Private Investment in South Africa

Overview of Private Investment in South Africa


Over the last decade, the South African private equity industry has grown significantly, with over R100 bn under management in 2009. The industry occupies a specialized niche with a significant role in the overall South African economy.
 

• BEE remains a major source of activity in the industry. Investments in entities that are black owned, empowered or influenced is up 38.1% from R11.8 billion during 2007 to R16.3 billion during 2008

•  Given the significant amounts of funds raised from 2005 to 2008, some R29.2 billion is available for further investment by the industry. Around 80% of these available funds are managed by fund managers that are at least black influenced or managed by Governmental funds. This represents a significant pool of capital for funding businesses and continuing the vital socio-economic BEE process

• Investors want continued exposure to the positive absolute returns and significant portfolio diversification benefits that investment in private equity funds in South Africa offers

The scale of activity in the industry continues to outperform most of the major international economies, which bodes well for South Africa’s Government stated growth targets, as local and international research confirms that private equity investment is a key driver of entrepreneurial activity and growth in any economy. Looking ahead, prospects for South African private equity are difficult to determine but it appears that:
 

• Private equity fund managers will become more internally focused, spending the majority of their time on portfolio company management, focusing on what they have invested into and driving value from better operational performance in their portfolio companies

• The time of mega-deals has passed, for now. While risk is declining, investors may still be unwilling to commit a significant proportion of their capital to fewer businesses. This may indicate that the greatest opportunity for our industry in the year ahead could lie in the mid-market and particularly the infrastructure sector

  Source: http://www.savca.co.za/downloads/PrivateEquitySurvey2009.pdf
 

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South Africa Venture Capital Association (SAVCA)

The main objectives of the Association are to:

• Promote the venture capital and private equity profession in Southern Africa

• Represent the profession at the national and international level

• Develop and stimulate professional and transactional venture capital and private equity investments throughout Southern Africa

• Stimulate the expansion of venture capital and private equity throughout Southern Africa

• Collect information from markets and from members

• Circulate information to members and the outside world

• Stimulate and maintain contacts within the membership

• Contribute to the management development of investors and investees

• Provide the relevant authorities with proposals for improvement in the corporate, fiscal and legal environment for venture capital and private equity in Southern Africa

• Maintain ethical and professional standards

Source: http://www.savca.co.za/
 

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Doing Business 2010 - South Africa

Doing Business 2010: Reforming Through Difficult Times is the seventh in a series of annual reports investigating regulations that enhance business activity and those that constrain it. Doing Business presents quantitative indicators on business regulations and the protection of property rights that can be compared across 183 economies, from Afghanistan to Zimbabwe, over time.

A set of regulations affecting 10 stages of a business’s life are measured: starting a business, dealing with construction permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business. Data in Doing Business 2010: Reforming Through Difficult Times are current as of June 1, 2009. The indicators are used to analyze economic outcomes and identify what reforms have worked, where, and why.

Below is an excerpt from the South Africa profile in Doing Business 2010, as well as a link to the full guide: http://doingbusiness.org/Documents/CountryProfiles/ZAF.pdf
 

Starting a Business

Procedures (number) 6

Time (days) 22

Cost (% of income per capita) 5.9

Min. capital (% of income per capita) 0.0

Dealing with Construction Permits

Procedures (number) 17

Time (days) 174

Cost (% of income per capita) 24.5

Employing Workers

Difficulty of hiring index (0-100) 56

Rigidity of hours index (0-100) 20

Difficulty of redundancy index (0-10) 30

Rigidity of employment index (0-100) 35

Redundancy costs (weeks of salary) 24

Registering Property

Procedures (number) 6

Time (days) 24

Cost (% of property value) 8.7

Getting Credit

Strength of legal rights index (0-10) 9

Depth of credit information index (0-6) 6

Public registry coverage (% of adults) 0.0

Private bureau coverage (% of adults) 54.7

Protecting Investors

Extent of disclosure index (0-10) 8

Extent of director liability index (0-10) 8

Ease of shareholder suits index (0-10) 8

Strength of investor protection index (0-10) 8.0

Paying Taxes

Payments (number per year) 9

Time (hours per year) 200

Profit tax (%) 24.5

Labor tax and contributions (%) 2.4

Other taxes (%) 3.3

Total tax rate (% profit) 30.2

Trading Across Borders

Documents to export (number) 8

Time to export (days) 30

Cost to export (US$ per container) 1531

Documents to import (number) 9

Time to import (days) 35

Cost to import (US$ per container) 1807

Enforcing

Contracts Procedures (number) 30

Time (days) 600

Cost (% of claim) 33.2

Closing a Business

Recovery rate (cents on the dollar) 32.2

Time (years) 2.0

Cost (% of estate) 18