This paper studies the developments of private equities financing in the South African market and how this represents the general investment opportunities available to serious investors. The paper looks into the significance of private equity investments (in general) and how it has been adopted in the South African market. The different milestones represent different obstacles private equity financing has faced and how they have overcome initial investor apprehension. This paper also looks into the wide variety of benefits of this specific financial sector and how in turn, it affects the economy as a whole.
Private equity is the ownership of shares or other equity or equity-like interests in companies that do not trade publicly on a stock exchange, or over-the-counter, among investment dealers. So rather than see shares listed on the stock market as one would usually do, private equity represents shares that are bought between investors off market. As there is no instantaneous market for trading, these investments are appropriate only for patient investors with a long-term view. Buying and selling is also done on an agreed upon basis. It is very much a personal market that does not involve gazetted news that provides market updates on a daily basis. Private equity is long term investment as it mostly focuses on big investments as compared to listed equity (Venture Choice, 2007).
Because the investments often involve the acquisition of a controlling interest or significant influence costing several millions of dollars, private equity opportunities are generally more appropriate for large institutional investors with the time and resources to evaluate the potential risks and returns, and the patience to wait 10 years or longer to maximize investment returns (Venture Choice, 2007). As we can see, the amount of private equity in an economy reflects the purchasing potential of investors as bulk buying is common. By seeing this, we can understand that there are funds being pumped into non-listed stock that are perceived to have growth rates. Since long-term maturity usually follows, start-up companies are almost always unlisted equity investment instruments.
Types of Investments – branches of Private Equity Investments
Currently, there are three types of private equity investments (Venture Choice, 2007):
- Venture capital – venture capital looks into start-up companies who require capital to commence their businesses. They are principally early-stage companies that are still developing their products or services, yet have the prospect of generating revenue in a few years. Upon seeing this, private equity investors jump at the opportunity to pump funds into these companies for a prospect of high returns in the future. Some venture capitalists invest in existing firms that embark on specific new projects that would entail revenue in a shorter time-frame – for example: a project seen to flourish in less than three years.
Generally, the higher the number of venture capitalists investments in an economy, the higher the indicator of economic boom. Since money is being pumped into usually, high-technologically based companies, returns are also perceived to flow in, in years to come.
- Buyout and acquisition financing – this form of investment is an interesting one as it is usually accompanied by a new business plan. This reflects a change in the company’s business direction and introduction of new ideas. Sometimes buyouts include new management teams geared to improving a company’s financial performance.
New direction indicates changes in the economic drivers of a country. The weightage of change however, depends on a few factors such as the company’s contribution towards the sector, and in turn, the economy. Another factor would be the actual change in business as it may not be a significant market driver to begin with.
- Expansion or merchant banking capital – expansion always translates into economic growth. This therefore is a good indicator that private equity is able to channel funds into the economy. Expansion or merchant banking capital represents established companies looking to enter new markets or achieve a larger scale of operations.
The three different types of financing represent forms of investment that are unconventional against the traditional investment instruments. All three follow through a stipulated event, such as a new project or new company and therefore are instrumental change mechanisms in the financial market.
Valuation and performance measurement
In the early years of a private equity fund, valuations of portfolio companies are utilized to measure the performance of the portfolio – this is very much like unit trusts, where returns are e measured by the overall performance of the fund. Private market investments are carried at cost for at least the first year of ownership. The sale of portfolio companies, or public offerings of their shares, results in cash and occasionally share distributions to the limited partners (Venture Choice, 2007). By doing so, income earned therefore is similar to listed stock on the exchange as cash dividend is paid out based on a ration of profits.
The most widely used measure of performance is the internal rate of return (IRR). According to Venture Choice (2007), the calculation of the IRR takes into consideration the timing of cash distributions to the partners (realized IRR) or the length of time an investment has been held (unrealized IRR), relative to when capital was drawn down to make each investment. Calculating profit on non-listed equity can be viewed like any other investment where initial capital is subtracted from the profits that are received. Of course the time factor is particularly unique to distinguish the fact that private equity are mostly project based investments that observe a time-frame prior to a return.
Another widely accepted measure of performance is multiple of capital contributed (MOC) or a multiple of distributions received relative to the capital invested. This measures the proceeds received when an investment is sold, or the valuation of an investment still held, as a multiple of the original cost of the investment. ROC does not take into account the length of time between the date the investment was made and the valuation date (unrealized MOC), or the date the company was sold (realized MOC) (Venture Choice, 2007).
There are several benefits to considering private equity investments and this does indicate its role in determining the performance of an economy. Private equity provides long – term, committed share capital which can help unquoted companies grow and succeed. This is in tandem with long-term planning for effective economic growth. If entrepreneurship is able to spur an economy through a handful of initial public offerings representing profitable ventures, it is possible that private equity will play an indicative role in determining the interest in the stock-market. The stock exchange may lose its significance and attractiveness to serious investors as compared to the occasional investor. Through this study, we will see if the significance of private equity in the South African economy has such an impact on serious investors.
