Private equity is just getting going in South Africa. The value of funds under management jumped almost a third last year to R56.2bn from R42.5bn in 2005, according to industry body Savca.
The profile of private equity funding has grown in South Africa, even though it remains a tiny piece of the global picture, points out a story in an FT special report. The value of investments as a percentage of GDP is 1.7 per cent, higher than the Asia-Pacific region’s 0.9 per cent and continental Europe’s 1.5 per cent. (The US and UK come in at 2.8 per cent and 2.7 per cent respectively.)
That growth has been enough for private equity in South Africa to attract the kind of unwelcome attention that it has received in the more developed markets. Trade union UNI earlier this year expressed concern at “a wave of private equity buyout activity in their country.”
“As controversy rages over private equity buyout deals in South Africa, Minister of Finance Trevor Manual, said: ‘Am I on a rooftop with a trumpet, inviting them? No, clearly not. You can’t wish them away’,” the UNI release continues.
Shareholders, says the FT’s report, are expressing concern that deals have more to do with management greed, than fixing the company. Last month a proposed R14bn acquisition of Shoprite by Brait Private Equity was scuppered by institutional investors concerned about the price offered and the intention of the chairman to use his preference shares to push the deal through.
One role private equity plays in South Africa is helping boost black ownership of the economy through funding black investors who want to buy equity in a company, or to support the development of black-owned enterprises, says the report. Of the 803 private equity investments last year, 332 had an empowerment aspect to them, up from 287 such deals out of 730 in 2005.