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Black Economic Empowerment and Private Equity in South Africa

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Pan African Infrastructure Development Fund ('PAIDF') raises $625m. ... (Source: Business Day September 2008) Private Equity and the JSE. Waco Scaffolding deal ... – PowerPoint PPT presentation

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Title: Black Economic Empowerment and Private Equity in South Africa


1
Black Economic Empowerment and Private Equity in
South Africa
  • Creating Opportunities For Investment

2
Presenter
Black Economic Empowerment Private Equity in
South Africa
  • Mr Frencel Gillion
  • Chief Investment Officer (CIO)
  • National Empowerment Fund

3
NEF Mandate
4
BEE A Brief History
5
World Stock Exchange Rankings and the JSE
Source World Federation of Exchanges
Highlights for the first half-year July 2008
6
Key Markets in Africa
Source Standard Poors Global Markets
7
Mergers Acquisitions Activity in South Africa
514
502
371
415
314
284
269
242
236
261
168
165
150
224
293
143
231
137
52
43
30
110
84
13
12
8
Source Ernst Young Survey 2007
8
Mergers Acquisitions Activity in South Africa
Source Ernst young Survey 2007
9
Mergers Acquisitions Activity in South Africa
  • 2007 was a record year in deal flow 81
    increase in value
  • Presence of emerging markets and companies. ICBC
    purchase of 20 in Standard Bank
  • South Africa seen as a footprint into Africa
  • Resources and Financial services dominate MA
    Activity
  • Retail Sector transaction informed by growing SA
    middle class
  • Growing role and appetite of international
    Private Equity players Edcon / Bain
  • Mega deals include 3 BEE transactions valued at
    R33.5bn

9
10
BEE and Mergers and Acquisition Activity
  • BEE transactions continue to be a major driver of
    MA activity
  • Publication of Codes of Good Practice in 2007
    serves as catalalist
  • BEE has become a business imperative
  • Focus on Broad Based BEE and not only ownership

Source Ernst Young 2007 Survey
  • BEE companies increasingly acquiring controlling
    stakes versus passive
  • Consolidation amongst BEE groups is an emerging
    trend

11
South African Private Equity Industry
Funds Under Management
12
South African Private Equity Industry
  • South Africa experienced 46 increase in Funds
    under Management
  • Funds under Management constitute 2.8 of the GDP
  • South Africas Private Equity Industry is larger
    than global average relative to GDP
  • Industry is dominated by independent Managers
    (50) and Financial Services captives (30)
  • Independents have increased their total Funds
    under management by 74 between 2007 and 2006

13
South Africa Private Equity Industry Investment
Focus
  • Opportunities across sectors
  • Resources remains dominant
  • Retail Sector informed by Edcon / Bain Capital
    deal

14
Private Equity Fund Raising Activity
15
Private Equity Fund Raising Activity
  • 2006 and 2007 record years
  • 64 of funds raised were from US Sources
  • 73 of funds raised during 2007 were from Private
    Equity Fund of Funds
  • US now the largest source of accumulated Funds
    raised to date (34), SA (32), UK (27)

16
Private Equity Investment Activity
  • Reported private equity instruments increased by
    270 from 2006 to 2007
  • Private equity constitute nearly 5 of total MA
  • SA private equity investment activity achieved
    11th place in 2007 global rankings

17
BEE and Private Equity
  • BEE is critical both in terms of black Private
    Equity Managers and deal flow
  • At least 55 of funds under management is black
    empowered / influenced
  • R11.6bn (42) of the total 2007 Private Equity
    deals included a BEE component
  • This represents a 147 increase from 2006

18
BEE A Business Imperative
19
Africa Attracting Private Equity Interest
  • Pan African Infrastructure Development Fund
    (PAIDF) raises 625m.
  • Africa needs to boost investment in
    infrastructure to help sustain a growth rate of
    more than 6 Finance Minster Trevor Manuel at
    launch of PAIDF. (Source Bloomberg June 2007)
  • SA Investment firm Pamodzi Investment Holdings
    launches 1.3bn resources Fund. (Source Reuters
    August 2007)
  • Africa is reserve rich with a large growing
    consumer market. The Sectors that will continue
    to benefit are these exposed to domestic
    infrastructural spend companies exposed to
    consumer markets including Financial Services
    Peter Schmid, Head of Actis Africa. (Source
    Business Day September 2008)

20
Private Equity and the JSE
  • Private Equity buyers are competing with stock
    exchanges for quality investments
  • Waco Scaffolding deal
  • Delisted from JSE in 2000 via a purchase of
    R1.9bn leading Private Equity Firm Ethos
  • Proposed relisting in 2005 on JSE did not
    materialise
  • Ethos eventually sold to Investment Private
    Equity Firm in a R5,4bn deal
  • Recent delisting driven by Private Equity Firms
  • Edcon / Bain Capital R27,1bn
  • Alexander Forbes / Actis R8,9bn
  • Consol / Brait R6,6bn
  • Primedia / Brait R7,3bn
  • JSE also serves as a potential exit
  • Kelly Group / Brait

21
Conclusion
  • BEE deal flow expected to be maintained at
    current levels for at least 10 years
  • SA BEE research firm stated that BEE transaction
    deals should be at least R162bn per annum to
    reach 25.1 target by 2017
  • Empowerdex estimates that 58 of JSE listed
    companies have black ownership below 25
  • BEE Finance currently provided by
  • SA Major Banks (R55bn in 2007)
  • DFIs such as NEF, IDC, PIC
  • Limited off shore funding
  • Private Equity is likely to be supported by slow
    down in Corporate valuations on JSE.
  • BEE Funding and Private Equity Investment
    opportunities exist!
  • High yield mezzanine instruments to Finance BEE
  • Leveraged debt including high yield Bonds to
    Finance LBOs
  • Investing as Limited Partners in Private Equity
    Funds
  • Investing in private equity directly or in
    syndication with local Private Equity Managers.

22

We thank you for your attention.
www.nefcorp.co.za
22
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