Despite the low growth environment in South Africa, private equity houses in the country continue to see investment opportunities and deliver lucrative returns for investors, AGF has learned.

Erika van der Merwe, CEO of the Southern African Venture Capital and Private Equity Association (SAVCA), said that SAVCA members across the size spectrum sealed transactions during the course of 2015, with a number of further deals still in the pipeline.

“Managers continue to see opportunity and, with careful deal selection and thoughtful, focused and active management, they work to ensure that the investee companies become better and more buoyant businesses – whatever the macroeconomic circumstances,” she said.

The latest RisCura-SAVCA South African Private Equity Performance Report shows that South African private equity delivered a ten-year internal rate of return (IRR) of 20.7% in the period ending September 2015.

This compared with the 14.9% yielded by the JSE All Share Total Return Index (ALSI) over the same period.

For Andrew Dewar, Managing Partner at Rockwood Private Equity, leadership, both at the fund manager and at the portfolio company, is "pivotal to successful value creation".

Rockwood Fund I is a R4.5bn, South African leveraged buyout fund with five portfolio companies; a polypropylene producer Safripol; a household furniture maker Bravo; a facilities management, catering, cleaning and hygiene services firm Tsebo; a waste-management company Enviroserv; and Kwikspace, a prefabricated buildings manufacturer.

Rockwood Fund I is fully invested, but according to Dewar, the firm has managed to raise some capital for individual acquisitions: “Outside of the Fund we are actively pursuing acquisitions, which we haven't done for some time now.”

The Rockwood team focuses on taking substantial equity positions in medium to large sized companies that have experienced management teams.

“Strong management is the cornerstone of our investments and our role is to support the portfolio company’s management post-acquisition in implementing strategies that are dynamic in nature and adaptable to changes in the macroeconomic environment,” said Dewar.

Stuart MacKenzie, CEO of Ethos Private Equity, said that his team’s approach to sourcing the right deals is to identify businesses that have the potential to outperform despite economic headwinds, and then partnering with management teams that strive for excellence in leadership, strategy and execution.

“Periods of increased volatility and complexity require strategic agility to take advantage of the opportunities that inevitably arise, whilst managing the risks,” he said.

Looking ahead, Van der Merwe expects the private equity industry in Southern Africa to remain buoyant during 2016, with managers likely to make regular announcements of acquisitions and asset realisations.