Private equity firm Ethos Capital expects the latest market optimism and brighter economic prospects to see SA’s wealthy individuals spending big in the hunt for good deals in the private equity market, and for foreign capital to return to the market.
Anthonie de Beer, the CEO of Ethos Capital, said the stage had been set for the sector to enjoy inflows and a ramp up in deal making. The suspension of load-shedding since March and the establishment of a government of national unity after the May elections had sparked renewed optimism for economic reform and growth, she said.
“International equity that used to be in private equity ran scared in the past 10 years. We had low growth, currency volatility and the big pools of capital that used to come here from North America and Europe ran dry. That meant the funding for the private equity market was mostly local, which made the pool smaller.
“To give you a sense, 70% of our money used to come from outside SA and that dried up in a big way. When things start turning — as they are now — you start to see opportunistic investors coming back to the market, looking for best returns,” she said.
What we are seeing at the moment is wealthy individuals looking for opportunities in a big way. A lot of them had taken money offshore and are now looking for good deals in SA, which are plenty.
“What we are seeing at the moment is wealthy individuals looking for opportunities in a big way. A lot of them had taken money offshore and are now looking for good deals in SA, which are plenty. The banks are also looking at the local market.”
Ethos is invested in companies such as TymeBank, which recently clocked up 10-million clients; glassmaker Consol; food producer Premier; media group Primedia; and fintech outfit Crossfin.
Ethos invests directly into funds or co-investments which give the company largely indirect exposure to a diversified portfolio of unlisted private equity-type investments.
The company’s board recently decided to unbundle the group’s ordinary Brait shares.
“This has not only resulted in a significant distribution to shareholders but will reduce the impact of share price volatility and remove the double discount on the Brait ordinary shares, which have negatively affected our Net Asset Value Per share over the past few years,” Ethos chair Yvonne Stillhart said in her letter to shareholders before company’s AGM next month.
“While the board is committed to executing the distribution of the exit proceeds as guided by our shareholders, we will continue to engage our shareholders on strategic options around any exit proceeds and will remain agile should market conditions or shareholder preferences change.”
In the year ended June, the value of the group’s listed portfolio slumped 52%, primarily due to significant reductions in the share prices of Brait (73%) and MTN Zakhele Futhi (27%).
The unlisted portfolio achieved a gross return of 4%, reflecting a mixed performance from the portfolio.
Still, there were notable increases in the values of Synerlytic and Crossfin after successful sales and strong performances by Gammatek, Twinsaver and TymeBank.
The company’s fintech investment, Optasia, continued to perform strongly with higher operating profitability but the valuation was hit by currency devaluations, especially in Nigeria.
In September Naspers’ e-commerce business in SA, Takealot, sold Superbalist to a consortium of retail and private equity investors led by Blank Canvas Capital.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.