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SAVCA’s Fortnightly Newsletter Keeping You Up to Date

SAVCA Newsletter
October 2014

Dear members and friends  
 

A sturdy performance for South African private equity

 
The latest RisCura-SAVCA South African Private Equity Performance Report confirms that South African private equity continues its run of strong performance. Over the ten years to June 2014, private equity funds yielded an annualised rate of return of 18.6% net of fees. This strong track record, alongside a continued market recovery since 2008, supports a fresh wave of fundraising by local managers, many of whom have launched new funds over the past year. For investors with long-term time horizons, private equity investment in this market remains attractive.
 
We were thrilled with the turnout at last week’s SAVCA-GIBS Advanced Programme in Private Equity. With over 90 delegates and overwhelmingly positive feedback, this course is sure to become a fixture on the annual SAVCA calendar.
 
Also well-supported was SiMODiSA’s first showcase event, Start Up South Africa. Part-sponsored by SAVCA, this Cape Town-based event featured discussions centred on how South Africa can create a healthy ecosystem to support fledging, high-potential businesses. We build on the theme in this week’s Q&A, which features two seasoned venture capital experts.
 
Looking forward to next year, preparations are well underway for the 2015 SAVCA Private Equity Conference. We have had a flurry of delegate registrations and strong support from sponsors. Please visit www.savca2015.co.za to read more and secure your early-bird discount. If you would like to add your firm name to the growing list of conference sponsors, please contact the SAVCA office.
 
We look forward to interacting with SAVCA members once again at the upcoming SAVCA AGM to be held at Webber Wentzel at 5pm on 22 October 2014.
 
Please keep us updated with your news and visit the SAVCA website to find new research, industry updates and upcoming events.

Regards
 
Erika van der Merwe
CEO: SAVCA

 
Research

 
Team stability and succession planning are of vital importance to private equity firms. With this in mind, we have partnered with EY to produce a research report entitled “Valuing a GP”. The report reflects the EY Transaction Advisory Services team’s analysis of how to best determine the value of a private equity firm. This report will also be the focus of a roundtable discussion exclusive to SAVCA Full Members, to be held on the afternoon of 6 November 2014. Please contact the SAVCA office for more details.

 

Feature: Venture Capital


A few weeks ago, SAVCA and Knife Capital hosted the first SAVCA Venture Capital Foundation Course. Brett Commaille, CEO of AngelHub Ventures, and Stephan Lamprecht from Venture Solutions shared their thoughts on the local industry.

Venture capital is an often misunderstood. What misperceptions would you like to debunk?

BC: The biggest myth, and one that some entrepreneurs hang on to, is that venture capitalists don’t invest or take any risks. There is a belief that we’re pencil pushers and spreadsheet jockeys. This is simply not true; we do invest and often with our own hard-earned cash. We are just very particular on what we will invest in. Businesses are not easy to build and this means that we need to be sure that the business and the entrepreneur have what it takes to succeed. Typically, the best kinds of investments are into businesses which potentially could make it on their own. Venture capital funding helps these companies accelerate quickly and build market share.

SL: There are many myths about venture capital – it’s an enigmatic and misunderstood investment class. People tend to associate venture capital with American movies and Silicon Valley technology investments. Lots of glamour and lots of money to be made. In reality, it’s more about tough decisions and some really hard work.

How does South Africa’s venture capital sector compare with what is found in other parts of the world?

BC: While we are far smaller and younger than the VC in developed markets, our industry has a great deal in common with those in other parts of the world. Having dealt with foreign VC professionals, most recently in Switzerland, it is evident that their practices and challenges are reassuringly close to our own. We have gravitated toward standardised terms and conditions and the investment structures used are fundamentally the same.

SL: The local sector is still very small, as to be expected from an economy of our size. Then again, there are only a handful of countries, such as the US and the UK, where the industry is sizable. For example, a venture capital course or conference in another part of the world would attract a similar attendance as in South Africa. In many respects, South Africa is quite mature and compares favourably with developed markets. A venture capital firm in Europe, for example, would operate in a very similar way to one in South Africa. Our term sheets and contracts would be almost interchangeable.

What would need to change for venture capital investment in South Africa to grow?

BC: The industry needs more recognition and would grow if investors were more aware of the success stories. The industry is still under the radar and this needs to change. We certainly need more positive regulation to incentivise investment into the sector. In other parts of the world, where venture capital investment is incentivised, many more private investors participate in this space and a significant, measurable effect has been seen on several countries’ GDP.

SL: The entire venture capital ecosystem needs to grow to support the industry. We also need to foster a better understanding of what venture capital investment can bring to strong entrepreneurial companies. In general, I believe that the local venture capital industry is too focussed on technology investments. As a developing nation, I believe that there is much scope for great investments to be made in a variety of sectors. There are many great South African companies which could benefit from venture capital investment.

