/ 6 May 2009

SA private equity remains active despite crisis

Private equity investors are continuing to invest in South Africa despite a global credit crunch, with the manufacturing and construction sectors favoured, a key industry player said on Tuesday.

Sanlam Private Equity’s deputy chief executive, Cora Fernandez, said there were more investors interested in unlisted mid-size and small companies.

”There’s a lot of demand for capital in the mid-cap space and there’s a lot of activity for new deals on the smaller side,” Fernandez told Reuters after a media briefing on private equity.

”We’re seeing a lot of activity in the manufacturing space, the construction space and in the technology-driven business.”

Developed world private equity has been hurt by the drying up of credit because many private equity buyouts were previously leverage based. Most emerging private equity deals, however, are cash-based.

A survey by the Emerging Markets Private Equity Association last month showed 78% of institutional investors in global emerging markets were still intending to commit to additional deals over the next five years, with 49% intending to do so within the next two years.

South Africa’s private equity sector contributes 2,8% to the country’s gross domestic product, although it only accounts for 1% of global private equity activity, according to data released by the Southern African Venture Capital and Private Equity Association at the briefing.

Sanlam Private Equity, a unit of financial services firm Sanlam, is one of the biggest private equity players in South Africa with about 54 investments in its portfolio.

Fernandez said she expected private equity activity in Africa’s biggest economy to pick up further in the first quarter of next year. – Reuters