equity Industry Survey | 37
20172016201520142013201220112010200920082007200620052004200320022001
Unrealised investments
Undrawn commitments
Figure 23 | Total FUM, split by undrawn commitments and amounts invested
122.7108.7
78.3
54.7
25.5
109.6
83.968.8
25.9
80.7
113.6
87.7
70.4
26.5
33.9
29.028.2
35.9
58.2
48.941.6
39.3
33.330.635.935.040.6
31.6
25.3
16.013.813.87.97.7
158.6
171.8
158.5150.3
127.0
114.0114.5114.2105.4109.4
86.3
59.2
42.539.739.336.935.9
38 | SAVCA 2018 Private Equity Industry Survey
Unrealised investments
Undrawn commitments
Figure 24a | Total FUM in 2017, by type and split by undrawn commitments and amounts invested (Rbn)
Captives – Other
Captives – Government
Captives – Financial Services
Independents
3.90.54.4
26.929.7
53.1
1.328.2
1.531.2
54.9
108.0
108.0
Captives – Other
Captives – Government
Captives – Financial Services
Independents
6.31.07.3
28.132.4
56.0
0.128.22.3
34.7
32.488.4
Figure 24b | Total FUM in 2016, by type and split by undrawn commitments and amounts invested (Rbn)
Funds Under Management
SAVCA 2018 Private Equity Industry Survey | 39
20172016201520142013201220112010200920082007200620052004200320022001
Undrawn Commitments South Africa
Unrealised Investments
Undrawn Commitments Pan Africa + Rest of Africa
Figure 25 | Total FUM at year end, split by amounts invested and geographical undrawn commitments (Rbn)
122.7
113.5
109.6108.7
87.7
80.783.978.3
54.7
25.9
70.4
33.9
25.5
68.8
26.529.128.2
7.7 7.9 13.8 13.8 16.0
25.3
31.6
25.0 20.015.5 15.0
17.718.2 17.2
13.4 15.417.9
23.515.8
16.924.7
22.326.6
33.724.6
20.4158.6
171.8
158.5150.3
127.0
114.0114.5114.2105.4109.3
86.3
59.2
42.539.739.337.035.9
15.5
40 | SAVCA 2018 Private Equity Industry Survey
2016 201720152014201320122011201020092008
Figure 26 | Classifi cation of undrawn commitments by stage of investments (Rbn)
58.2
35.9
48.9
41.639.3
33.130.4
35.4
40.5
35.0
Late stage
Early stage
50.8
1.140.5
35.5
28.125.0
0.435.0
1.933.1
3.736.8
0.548.4
32.5
7.4
3.8
5.05.4
3.4
Funds Under Management
SAVCA 2018 Private Equity Industry Survey | 41
Figure 27 | Composition of undrawn commitments by type of fund manager (Rbn)
Captives – Other
Independents
Captives – Government
Captives – Financial Services
2016 201720152014201320122011201020092008
54.9
32.5
43.2
35.130.9
26.023.1
23.523.2
28.01.0
0.5
0.2
1.71.8
1.81.7
2.20.6
8.00.1
1.3
0.3
0.1
0.1
2.12.3
1.5
5.2
4.86.6
5.35.5
9.611.2
2.435.9
58.2
48.9
41.639.3
33.130.4
35.435.0
40.5
42 | SAVCA 2018 Private Equity Industry Survey
Agri and Agri processing
Energy and related
Banks, fi nancial services and insurance
General
Healthcare
Infrastructure
Manufacturing
Other
Mezzanine
Mining and Resources
Real Estate
2016 201720152014201320122011201020092008
1.40.40.1
0.7
23.7
0.3
6.00.3
6.8
4.5
2.2
4.5
2.7
18.30.2
12.7
14.912.3
15.9
12.8
22.0
27.4
33.7
27.1
0.1
12.3
0.18.5
0.4
0.7
0.6
3.7
1.2
7.3
0.4
10.7
2.1
1.3
1.5
1.5
0.6 2.0
25.7
21.021.1
33.8
20.1
25.5
34.0
41.6
47.235.9
Figure 28 | Composition of later stage, independent undrawn commitments by focus of the fund (Rbn)
Funds Under Management
SAVCA 2018 Private Equity Industry Survey | 43
Figure 29b | Composition of FUM in 2016 by BEE level of fund manager
Figure 29a | Composition of FUM in 2017 by BEE level of fund manager
Level 1 6.7%
Level 2 37.6%
5.7%
8.5%
1.2%
0.0%
2.2%
0.2%
37.9%
Level 3
Level 4
Level 5
Level 6
Level 7
Level 8
Not disclosed or non-compliant
Level 1 2.4%
Level 2 9.0%
8.3%
26.6%
0.0%
13.5%
0.2%
0.0%
40.0%
Level 3
Level 4
Level 5
Level 6
Level 7
Level 8
Not disclosed or non-compliant
44 | SAVCA 2018 Private Equity Industry Survey
Funds Under ManagementComparison to the global market
• Although the South African private equity industry as a whole is relatively small in comparison to more developed economies, it is still well-established and signifi cant in the regional market.