As the investment is made in exchange for a stake in a company, the investors’ returns are dependent on the growth and profitability of the business. As a result of this investors are only interested in companies with high growth prospects. However, provided there is real growth potential the private equity industry is interested in all stages, from start – up to buy – out.
Private equity backed companies have been shown to grow faster than other types of businesses (Both, 2007). This is made possible by the provision of a combination of capital and experienced personal input from, which sets it apart from other forms of finance. Private equity can spur motivation– it is also a platform for strategic business decision making.
The Commencement of Private Equity Investments
Private equity investments initially stemmed from the UK in the late 18th century when entrepreneurs found wealthy individuals to finance their projects. This method of financing soon caught on and became an industry in the late 1970s and early 1980s when a number of private equity firms were founded. Due to the opportunities for high returns over a period of time, this investment is gaining popularity globally. In 2003, researchers (KPMG, SAVCA, 2004) stated that private equity investment became a significant source of financing as well as a popular investment tool for investors in South Africa. By this and through the rest of the study, we can observe that the rapidly developing financial market of South Africa is attaining modernity through financial product innovation.
The Role of Private Equity
There are two different types of fund managers when it comes to looking at private equity investment. A distinction needs to be made between captive and independent fund managers (Venture Choice, 2007). Fund managers include independents who manage funds on behalf of third parties as well as captives who manage on balance-sheet investments that were funded by a parent or group often from an indeterminate pool of money. Captive funds are further classified into the captive funds of government, financial services (including banks and insurance companies) and other captive funds (including corporate).
Again, there are plenty of benefits of private equity investments. That is why there is such an emphasis on its growing rile in channeling financial and economic growth in South Africa. Not only will private equity investments introduce different sources of large amount of funds into the economy, the system allows for an increase in understanding of the financial markets. Furthermore, investment opportunities are seen to be wide-spread with the interest in entrepreneurship at its heights (KPMG, SAVCA, 2004). Thus it appears possible for investors to pick and choose investments from a range of high growth projects that will in turn contribute as motivating factors for the South African economy.
For example, with the advent of technology, it is not unusual to see a growth spurt of information technology-based companies sprout with new ideas to combat obsolescence in the technology sector. For example, the Malaysian financial market’s MESDAQ board, facilitating the listing of high growth technology companies, continues to record the highest number of listings, in comparison to the country’s 2 other boards (Bursa Malaysia, 2007). This is in lieu for the nation to become dependent upon the technology services sector by year 2020. Thus, introduction of new technology and technical know-how in general is a core driver of any economy – hefty funds soon follow upon success of technology projects and products.
There are plenty more of benefits that the private equity investment market can introduce to a country. Here are some additional factors that would propel the South Africa market into the future (KPMG, 2007). In addition to that, there is great potential for the sector to become an indicative growth component in the local financial markets. Implemented well, hefty returns indicate success in the global market as well.
Private equity investors have a considerable impact in terms of productivity, skills development, national competitiveness and job creation, as it includes the transfer and exchange of know-how and not only the flow of capital. Private equity fund managers play an active role in managing their investments into companies as they derive a return from the increased valuation of their investments (not just debt repayment and an associated interest rate) and hence they focus on business development for the companies they invest in.
The private equity industry, therefore, represents a significant sector within the overall financial services industry, and an attractive asset class within the broader capital markets. This can be seen due to the innovative streams of cash inflows (as compared to the passive stream of interest income). As seen across a range of indicators, the profile of the local private equity industry is that of a productive contributor to the development of the South African economy, particularly in the context of policies such as Black Economic Empowerment (BEE) which overlooks potent socio-economic issues that are set to change for the future. As mentioned before, the promotion of entrepreneurial initiatives will eventually promote South Africa’s global competitiveness.
History of Private Equity in South Africa
The private equity investment market in South Africa has always existed in the economy and has spurred its own funding for a long time. However, due to continuous development in the domestic market of financial professions and the curious interests of foreign investors, private equity has been seen as a growing market, indicative of a hefty source of funds for the financial industry (KPMG, 2001). The answer lies in the development, internationally, of a professional private equity management industry. The success in terms of growth achieved by private equity funds in the United States and to a lesser extent in Europe has resulted in the development of professional private equity firms in other parts of the world, including South Africa (KPMG, 2001). South Africa’s developments can be seen as follows.
