South Africa private equity market is drawing the attention of the international investors.
Private equity funds in South Africa are facing difficulties in raising foreign investment. This is primarily due to the perception that South Africa does not require development aid and the apprehension of offshore investors about investing in a country with low growth. According to TechCentral this viewpoint was shared by Samantha Pokroy, CEO of Sanari Capital.
South Africa Private Equity Market fending away international investors
According to Pokroy, South Africa is considered a middle-income country only because of averaging. She pointed out the significant inequality within the society and emphasized the urgent need to address structural inequalities. Pokroy believes that private equity has a significant role to play in this regard due to its influence on the economy and the businesses it invests in.
The International Monetary Fund (IMF) has projected a meager economic expansion of 0.3% for the current year. It also predicts that growth will remain below 2% until at least 2028. This sluggish growth is attributed to record electricity outages and logistical constraints. However, Pokroy argues that investors are missing out on potential growth opportunities by focusing solely on these top-line numbers.
Despite South Africa’s market not being considered a hot market, Pokroy believes there are numerous untapped opportunities that are extremely well priced.
Fundraising and Investment Opportunities
According to the South Africa Venture Capital and Private Equity Association, private equity funds raised R19.6-billion last year, marking a 22% increase from the previous year. However, only 15% of this amount was sourced from foreign corporates and other PE funds.
The Sanari 3S Growth Fund managed to raise R1.25-billion rand from investors including Africa’s largest asset manager, the Public Investment Corp, and Alexforbes Investments, which manages R450-billion in assets. The fund plans to have its final fundraising round by May.
In its first round last year, Sanari received R465-million, which it invested in Edulife Group (a network of private schools), technology company LightWare LiDAR, and biometric verification company Identity.
With this additional funding, Sanari can now make larger deals both domestically and across the continent. It has increased its deal sizes to R50-million to R250-million from a previous cap of R20-million. The fund aims for portfolio returns of at least 25%.
Sanari is already targeting four other investments in sectors ranging from industrial technology, software and application, health care, and another group of schools operating in nine African countries.