 

SAVCA Events


LP Breakfast (Institutional Investors, Fund of Funds and Regulators only)
Date:        21 October 2014                                                                                                       
Time:       8:00am for an 8:30am start. Event to end by 10:00am.                                              
Venue:     The Saxon Hotel, 36 Saxon Road, Sandhurst, Johannesburg
RSVP:      Booking is essential: The SAVCA Office on events@savca.co.za or +27-11-2680041 

Click here for more information
             
SAVCA AGM (Members only)
Date:        22 October 2014                                                                                                       
Time:       5:00pm-7:00pm
Venue:     Webber Wentzel, 10 Fricker Road, Illovo, Johannesburg
RSVP:      Booking is essential: The SAVCA Office on events@savca.co.za or +27-11-2680041
 Click here for more information

SAVCA Master-Classes in Competition Regulation: Developments in South African competition legislation and regulation and their implications for private equity (CAPE TOWN)
Date:        31 October 2014
Time:        All day
Venue:     Webber Wentzel, 15th Floor, Convention Tower, Heerengracht Street, Foreshore, Cape Town
Cost:        SAVCA members pay R3 500; non-members pay R4 000.
RSVP:      Booking is essential: The SAVCA Office on events@savca.co.za or +27-11-2680041
Click here for further information

Roundtable Discussion on Valuing a GP – hosted by SAVCA and EY Transaction Advisory Services. strictly for SAVCA Full Members only. Please contact events@savca.co.za for more information.
Date:        6 November 2014

SAVCA Annual Conference: LP Masterclass
Date:       12 February 2015
Time:      12:00pm-5:00pm
Venue:    Spier, Stellenbosch
RSVP:     The conference organiser, Karin Diederichs, on karin@soafrica.com or +27-21-4210345
Click here for further information
 
SAVCA Annual Conference: Members Reception
Date:        12 February 2015
Time:       5:00pm-7.30pm
Venue:     Spier, Stellenbosch
RSVP:      The conference organiser, Karin Diederichs, on karin@soafrica.com or +27-21-4210345
Click here for further information
 
SAVCA Annual Conference
Date:       13 February 2015
Time:       All day conference
Venue:     Spier, Stellenbosch
RSVP:     Booking is essential: The conference organiser, Karin Diederichs, on karin@soafrica.com or +27-21-4210345 or +27-83-2709219
 Click here for further information or visit the conference website on www.savca2015.co.za.
 
Keep up to date with all our events and courses by regularly visiting the SAVCA online calendar.

 

Industry Events


Women’s Private Equity Network (WPEN) Summit 2014
Date:        12 November 2014
Venue:      London                                                                                                                                              
The WPEN Summit 2014 presents a unique opportunity for senior level and next generation women to cut across regions, organisations and ‘old guard’ networks in order to develop new relationships and do more business, make valuable business connections, promote their firms and enhance their careers. Over 100 participants are already registered for the event and comprise professional women from the major investment firms, law firms and investment banks as well as company directors and high profile entrepreneurs. SAVCA female members can benefit from an exclusive 15% off the cost of delegate tickets. Please quote VIP code: WPEN2014SAVCA Register your place here

Africa Investment Exchange: Energy  

Date:        24-25 November 2014
Venue:     RSA House, London
AIX: Energy is a two-day investor’s meeting which responds to new paradigms in the African energy sector shaped by new players, innovative financing structures, impact investment strategies and technological innovation. AIX: Energy will focus on channelling private resources into the African power sector – from thermal IPPs to innovative distributed power and renewables solutions – providing a forum for investors to meet with African businesses and policymakers.   
For more information and to register your place here
 
Africa Inbound 2014
Mergermarket will be hosting its annual Africa Inbound forum, once again taking place in London. This year’s event will feature senior management figures from major international corporates who will share their experiences of conducting M&A in Africa. Expert speakers will also review the African deal market and provide in-depth insight in to the future investment pipeline for 2015.                                         
Date:        
25 November 2014
Venue:      The Waldorf Hilton, London 
Click here for a full line-up of speakers or to download the agenda
Register your place here

SuperReturn Africa 2014
Hear from 130+ outstanding speakers in Cape Town this year (the biggest line-up ever) including international LPs, DFIs, local LPs and industry veterans with representatives from: GEPF, PartnerRe Principal Finance, Cook Children's Healthcare System, Standard Bank , State General Reserve Fund Oman, Goldman Sachs, Old Mutual Investment Group, The Carlyle Group, The Wellcome Trust, DEG ,CDC Group, Quilvest Group, Venture Capital Trust Fund, IFC,  Finnfund, Swedfund, Commonfun, Obviam, Hamilton Lane, Kuramo Capital and many more.
Dates:      2 December - 4 December 2014
Venue:     The Westin, Cape Town
• Join 500+ private equity professionals
• Meet 150+ local and international LPs
• Hear from 130+ industry leading speakers
• 30+ countries represented
• 2 pre-conference summits - The West Africa Summit OR The Fundraising Summit
SAVCA members can benefit from an exclusive 20% discount. Please quote VIP code: FKR2356SAVCA2 when registering. Click here for more information or to register online, please
 
