Regional breakdown: Southern Africa

South Africa faces headwinds, but GPs still have an appetite for the country, ranking it the third-most attractive on the continent.

South Africa continues to make an outsized contribution to private equity investment activity in Southern Africa. The country accounted for 77 percent of deal volume in the region last year, according to data from the African Private Equity and Venture Capital Association.

However, the country has been facing considerable headwinds, including an economic contraction of 7 percent in 2020, as well as recent unrest and a third covid wave. The proportion of LPs in AVCA’s annual African Private Equity Industry Survey who view South Africa as an attractive country (ranking it in seventh place on the continent) and Southern Africa as an attractive region for investment (26 percent) has been declining in recent years.

Yet GPs have a more optimistic view – 49 percent say Southern Africa is an attractive region for investment and they rank South Africa as the third most-attractive country in Africa.

In July’s World Economic Outlook, the International Monetary Fund revised South Africa’s economic growth estimate for 2021 from 3.1 percent to 4 percent “following a strong positive surprise in the first quarter”.

“The size and maturity of the market attracts significant investor interest, and for that reason South Africa will continue to be the largest player with the strongest growth potential in the Southern African Development Community region,” says Alexia Alexandropoulou, research manager at AVCA.

“That said, recent political unrest and the South Africa’s struggle to contain the covid-19 pandemic position other countries in the region, such as Mauritius and Zambia, to attract more investor interest in 2021.” As the focus on diversity, equity and inclusion gathers pace across private markets, Southern Africa’s private equity industry is working to increase the number of women-owned and managed funds. In April, the Southern African Venture Capital and Private Equity Association partnered with MiDA Advisors to launch the Women Empowerment Mentoring and Incubation Fund Manager Programme, which is supported by the United States Agency for International Development.

In a launch statement, SAVCA CEO Tanya van Lill noted that just 9 percent of fund managers that are members of SAVCA are women-owned. According to the association, the programme has the potential to unlock $20 million of investment funding for the region.