• Using Emerging Markets Private Equity Association (EMPEA) information, together with survey data for South Africa, South Africa’s investment activity as a percentage of GDP for 2017 stands at 0.7% (2016: 0.4%).
Figure 30 | Global private equity capital penetration (as a % of GDP)
2017
2016
United Kingdom
United States
Israel
South Africa
Poland
South Korea
India
Japan
China
Sub-Saharan Africa
Brazil
Indonesia
Nigeria
Mexico
Turkey
MENA**
Russia
2.781.68
1.691.63
0.84
0.700.40
0.450.12
0.250.35
0.310.29
0.110.20
0.070.18
0.150.12
0.120.11
0.150.07
0.150.06
0.110.05
0.01
0.4
0.01
0.1
0.000.02
2.47
* Middle East and North Africa Source: EMPEA, 2018. Industry Statistics Year-end 2017.
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46 | SAVCA 2018 Private Equity Industry Survey
Reaffi rming Transformation
SAVCA 2018 Private Equity Industry Survey | 47
Figure 31a | Investments by BBBEE recognition level in 2017 (excluding Captives - Government)
Level 1 5.5%
Level 2 8.5%
17.8%
5.2%
0.0%
16.7%
0.0%
0.0%
46.3%
Level 3
Level 4
Level 5
Level 6
Level 7
Level 8
Not disclosed or non-compliant
Figure 31b | Investments by BBBEE recognition level in 2016 (excluding Captives - Government)
Level 1 7.0%
Level 2 25.5%
2.0%
10.3%
10.4%
3.6%
4.5%
1.6%
35.1%
Level 3
Level 4
Level 5
Level 6
Level 7
Level 8
Not disclosed or non-compliant
Reaffi rming Transformation BEE participation in investments is fundamental to the growth and sustainability of the South African economy, and remains a signifi cant and vital portion of private equity activity in South Africa.
In 2017, 36.9% of investments made were in businesses with ratings levels 1 to 4 of the Department of Trade and Industry (the dti) BEE codes. These fi gures are in line with the general ratings for South African companies.
48 | SAVCA 2018 Private Equity Industry Survey
Resilient Performance
SAVCA 2018 Private Equity Industry Survey | 49
Resilient PerformanceRisCura (a global, independent provider of professional investment services) in conjunction with SAVCA, produce a quarterly South African Private Equity Performance Report, which tracks the performance of a representative sample of South Africa’s private equity funds. The latest reported private equity returns over different time periods are as follows:
Figure 32a | Returns over different time periods (Rands)
Times money
Time Period Pooled IRR Realised Unrealised Total
10 year 11.6% 1.0 0.6 1.5
5 year 13.1% 0.7 0.6 1.4
3 year 10.9% 0.5 0.7 1.2
Figure 32b | Listed equity comparison (ZAR)
Compound annual growth rate (CAGR)
Year Pooled IRR ALSI TRI* FINDI TRI* SWIX TRI*
10 year 11.6% 10.7% 15.8% 11.7%
5 year 13.1% 11.9% 16.9% 12.8%
3 year 10.9% 9.3% 10.9% 9.4%
Private equity’s performance, relative to listed markets, remained steady in a very volatile market in 2017.