Asian Financial Forum | Asia: Sustainable Development in a World of Change
Date:        19-20 January 2015
Venue:      Hong Kong
The Asian Financial Forum (AFF) brings together some of the most influential members of the global financial and business communities each January to discuss developments and trends in the dynamic markets of Asia.
Deal Flow Matchmaking session (20 January 2015)
The forum features a unique deal-sourcing and matchmaking session jointly organized by the Hong Kong Venture Capital and Private Equity Association and the HKTDC. One-on-one meetings are arranged between sources of funds and sources of deals, enabling participants to meet with potential business partners from around the world.
Click here for further information

 

SAVCA in the news
 

Private equity funds deliver sturdy performance – SAVCA I Engineering News     
The second-quarter RisCura–SAVCA South African Private Equity Performance Report, released on Wednesday, showed that, over the ten years to June 2014, private equity funds yielded a yearly internal rate of return of 18.6%.
 
Investors begin with the end in mind I Business Brief
A number of South African-based private equity funds have announced sales of assets from their portfolio of companies, including some big-ticket, high profile exits. Erika van der Merwe, CEO of SAVCA believes that many more such exits are likely over the next two years, as funds follow the natural rhythm of the private equity cycle.
 
SweepSouth sweeps up award at SiMODiSA StartupSA I VentureBurn
Startup South Africa by SiMODiSA saw on-demand cleaning service SweepSouth named the winner of the conference’s Get-Up Start-Up pitch awards last week. SAVCA was one of the main sponsors at Startup South Africa.

 

SAVCA Members in the News


Public Investment Corporation invests R2.5bn in Africa I Southafrica.info
The Public Investment Corporation, a South African government-owned financial services provider, plans to invest R2.5 billion on the African continent during the 2014/15 financial year.

The Abraaj Group invests in leading South African FMCG manufacturer I Press release
The Abraaj Group, a leading investor operating in global growth markets, today announced the acquisition of a majority stake in Liberty Star Consumer Holdings, one of the largest unlisted food and personal care manufacturers in South Africa.

AfDB approves €10 million equity investment in Moringa Private Equity Fund I StarAfrica  
The African Development Bank approved a €10-million equity investment in the African compartment of the Moringa Private Equity Fund. The fund will invest in scalable, replicable agroforestry projects in Sub-Saharan Africa and Latin America.

Africa ripe for taking I East African Business Week                  
Hurley Doddy and Vincent Le Guennou, co-chief executives of Emerging Capital Partners comment on the growing investment interest that Africa holds for the Middle East.

 

Industry News and Insights


Managers wary of  private equity I FT Advisors                                                   
In theory, it should be an ideal time for multi-asset managers to invest in private equity. Yet despite the market upturn in the past five years, relatively few multi-managers deal in this asset class.

Private equity and activist investors: Frenemies in Deal Making I WSJ 
Activist investors may be a thorn in the side of public companies, but to private equity firms they’re both friend and foe. Activists pressuring public companies to spin off subsidiaries or pushing for a sale can create deal opportunities for deal-hungry private equity firms. But sometimes those same shareholders can also become obstacles.

Private equity: bringing in capital I The Africa Report                                                                                  
The emergence of local and national funds, and a greater willingness on the part of African companies to open their equity to outside investors, have created a fresh impetus for private equity investment.
 
In private equity, management’s role, incentives are shifting I Wharton University of Pennsylvania  
This Knowledge@Wharton podcast on private equity looks at the management structures that are working best for portfolio companies and how incentives are changing.

Private equity remains a rarity in African pension portfolios I Financial Times
While global funds in putting the west’s pension money to work in fast-growing Africa, yet outside of South Africa, most African pension funds continue to shun private equity opportunities.
 

Job Opportunities

 
Contact info@savca.co.za to advertise an opening at your firm on our online jobs portal.
 

Advertising with SAVCA

 
SAVCA welcomes the opportunity to work with members and stakeholders in promoting the Southern African private equity and venture capital industry. The organisation constantly seeks creative ways of doing so, including through the marketing member firms’ activities. Should you wish to find out more about various marketing and advertising opportunities with SAVCA, contact the office on info@savca.co.za. Please also drop us a line if you would like to advertise an opening at your firm on our online jobs portal.
 
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Contact us
Telephone: +27 11 268 0041
Email address: info@savca.co.za