Southern African venture capital sector sees substantial growth

Tanya van Lill

The Southern African Venture Capital and Private Equity Association (SAVCA), the industry body and public policy advocate for private equity and venture capital in the region, has released the SAVCA 2017 Venture Capital (VC) Survey. The fourth edition of the report reveals a significant increase in capital employed in the VC asset class, up from R372 million in 2015 to R872 million in 2016, representing an increase of 134%.

– Overall, at the end of 2016: R3.5 billion was invested in 461 deals
– Investments were managed by 53 different fund managers, up from 36 in 2015
– New fund managers, not active prior to 2015, invested R312 million
– 14 exits took place, compared to 8 in 2015

SAVCA, along with research partner Venture Solutions (a sub-Saharan innovation management and commercialisation consultancy) surveyed 56 fund managers, basing results on concluded deals and transactions.

“The survey points towards a substantial strengthening in the position and impact of investors in VC deals”, says SAVCA CEO, Tanya van Lill. “This is based on the growth in both the number of VC investors and the number of reported deals concluded over the period 2014 to 2016 in comparison to the prior three-year period.”

In terms of investment activity, the report showed that:

– ICT comprised 27% of deals concluded in 2016, while Manufacturing and Business Products & Services comprised 13% and 12% respectively
– Manufacturing was the largest sector by number of deals in 2016
– There was a total of 8 Fintech specific deals by the end of 2016 compared to 4 in 2015. Most of these took place in the Western Cape
– Energy investment decreased (in terms of value of all deals recorded) from a high of 6% in 2012 to 1% in 2016

Adds van Lill, “Angel investment in Southern Africa is an important source of capital for early stage businesses. The survey shows that angel activity is emerging from its fringe status to present attractive investment opportunities for high-net worth individuals. Approximately, R44 million was invested in 2016, with the top sectors attracting angel investment comprising Business Products & Services (12%); Software (11%); Consumer Products & Services (9%); and eCommerce (8%). Going forward, this type of investment could be strengthened through enhanced networking and entrepreneurial business opportunities.”

“Despite harsh trading and volatile market conditions, overall the venture capital sector has shown resilience and exceptional growth,” comments Stephan Lamprecht, Founder of Venture Solutions.

“The magnitude of the SA VC asset class (R3.5 billion across 461 deals) is an indicator that it has huge potential to be a driver of significant economic growth and should attract the attention of policy makers. The introduction of the Section 12J tax incentive has already had a tangible impact in increasing the availability of risk capital for investment in smaller entrepreneur-driven businesses.”

For full report click here

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