The overriding principle of the International Private Equity and Venture Capital Valuation (IPEV) Guidelines is to show a fair valuation of investments to the investor. These guidelines were released during 2005 and adopted by the majority of global private equity associations, including SAVCA. This methodology is used as the basis for measuring the performance of private equity funds.
*Listed index returns are before fees.
50 | SAVCA 2018 Private Equity Industry Survey
Representing the Sector: Private Equity Investment Professionals
SAVCA 2018 Private Equity Industry Survey | 51
Representing the Sector: Private Equity Investment ProfessionalsThe heartbeat of the industry is its people. Looking at 2017:
• At 31 December 2017, Black professionals accounted for 29.9% of the total of all professionals (2016: 30.3%), Coloured professionals 6.2% (2016: 3.8%), Indian professionals 14.8% (2016: 12.7%) and White professionals 47.4% (2016: 53.2%).
• At 31 December 2017, 21.8% of all professionals were female (2016: 13.3%).
Figure 33a | Distribution of professionals 2017
Black Coloured Indian White Undisclosed Total
Male 23.0% 5.0% 11.2% 37.8% 1.2% 78.2%
Female 6.9% 1.2% 3.6% 9.6% 0.5% 21.8%
Total 29.9% 6.2% 14.8% 47.4% 1.7% 100.0%
Figure 33b | Distribution of professionals 2016
Black Coloured Indian White Undisclosed Total
Male 23.7% 3.4% 11.4% 48.2% 0.0% 86.7%
Female 6.5% 0.5% 1.3% 5.0% 0.0% 13.3%
Total 30.3% 3.8% 12.7% 53.2% 0.0% 100.0%
52 | SAVCA 2018 Private Equity Industry Survey
Recap: Data Tables
SAVCA 2018 Private Equity Industry Survey | 53
Year ended 31 December 2016
Total funds under
management at year end
Undrawn commitments
at year end
Fund raising activity during
the year
Investment activity during
the year
Funds returned to investors
during the year
R millions R millions R millions R millions R millions
Early stage funds
- Independents 20 577.63 7 349.96 7 039.57 1 593.70 5 497.27
- Captives (Financial Services) 0.00 0.00 0.00 0.00 0.00
- Captives (Government) 216.61 0.00 0.00 1.66 0.00
- Captives (Other) 23 727.40 93.00 0.00 330.50 0.00
44 521.64 7 442.96 7 039.57 1 925.86 5 497.27
Later stage funds
- Independents 87 425.53 47 533.93 2 293.77 6 409.29 9 395.28
- Captives (Financial Services) 31 168.44 1 509.98 931.22 4 011.78 2 565.08
- Captives (Government) 4 518.45 1 214.25 0.00 298.96 438.82
- Captives (Other) 4 205.95 543.91 0.00 1 377.67 303.60
127 318.37 50 802.06 3 225.00 12 097.71 12 702.78
171 840.01 58 245.02 10 264.57 14 023.56 18 200.05
Year ended 31 December 2017
Total funds under
management at year end
Undrawn commitments
at year end
Fund raising activity during
the year
Investment activity during
the year
Funds returned to investors
during the year
R millions R millions R millions R millions R millions
Early stage funds
- Independents 11 201.00 3 410.40 1 404.00 1 128.34 237.24
- Captives (Financial Services) 0.00 0.00 0.00 0.00 0.00
- Captives (Government) 0.00 0.00 0.00 0.00 0.00
- Captives (Other) 0.00 0.00 0.00 0.00 0.00
11 201.00 3 410.40 1 404.00 1 128.34 237.24
Later stage funds
- Independents 77 240.67 29 066.60 5 601.07 8 580.75 10 394.71
- Captives (Financial Services) 34 704.55 2 334.47 150.06 4 028.42 6 704.05
- Captives (Government) 28 193.70 93.50 0.00 15 521.37 78.07
- Captives (Other) 7 305.08 1 036.70 362.00 2 025.51 140.98
147 444.00 32 531.27 6 113.13 30 156.05 17 317.81
158 645.00 35 941.68 7 517.13 31 284.39 17 555.05
Recap: Data Tables
