Survey shows improvement in private equity performance in Southern Africa

by MMC
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Leading EY management consulting firm and private capital partner Africa Graham Stokoé On September 7, he discussed key findings from the Southern African Venture Capital and Private Equity Association’s annual private equity (PE) industry survey and highlighted the improving performance of private equity firms of Southern Africa in 2022, compared to global trends.

“49 PE companies participated in this survey. EY has been running this survey for three years and it is pleasing to see that the number of participants has increased compared to last year’s 40 participants. It’s a great representation of the industry and what’s going on. This allowed us to obtain excellent data and increase the credibility of the results,” he said at the launch of the PE Equity Survey 2023, held in Johannesburg.

The information in the survey covers events up to December 31 of last year. The survey covers the analysis of strategic priorities of the industry. This includes environmental, social and governance (ESG) and impact investing, talent, large-scale black economic empowerment, fundraising, investment and divestment activities, value creation and funds under management.

The survey includes comparisons with global PE trends and the level of detail provided by respondents varies across survey topics and questions.

“This is the first time in our three-year survey that we have encouraged industry participants to share sufficient information about their portfolio companies. This includes information on revenues, employees and earnings before interest, taxes and depreciation. This allows us to see whether this industry stimulates value creation and therefore economic growth.

With the global recession and geopolitical concerns seen as the biggest industry concerns by Southern African and global private equity firms, Stokoe highlighted that the timing of the survey could have a slight impact on the results.

Views from Southern African PE companies were collected in March and April 2022 and those from global PE companies in November and December 2022.

“Some of these macroeconomic changes in interest rates and inflation have only emerged in recent months, not in the survey conducted in March and April of last year.

“In some broader areas like cybersecurity and other global concerns like geopolitics, one should keep in mind that, according to the global survey, global PE companies are much larger than the average company size of southern African EPs. This will cause some differences in the results.


Geopolitical concerns aside, the survey found that 57% of private equity firms have specific impact investing mandates, up from 45% in 2021.

Among respondents whose funds do not have an impact investment mandate, 79% are likely to consider such mandates in the next five years, down from 86% in 2021.

The study also indicates that the strategic priorities of Southern African private equity firms, apart from asset growth, are ESG initiatives and talent management.

“This is a theme that has become massively globalized. It’s been a theme in a number of Southern African MOUs for many years, but the importance of this theme is growing globally, to attract capital and, you know, it’s showing significant impact. Investors want financial returns, but also want to enjoy the full impact of their investments,” Stokoe said.

He also highlighted that the survey results indicate that the private equity industry is experiencing positive changes in terms of transformation.

Fifty-nine percent of private equity firms have more than 50% black ownership without applying modified flows.

Additionally, 28% of private equity firms have more than 30% Black female executives and 60% of private equity firms have more than 50% Black female executives.

Stokoe also noted that Southern African private equity firms have continued to focus on hiring more people from diverse racial and ethnic backgrounds, both at the front and back office levels.

He added that in terms of private equity firms with over 30% representation of underrepresented people from diverse racial and ethnic backgrounds, Southern African firms with over 30% representation have moved from ‘around 60% to 70% in 2021 to 80% last year.

Global companies with representation of more than 30%, however, grew by about 10% to 20%.

“We are much more diversified in Southern Africa than in global private equity firms. This is a trend that has given a lot of momentum to the growth of processing, as Southern Africa has also improved in this area. In the meantime, black management has decreased slightly, so there are more transformations in terms of ownership, but there are ups and downs in various areas.”

He also highlighted that the survey results indicated that the number of companies with more than 30% women on boards increased from 28% in 2021 to 42% last year. This follows a decrease from 2020 to 2021.

The survey results also indicated that PE fundraising in Southern Africa saw a 21% increase in 2022 compared to 2021.

This brought fundraising activities closer to pre-pandemic levels in 2019, which was contrary to global PE fundraising trends, which declined by 13%.

“In terms of rands and dollars it doesn’t look as good, but southern Africa is dominated by small private equity firms so that plays a role.”

He also highlighted that 51% of funds raised came from investors outside Southern Africa, with European and UK investors accounting for 77% of investments outside Southern Africa.

“For the first time, last year we received more capital from non-South African investors than from South African investors. Despite all of Southern Africa’s challenges, investors from outside the region are putting their money into Southern African private equity firms.

The study results also showed that contrary to global trends – where private equity exits were moderate in 2022 – Southern African private equity firms saw a sharp increase in both the value of exit proceeds (exceeding the R20 billion level for the first time since 2011) and number of exits (the highest in the last four years).

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