SAVCA Private Equity Conference 2024: Day two round-up
The second day of the 2024 SAVCA Private Equity (PE) Conference kicked off in Cavalli Estate in Somerset West on Wednesday 28th February.
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Just under 500 delegates joined us between the two days of the 2024 SAVCA Private Equity (PE) Conference hosted at Cavalli Estate in Somerset West. The programme for the day, which continued to be built around the theme of “Synergy with Collaboration”, engaged industry stakeholders, panelists and delegates in thought-provoking dialogues around topics such as how to ensure successful exits, sustainability and climate change – as well as SA’s energy transition and funding considerations.
Setting a tone of relentless optimism for the day was MC Lerato Mbele, renowned international broadcaster and speaker, who spoke to the need of the industry to celebrate the small wins. “We need to ensure that, as an essential driver of growth in the South African economy, you remain energised by the small wins and victories. This is particularly important in a sector, where you as the investors, will only see returns in a period of between 5 – 7 years, but are operating in a world of instant gratification, where everyone wants to see results overnight.”
Exits and liquidity – is there a secret sauce?
Honing-in the focus on exits and liquidity was moderator James Westgate, Partner at Bowmans. “Sometimes, when you’re doing exits in South Africa – it feels like you’re having to take punches wherever you go. Hopefully, this panel will help us unpack a technique that we can all implement to ensure a much smoother and more streamlined process.”
Kick-starting the answers to the highly anticipated question of investor expectations and exit strategies was Bame Pule, Founder & CEO at Africa Lighthouse Capital. As Pule asserts: “For the investment committee and for our team, it’s essential that we have multiple exit routes. This helps us to gauge whether the business operates in an industry that is suited to a trade sale, a listing – or sale to a larger private equity firm. In approving any deal, it’s crucial for us to show that there are multiple paths to an exit. Once we do a deal, as part of our portfolio management and engaging with the portfolio company at a board level – there is an ongoing discussion about preparing the company for an eventual exit.”
This includes ensuring that the company is an asset that can be sold in an M&A process or can be put through a listing process. “While everyone may be looking for a short and sweet answer about how to ensure successful exits, the reality is that we need to be thinking of exits as an everyday thing – as opposed to an end result.”
Adding to this conversation was Preshan Govinder, Manager Sales and Business Development at JSE Private Placements: “From our perspective, we haven’t seen a lot of PE-type exits in a while. From what we have seen, the market has been dominated by trade deals. However, this is starting to change – and we believe this is being led by managers that have a listed mandate. An asset that comes to a private equity ecosystem is a very listable asset. This is due to having proper governance in place as well as good management teams.”
Concluding the panel was Dustin Graham, Managing Partner at Benchmark International, who shared concise tips regarding how businesses can prepare themselves for exits: “In our opinion, the process of preparing for exits needs to start much earlier than is currently the case. Technically speaking, you should be preparing for an exit two years before you actually exit. You should also be strongly analysing the deal flow process, and determining if there are other, more practical exit routes that you may have not considered and could prove to be more successful.”
Sustainability and climate change
Next up, audience members heard from a panel lead by Meta Mhlarhi, Co-Founder & Fund Principal at Mahlako Financial Services. This panel focused on sustainability, climate change and impact investing. To start, panel members shared what climate change and impact investing meant to them. As Tanya Goncalves, Head of Investor Relations and Impact at Metier Investment & Advisory Services put it: “For us, impact and responsible investing means investment that aligns with the values of a business. It’s also about getting those financial returns for our investors, but also – intentionally looking for ways to make a positive difference on people and the planet.”
Bolstering this conversation was Martine Botha, Global Financial Services ESG Executive and Senior Manager at KPMG. In her opinion, “When it comes sustainability, it’s imperative to take a long-term view. That’s why I believe that private equity is so important in this space, because we can really take a refined approach to exactly how we are investing, and who we are investing into. For everyone who works in PE, and is in the room today, we need to work together to direct capital to the areas that are important in the long-term. This makes PE such an exciting sector to be working in, as we can make a fundamental difference to how the world will look in years to come, by directing capital and focus to key areas such as ESG and impact investing, which focuses on yielding positive results not only for our investors – but also for the environment.” Botha also elaborated on the importance of really getting to grips with ESG reporting. “We need to understand why we are doing this reporting. It can’t just be a box-ticking exercise, instead – we should be taking key learnings from this reporting to understand what can and should we be doing differently?”
