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Survey Finds Healthy Private Equity Sector in South Africa

by Robert Lee, Tax-News.com, London

08 May 2006


The latest KPMG and SAVCA Venture Capital and Private Equity Industry Performance Survey shows that the private equity industry in South Africa is set to flourish, with R15.6 billion at the end of 2005 in undrawn commitments available for future investments.

According to the research, South Africa’s private equity industry now boasts total funds under management of R43.9 billion, an increase of 10% since the end of 2004.

In other findings drawn from the survey:

Financial Services’ funds under management increased by 18% from R11.9 billion at the end of 2004 to R14 billion at the end of 2005. Their funds under management have increased by a compound annual growth rate of 28% during the last four years.

Government’s funds under management increased by 33% from R5.8 billion at the end of 2004 to R7.7 billion at the end of 2005.

Funds raised of R2.2 billion during 2005 following on from the R2.3 billion raised in 2004, and R4.9 billion raised during 2003.

Investment spending by private equity firms was down 24% from R6.5 billion during 2004 to R4.9 billion during 2005.

R4.4 billion was returned to investors during 2005 following on from R4.5 billion returned during 2004.

Fund managers, excluding Captives – Government, that are black owned, empowered or influenced companies had R27.3 billion of funds under management at 31 December 2005, an increase of 46% from the R18.7 billion at the end of 2004.

Investments in entities that are black owned or empowered were up 78% from R1.8 billion during 2004 to R3.3 billion during 2005.

Private equity provides equity capital to enterprises that are generally not quoted on a public stock exchange.

Private equity can be used to develop new products and technologies, to expand working capital, to make new acquisitions or to strengthen a company’s balance sheet. It can also resolve ownership and management issues, succession in a family owned business or the buy-out or buy-in of a business by experienced managers.

A comprehensive report in our Intelligence Report series examining tax-sheltering arrangements for investors, including Forest Finance, Film Finance, Venture Capital, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report5.asp

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