The Fundamental Role of Private Equity

LAGOS (Capital Markets in Africa) – Investments by private equity funds into companies hold great benefits besides the provision of capital. Private equity investments have a considerable impact in terms of productivity, skills development, job creation, and social impact, as it includes the transfer and exchange of know-how, access to a broader network, and not merely the flow of capital. Private equity fund managers play an active role in managing their investments in companies, with the aim of adding maximum value as they and their investors derive a return from the increased value of their investments. 

In South Africa, the private equity industry represents a significant sector within the overall financial services industry and is an attractive asset class within the broader capital markets. As seen across a range of indicators, the profile of the local private equity industry is that of a productive contributor to the development of the South African economy. In addition, private equity facilitates BEE, addresses economic imbalances of the past, promotes entrepreneurial initiatives and positions, South Africa to compete successfully on the global stage.

Private equity is also an important source of Foreign Direct Investment (FDI), both indirectly via the raising of offshore money by local fund managers and also by direct co-investment by foreign investors (which is an investment alongside the private equity fund manager).

An extract from the INTO AFRICA May 2019 Edition: Private Equity: Nurturing Africa. The article is written by Shelley Lotz (Head of Regulatory Affairs: Southern African Venture Capital and Private Equity Association (SAVCA)) and to read the full article, please download by clicking: INTO AFRICA PUBLICATION: MAY 2019 EDITION.