Author: Southern African Venture Capital and Private Equity Association (SAVCA)
In Southern Africa, the impact and value created through private equity extends far beyond just that of a specific deal’s allocated investment, it is also about positively influencing businesses, the communities connected to these businesses, and their broader economic environment. This is according to the recently launched SAVCA 2017 Case Study Compendium (see here) which highlights how private equity investment is resulting in more sustainable business practices and positive community outcomes.
The publication – comprising of sixteen case studies showcasing successful private equity and venture capital partnerships between fund managers and the businesses in which they invest – underscores the long-term nature of these collaborations and confirms the value add offered to both start-up and established businesses.
Tanya van Lill, CEO of the Southern African Venture Capital and Private Equity Association (SAVCA), says that these case studies confirm that partnerships of this nature represent a great deal more than just monetary investment. “Private equity plays a vital role in corporate governance, job creation, employment equity initiatives, skills programmes, and social upliftment, thus rendering the portfolio company more resilient, more efficient, with healthier governance structures and with an expanded footprint.”
Technology is a recurring theme from the SAVCA 2017 Case Study Compendium, adds van Lill. “Some of these companies have introduced systems to manage their operations more efficiently, while others have introduced new technology to the market. An example of this is seen in the Emfuleni Voerkrale case study, where the sheep feedlot company was backed by IDF Managers in 2015 to acquire a state-of-the-art electronic scale to weigh animals. This allows management to easily access and analyse data on each animal, which has enabled faster and more efficient decision-making.”
She refers to the case study of Tsebo Solutions Group (Tsebo) as an example of this, highlighting the instrumental role taken by investor Rockwood Private Equity in guiding the adoption of best practice global corporate governance. “Through the transformation of Tsebo’s corporate governance risk management and control framework to reflect global best practices, Rockwood supported Tsebo in successfully competing for the African component of global marketplace bids, which it had not done before. To date, Tsebo has been successful in five out of six bids with leading global multinational brands.”
While these case studies leave little doubt as to how fruitful partnerships between fund managers and portfolio companies can aid in driving economic growth, van Lill points out that this is very much dependant on securing the right investor as a partner. “Identifying the right business in which to invest, as well as the right partner with whom to invest, is vital to success. Key to this decision, from the perspective of a portfolio company, is whether a potential partner can bring tangible value to the business.”
The SAVCA 2017 Case Study Compendium also showcases 14 other successful cases of fruitful partnerships between private equity fund managers and portfolio companies.
More than 200 African private equity deals were reported over the past year – of which approximately 65% were in South Africa, while SAVCA’s most recent VC survey reported 168 new venture capital deals from 2011 to 2015. Van Lill says that while the private equity and venture capital community is growing, there remains significant scope for further partnerships with businesses for growth, expansion and value creation in Southern Africa, and into Africa.
“SAVCA seeks to continue its efforts in advocating the asset class to investors, institutional and other, in order to create greater awareness of the benefits of private equity for business and the economy,” concludes van Lill.
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, representing about R170 billion in assets under management, through 160 members. SAVCA promotes Southern Africa private equity by engaging with regulators and legislators on a range of matters affecting the industry, providing relevant and insightful research on aspects of the industry, offering training on private equity and creating meaningful networking opportunities for industry players.
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(Image: Rosemary and Mochele Noge of Emfuleni Voerkrale)