The ebbs and flows of the South African private equity industry are in direct correlation to the evolution of South Africa’s politics and policies. History has played a central role in defining the pace and the players of the country’s PE industry, possibly more so than in any other emerging market.
PE was flourishing in the United States and Europe long before it came to South Africa. Oddly enough, the foreign disinvestment of South Africa by the U.S. and Europe—as a response to apartheid—would open the market to local banks that swiftly took advantage of lucrative deals.
However, it was only after the country became a democracy and economic sanctions were repealed that the South African PE market began to rise.
According to the 2015 Southern African Venture Capital and Private Equity Association Report, in the 1990’s, with the new political landscape, international investors became major players in South Africa. This was a game-changer. New opportunities for disenfranchised populations would develop.
But not all change came without growing pains. Tax legislation and extensive regulation did not always make sense. Tweaks and extensive alterations were made after it became clear that growth would be stunted.
South Africa was not impervious to the crash of 2008; it was felt around the world. However, because that crash hit the United States and Europe first there was time to minimize the impact on the South African economy.
While South Africa is rich with natural resources, the present PE industry is diversified, with endless opportunity. The country’s infrastructure needs are considerable. Foreign investors have government support and are welcomed to work towards closing the gap. Construction is on the rise; a record number of South Africans are now entering the housing market.
A young, rapidly growing middle class has greater spending power than ever before. Retail demands are met with the construction of shopping malls that have a wide variety of stores and restaurants. Entrepreneurs are taking advantage of new technologies and seeking additional funding from domestic and international sources.
“The people and businesses of South Africa seem eager to enter into partnerships with companies in the U.K. and North America, ”notes Alfred Zaccagnino, President of Samarian Group of Companies, a private equity firm with an expanding international portfolio. “Their neighborhoods and malls should have the same brand names that are consistently appearing in other places around the world. Samarian Group is eager to participate alongside common brands in an evolving South Africa.”