When asked about what the future of ESG and impact investing looks like, as well as the implication for fund managers - Shayne Krige, Director and Head of Investment Funds Practice at Werksmans Attorneys shared his perspective: “We need to move away from looking at ESG and impact investing as a regulatory requirement or as part of our investors’ demands. South Africans are fantastic at integrating these kinds of strategies into their operations. As such, it’s essential that we continue to do this because it is the right thing to do – not to give us better reputations or to gain access to investors or funding.”
Key insights from a sporting legend
Sharing his thoughts on what perfect synergy looks like and the importance of passion was South African Rugby Veteran, Duane Vermeulen. “If your passion is your career, everything else will follow with enthusiasm.” He also spoke to the importance of changing our mindsets when it comes to various obstacles and challenges that we may face in business, and in our personal lives. “Challenges need to be viewed as opportunities to learn, grow and improve. This can help us to thrive not only in our individual lives, but to make significant contributions to the team environments in which we operate.” When unpacking the concept of synergy in a team – Vermeulen shared his take that moments of perfect synergy, regardless of the profession you work in, are characterised by seamless collaboration, mutual understanding and a shared commitment to achieve a common goal.
Drawing this concept of synergy closer to home, Vermeulen clearly outlined how this manifests in the world and profession of rugby. “For example, synergy presents itself as the trust and unity in our team, the perfect pass, in our post-match celebratory rituals, in our community engagement and outreach – as well as the leadership roles that each one of us are called on to assume. We all play a fundamental role in rallying the team together and ensuring that we are focused on what we want to achieve – and have a firm understanding of how we are going to achieve it.” These lessons can be carried across to all industries, but especially to the PE sector, where synergy and collaboration are critical requirement to achieve success.
Concluding this keynote address, Lydia Shadrach-Razzino, Partner at Baker McKenzie lead a hearty Q&A between Vermeulen and the audience members on the day, with attendees sharing some of their top-of-mind questions for the sporting giant.
Honouring an industry giant – André Roux
A key milestone of the day’s agenda was the presentation of the Lifetime Achievement Award to one of the PE industry’s most influential leaders - André Roux. Presenting this prestigious award to Roux was Samantha Pokroy, CEO at Sanari Capital and Vuyo Ntoi, SAVCA’s Board Chairperson. As Ntoi put it: “By honouring industry giants such as André, we safeguard our industry’s rich history, and ensure that the key lessons we have learnt under his kind of leadership, continue to govern us for years to come. Veterans also play a pivotal role in fostering continuity and mentorship, they pass down their knowledge to the next generation, enabling a seamless transfer of skills, insights and strengths. They help us to uphold ethical standards, as their ethical conduct sets the bar for all of us. By recognising their contributions, we reinforce the importance of ethical practices in our environment.”
Sharing her thanks and congratulations, Pokroy elaborated: “I am exceptionally privileged to be a part of presenting this award to André. Notwithstanding health issues, he has still chosen to be here with us today. This speaks to his resilience and conviction.” Pokroy reflected on the support that he had provided her company, initially as a mentor, then subsequently as a Chairman. The audience was then treated to an emotional video which showcased the extent of Andre’s impact on the industry, and the pioneering investments he led at Ethos, which were instrumental in unlocking local capital and Foreign Direct Investment in local businesses.
Concluding the bestowing of this award, Tshepiso Kobile, CEO at SAVCA reflected on the importance of leading purposeful organisations, and announced the official launch of the forthcoming Annual GP Awards. “The details of these awards and the nominations process will be shared in due course. However – the objective will be to celebrate the deep and meaningful impact that our members are having on the industry.” In celebration of André’s love for the arts and zest for life, the winners of the Annual GP Awards will get to keep a roving statue award for one-year, which Roux has generously donated to SAVCA.