54 | SAVCA 2018 Private Equity Industry Survey
Respondents
SAVCA 2018 Private Equity Industry Survey | 55
Name Min investment Max investment ContactContact telephone
4Di Capital R0.5 million R49 million Samantha Sperring +27 21 659 2000
Abraaj Group US$10 million US$100 million Matteo Gaspari +27 11 884 2066
Acorn Private Equity R50 million R500 million Pierre Malan +27 21 852 2887
Actis Africa US$80 million US$250 million Tarryn Butcher +27 11 778 5919
African Infrastructure Investment Managers
R150 million R900 million Olivia Miller +27 21 670 1238
Agile R20 million R150 million Bulumko Ndema +27 11 217 3300
Ata Capital R0 R125 million Maredi Mampuru +27 11 321 1629
Bopa Moruo R25 million R80 million Nthime Khoele +27 11 784 1740
Business Partners Limited R10 million R50 million Nicole Badenhorst +27 11 713 6628
Capitalworks Equity Partners R100 million R500 million Andrew Hart +27 11 301 3000
Collins Private Equity R0 R40 million Bruce Chelius +27 31 536 8004
Convergence Partners Management R5 million No maximum Yolande Tabo +27 11 550 5320
Edge Capital R2 million R20 million Rich Chapman +27 21 671 2658
Exeo Capital R65 million R260 million Niel du Toit +27 79 983 0031
Harith General Partners $US10 million US$44 million Nakedi Kgapane +27 11 384 4019
Heritage Capital R30 million R100 million Kedibone Imathiu +27 10 597 7708
Horizon Equity Partners R15 million R50 million Shelley Lotz +27 11 502 6940
IJG Capital R8 million R40 million Jakob de Klerk +26 46 138 3517
Investec Asset Management Guernsey
R150 million R700 million Peter Baird +27 82 0713 184
Respondents
56 | SAVCA 2018 Private Equity Industry Survey
Respondents
Name Min investment Max investment ContactContact telephone
Jacobs Capital R5 million R50 million Marc Thom +27 31 573 2558
Kleoss Capital R50 million R150 million Melisa Musindo +27 11 666 1660
Metier Private Equity R50 million R750 million Wendy Diamond +27 11 268 4020
Medu Capital R50 million R200 million Leone Boshoff +27 11 268 9140
Nedbank Private Equity R50 million R300 million Tshifhiwa Magondo +27 11 294 0043
Novare Equity Partners R69 million R274 million Elzaan Kotze +27 21 914 7730
Pembani Remgro Infrastructure Managers
R0 No maximum Stella Mpofu +27 11 290 0238
Phatisa Group R100 million R400 million Vincent Destieu +27 11 463 1920
RMB Corvest R50 million R750 million Cornelie Read +27 11 380 8319
RMB Ventures R50 million R1 billion Khuthadzo Masindi +27 11 2821039
Sanari Capital R50 million R150 million Moushmi Patel +27 82 722 4013
Summit Private Equity R100 million R500 million Langa Madonko +27 82 486 1928
Venture Partners Botswana/ Temo Capital
P20 million P70 million Daudi Mtonga +26 46 122 0069
Trinitas Private Equity R40 million R150 million Gayle Burbaitzky +27 11 994 9707
Sampada Private Equity R10 million R80 million Kgomotso Serwalo / Nokuthula Mthombothi
+27 11 318 0171
Vantage Capital Fund Managers R50 million R350 million Siyanda Khumalo +27 11 530 9100
Your Insight intoAfrican AssetManagement
www.africaglobalfunds.com
Research Methodology
58 | SAVCA 2018 Private Equity Industry Survey
Research MethodologyThe surveyThe Southern African Venture Capital and Private Equity Association Private Equity (SAVCA) survey is based on responses received from private equity participants in the Southern African market. The values reported represent the equity component of transactions only. We do note that there are a small number of industry participants that elect not to participate.
