Southern Africa's private equity firms found it a lot easier to raise money last year than to spend it. The business runs on a loop: raise money from pension funds and other big investors, buy stakes in companies, grow them, then sell and hand the gains back.
That is the picture in the annual industry survey from the Southern African Venture Capital and Private Equity Association, SAVCA, released on Tuesday. Firms raised R22.0 billion last year, their second-best total in a decade, while private equity fundraising around the world fell 17%. The survey is voluntary, so it covers the firms that took part rather than the whole industry.
Pension money comes home
Most of the money was local. South African investors put up 55% of it, their biggest share in four years, and the country's pension and endowment funds were the largest disclosed source, at R4.4 billion, up from R1.6 billion. Bloomberg's reading of the report is that money raised for South Africa itself almost tripled.
"Particularly encouraging is the increased allocation by pension and endowment funds, reflecting continued investor confidence in the asset class and the opportunities available across the region," SAVCA chief executive Anusha Naidu wrote.
Fewer deals, better exits
Spending it was slower. Investment fell by about a sixth, to R22.4 billion, and the number of deals dropped by a similar margin, to 186. Firms still hold R45.4 billion of dry powder, money investors have promised but firms have not yet drawn, which is about twice what they invested last year.
Exits, the sales that return the money, went better. They paid out R20.3 billion, about a fifth more than the year before, and sales to other companies were back as the most common route. Where firms disclosed the numbers, they got back 1.6 times what they had put in.
The firms are cheerful about what comes next. Asked about the next three years, 88% of them expect the money they manage to grow, up from 79% last year, and the investors who back them are more bullish on fundraising than the firms themselves.
Technology is the fastest-rising worry on the list, and it is now the sector those investors most want to back. Only 7% of local firms spend more than a quarter of their own IT budgets on AI, against 48% of firms globally.