Energy transition and infrastructure funding
One of the final panels of the day was facilitated by Dr Roy Haveman, Principal: Financial Sector Policy and Public Economics at Krutham and unpacked the topic of energy transition and infrastructure funding. Setting the scene Nomvuyo Guma, Chief Director: Microeconomic Policy at Operation Vulindlela shared her insights into the current regulatory framework. “Our role at Operation Vulindlela is to accelerate the implementation of structural reforms. In terms of the broader energy sector reform – there are some things that are happening under the auspices of NICOM (National Energy Crisis Committee). And then, there is a broader reform that is currently underway. In terms of what’s happening in the regulatory space – specifically with reference to the amendment to the Energy Regulation Act, the amendment bill was taken to the parliamentary committee that looks at energy and resources and was tabled in parliament in August last year.
The parliamentary committee then went out for public comment and conducted various public hearings in all nine provinces. The comments that came out of the public participation process are currently being analysed by the committee. For us at Operation Vulindlela, we eagerly await these insights as we believe this (Energy Regulation Amendment Bill) is an incredible piece of legislation as it sets South Africa up for an improved energy sector that doesn’t have Eskom at the complete core of it. The legislation supports the unbundling of Eskom into three divisions and allows for greater private sector participation and competition in the energy mix. This will fundamentally change and improve the way in which our energy sector operates, allowing for more energy security in a country that needs it so desperately.”
A key point of this panel was unpacking current independent transmission projects and grid constraints. Leading this conversation was Dr Grové Steyn, Member of the Presidential Economic Advisory Committee: “Part of the purpose of unbundling Eskom and setting up the South African National Transmission Company is to set up a company that will have the balance sheet and creditworthiness to be a counterparty to help finance the capacity expansion of the national grid.” He observed that with the need being far bigger than what the transmission company can supply, there was a need for alternatives to incentivise private sector involvement. Steyn also highlighted two models that can be considered to unlock funding at scale, which must be executed simultaneously.
Puleng Pitso, Investment Specialist at NinetyOne pointed out that transmission lines require funding that is concessional, to limit the risk of higher prices ultimately being passed onto the end-user. Leveraging her private debt experience, she identified the need for credit enhancements and having the right stakeholders around the table when decisions are being made.
Reflecting on whether there is private sector appetite for funding these types of models and the role for PE was Emile du Toit, Managing Director: Fundraising and Liabilities Management at Harith: “We believe the private sector is keen to get involved in funding the proposed models. Unfortunately, we are dealing with a limited level of expertise in South Africa which impacts the extent to which private sector can get involved. We also need to take a detailed look at the risk allocation model, and there also needs to be a good risk reward for private equity investors to get involved in these types of projects and feel comfortable that they will get their returns.”
Fireside chat with an institutional investor
Wrapping up the proceedings for the day was a fireside chat, featuring discussions with the PIC Private Markets Teams, moderated by Fulu Makwetla from Thirdway Investment Partners. Yvonne Maitin, Executive Head of Unlisted Investments at PIC, highlighted the tremendous work undertaken to adress shortcomings that were identified in the Mpati Commission, providing insights into the rigorous investment process and due diligence procedures used by PIC when vetting prospects.
Maitin shared PIC’s unique approach to funding, particularly the creative solutions currently in place and the approval process. She also outlined a new initiative aimed at supporting emerging managers to build their track records and succeed with fundraising. She emphasised the asset manager’s priority to fast-track deployment of capital over the next two years.
Tsepo Mandlazi, Associate Principal of Multi Manager Private Markets at PIC, elaborated on the application process for engaging with PIC, which entails consideration of factors such as the fund size and strategies. In responding to the question posed on how the PIC approaches fees in the Fund of Funds model, Mandlazi explained the different approaches the employ to reduce the overall expense ratio. The chat shed light on PIC's strong collaborations with DFIs and other institutions.
Onwards to 2025
With the closing of another successful PE Conference, SAVCA looks forward to engaging with professionals across the board as the industry looks forward to driving investment in crucial sectors of society, while focusing on the undeniable need to collaborate and find synergies, to ensure that private markets become a mainstream avenue for achieving required return and necessary impact in the region.
About SAVCA
The Southern African Venture Capital and Private Equity Association (SAVCA) is the industry body and public policy advocate for private equity and venture capital in Southern Africa. SAVCA represents more than R214 billion in assets under management through circa 204 members that form part of the private equity and venture capital ecosystem. SAVCA promotes the Southern Africa venture capital and private equity asset classes on a range of matters affecting the industry, providing relevant and insightful research, offering training on private equity and creating meaningful networking opportunities for industry players.