Data integrity/privacy policy
All data submitted is kept strictly confi dential, with only the Deloitte staff who oversee and compile the survey results authorised with access to the raw data. SAVCA, the SAVCA sub-committee members who review the report, SAVCA directors, and other Deloitte directors and staff have no access to the underlying survey data. SAVCA, other Deloitte directors and staff, as well as the public have access only to the aggregated data, which is published in the SAVCA Private Equity Industry Survey report. Once Deloitte has completed the research on SAVCA’s behalf, all data is placed in custodianship with a legal fi rm.
About SAVCA
The Southern African Venture Capital and Private Equity Association (SAVCA) is the industry body and public policy advocate for private equity and venture capital in Southern Africa. SAVCA represents about R165 billion in assets under management through 170 members that form part of the private equity and venture capital ecosystem. SAVCA promotes the Southern Africa venture capital and private equity asset classes on a range of matters affecting the industry, providing relevant and insightful research, offering training on private equity and creating meaningful networking opportunities for industry players.
For more information visit www.savca.co.za
About our research partner
Deloitte provides audit, consulting, fi nancial advisory, risk advisory, tax and related services to public and private clients spanning multiple industries. Deloitte serves four out of fi ve Fortune Global 500® companies through a globally connected network of member fi rms in more than 150 countries and territories bringing world-class capabilities, insights, and high-quality service to address clients’ most complex business challenges. Our purpose, through every one of our approximate 264 000 professionals is to make an impact that matters.
For more information on our Deloitte Africa presence and service offerings, please visit:https://www2.deloitte.com/za/en/pages/deloitte-africa/articles/about-deloitte-africa.html.
SAVCA 2018 Private Equity Industry Survey | 59
62 | SAVCA 2018 Private Equity Industry Survey
Research MethodologyThe principal source of information for this survey was the survey questionnaire. Further sources include the SAVCA 2017 Members’ Directory, discussions with private equity industry participants, and public information on private equity funds that include international surveys.
The survey questionnaire was developed by SAVCA, with research support provided by Deloitte.
The guidelines for participation in this survey are as follows:
Participants must:
• Include investments if they are made in Southern Africa, regardless from where they are managed;
• Have as their principal business the management of funds (third-party and/or proprietary capital) for the provision of capital (equity or quasi-equity) primarily to unlisted companies;
• Employ professionals dedicated to the management of the capital and the investments made using the capital (and capital from other providers); and
• Aim to generate returns mainly through medium to long-term returns on the sale of investments and/or social devel opment returns.
Questionnaires were e-mailed to 141 (2016:110) funds. Of these, 47 (2016: 61), representing 80 funds (2016: 96), completed the questionnaire.
Other empirical data have been obtained from various sources, including:
• EMPEA Industry Statistics Q1 2018 – Industry Statistics for Emerging Markets Private Capital
• RisCura-SAVCA South African Private Equity Performance Report – Quarter ended: 31 December 2017
• Statistics South Africa
SAVCA reviews the document prior to its public release. SAVCA does not have access to any of the individually completed questionnaires submitted to Deloitte or any other information not presented in this publication.
While care has been taken in the compilation of the survey results, SAVCA and Deloitte do not guarantee the reliability of its sources nor of the results presented. Any liability is disclaimed, including incidental or consequential damage arising from errors or omissions in this report.
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SAVCA 2018 Private Equity Industry Survey | 63SAVCA 2018 Private Equity Industry Survey | 61
Review of Terms
BEE Black Economic Empowerment
BEE, as defi ned in the Financial Sector Charter, means the economic empowerment of all black people, including women, workers, youth, people with disabilities and people living in rural areas, through diverse but integrated socio-economic strategies.
Buy-out Leveraged and/or management buy-out or buy-in.
Captive funds Funds making investments mainly on behalf of a parent or group, typically an insurance company, bank or institutional asset manager, often from an indeterminate pool of money.
Development capital Funding for growth and expansion of a company.
DFIs Developmental Finance Institutions.
Early stage funds Funds focused on seed capital, start-up and early-stage investments.
EMPEA Emerging Markets Private Equity Association.
Follow-on investments
Investments into companies where at least one round of funding has already been made.
FUM Funds under management.
GDP Gross Domestic Product.
Independent fund Those private equity companies, managers or funds raising and disbursing capital which has been sourced mainly from third party investors.
IPO Initial public offering: when a company’s equity is offered and listed on a formal stock exchange.
IRR Internal Rate of Return.
Late stage funds Funds focused on buyout, replacement capital and growth capital.
Mezzanine debt Debt which ranks behind senior secured debt but ahead of trade credit and shareholders’ funds in terms of security. Mezzanine debt is often used in higher leveraged transactions to maximise funding availability from a company’s own balance sheet. It may provide for equity-like features such as attached share purchase warrants or participation in cash-fl ow.
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Review of Terms
SAVCA 2018 Private Equity Industry Survey | 63
Pooled IRR The pooled internal rate of return (IRR) aggregates or “pools” all cash flows and end-period net asset values to calculate a money-weighted return.
Replacement capital Funding for the purchase of existing shares in a company from other shareholders, whether individuals, other venture-backers or the public through the stock market. Unlike venture and development capital, the proceeds of replacement capital transactions are generally paid to the previous owners of the entity.
SAVCA The Southern African Venture Capital and Private Equity Association.
Seed capital Funding for research, evaluation and development of a concept or business before the business starts trading.
Start-up and early-stage funding
Funding for new companies being set up or for the development of those which have been in business for a short time.
Total funding Total funds raised by all providers of capital during a transaction. This could include the purchase consideration, funds to pay advisors fees, or funds required for immediate working capital requirements. This could be in the form of equity, shareholder loans, senior, mezzanine and junior debt and working capital facilities.
Trade sale Sale of a business to an industry third party.
UK United Kingdom.
Undrawn commitment Capital committed to a private equity fund, but not yet drawn down for investment purposes.
US United States of America.
Venture capital Seed capital or capital for start-up and early stage.
t +27 11 958 2019 | e [email protected] | www.aucourant.co.za | level 2 B-BBEE Contributor
Defi ne who you are...
Save the Date SAVCA 2019 Conference
SAVCA presents the fi rst joint Private Equity and Venture Capital in Southern Africa Conference
27-28 February 2019 – Private Equity
1 March 2019 – Venture Capital
Spier Wine Farm | Stellenbosch | South Africa
www.savca.co.za | +27 (0)11 268 0041 | [email protected] | @savca_news
A N A L T E R N A T I V E A D V A N T A G E
W W W . E T H O S . C O . Z AA n A u t h o r i s e d F i n a n c i a l S e r v i c e s P r o v i d e r .
F o r 3 4 y e a r s , E t h o s h a s a n u n p a r a l l e l e d t r a c k r e c o r d o f s u s t a i n a b l e , s u p e r i o r i n v e s t m e n t r e t u r n s .
S p e c i a l i s i n g i n p r i v a t e e q u i t y a n d c r e d i t i n v e s t m e n t s , E t h o s w a s i n s t r u m e n t a l i n e s t a b l i s h i n g t h e a s s e t c l a s s i n t h e s u b - S a h a r a n r e g i o n , w i t h a p a r t i c u l a r f o c u s o n t h e S o u t h A f r i c a n m a r k e t .
T h e f i r m ’ s u n i q u e u n d e r s t a n d i n g o f t h e s e r e g i o n s s e t s i t a p a r t a s a r e l i a b l e a n d c o m m i t t e d p a r t n e r i n s u c c e s s f u l i n v e s t m e n t a c r o s s e c o n o m i c a n d p o l i t i c a l c y c l e s .