In South Africa, the four major commercial banks and their predecessors pioneered leveraged buy-outs. This was largely driven by disinvestments from South Africa in the early 1980’s (KPMG, 2001). These buy-outs, encouraged by the international success of private equity, formed the foundation for the South African private equity market. Organised and professionally managed investments in the private equity market can be traced back to 1946 in the United States, when the American Research and Development Corporation (ARD) was formed to facilitate new business formation and development. ARD’s stock persistently traded at a discount, and it had difficulty raising capital on the stock market (KPMG, 2001).
The 1980’s and 1990’s therefore saw explosive growth in private equity commitments. In 1999 commitments to earlier stage venture capital funds exceeded commitments to buy-out funds for the first time, reflecting the strong growth in this sub-class of private equity.
Recent Developments and Milestones in the Private Equity Market
The South African Private Equity Market in 1999
In 1999, the South Africa private equity market had enjoyed strong growth with approximately R28 billion of capital funds under management. In 1999, South Africa’s private equity market was one of the largest in the world by value in relation to GDP (KPMG, 2001). The market has traditionally been dominated by captive funds, but independent private equity firms are now on the rise significantly. R3.4m was raised from third party funds in 1999, mostly from US sources. (Need transitional sentence to the next topic)
A lagging indicator in 1999 of interest in private equity funds is the general lack of interest by investors. Institutional investors have been generally reluctant to invest in South African private equity. A serious challenge arose of convincing foreign investors of the merits of private equity as a suitable asset class for long-term, sustainable growth.
The South African Private Equity Market in 2001
In 2001, the private equity market in South Africa still faced bleak opportunities due to the lack of confidence in institutional investors. Especially when a large amount of funding was usually relied upon from foreign investors, South Africa’s developing economy did not hold an attractive threshold to entice investors to inject their funds into the private equity financial sector. Despite growth of the industry, South African institutions still lack the funds they need to have their businesses grow (Martin & Pollinger, 2001).
The South African Private Equity Market in 2002
Several concerns sprung the global market in 2002. Mainly, issues revolved around oil price volatility; reliance on the US economy causing disruption in neighbouring economies. Furthermore, the highlights of rapidly developing nations such as South Africa imposing their presence and views in the global arena shifted interest from investments in developed countries to newly developing economies. Global outlook changed in 2002 and though some had adverse effects on countries like South Africa, many shaped the perception of the country in a new light.
Several factors influenced the numbing of financial markets. Most prominent were crude oil prices and the US economic growth rates (SAVCA & KPMG, 2002).
Financial markets remained unstable due to the economic fundamentals that increasingly differed from the high expectations of investors. Economic slowdown remained a threat that year and caused several disruptions in investments that were channelled the conventional way (through listed stocks and bonds). It can be perceived that due to these disruptions, serious investors looked into long term methods to avoid their short-term losses and the higher the injection of funds in long-term projects, the more effective were the hedging strategies during the year.
Narrowing into Private Equity Investment in South Africa in 2002
Private equity fared well in 2002 despite the global report of numbing financial markets and slipping oil prices. In 2002, an estimated R10-15bn was invested with as many as 50 players. Though this leading indicator that the economy was beginning to accept private equity as a major source of funds, investors were still cautious about committing money to a region where private equity was still perceived as being in its infancy.
Since the popularity of private equity investments increased in 2002, analysts believed that the financial sector overcame the hurdles of risk-aversion with respects to the private equity sector. Here are the few ideas that grew out of the newly perceived sector – all perceptions were leading indicators for healthy investment in the country – overturning to economic growth (Klein, 2002).
The sector was seen as a modern-day goldmine. Financial services and investment houses regrouped their management teams to focus on private equity investments. As goals were channelled towards encouraging this sector to flourish, competition began to increase and only the more capable players were left on the field. This played to the advantage of the investors.
The industry also required new skills and talent in the financial market indicating a leading factor in progressive financial investments. The sector was also seen as the industry with strong price to earnings ratio and therefore opportunity for strong growth potential (Klein, 2002).
Strategic management and financial structuring comes hand in hand with private equity. This is definitely an economic driver for the financial industry. One important element of private equity is that the funds are not just financiers but also have the ability to influence the strategic direction of the company.
In 2002, major companies opened opportunities to look into private equity. A change in direction of their business ideas and plans came into major conglomerate companies as a result of the surge of private equity companies.
Private equity thrives when conglomerates shed noncore interests. This opened up opportunities for large investments.
As private equity companies rely on their own investors for funds, they are under a lot of pressure to produce an excellent rate of return, or they will get no second chance. They have to be able to extract value at any cost.
The South African Private Equity Market in 2003
The South African private equity industry recorded total funds under management of R41.5bn at the close of 2003. Such statistics caused an upheaval of confidence in the market. The increase market a significant ten per cent increase of funds falling under management from the previous year (KPMG, SAVCA, 2004).
The private equity market began opening doors for international investors. These would include those coming from Europe. A total of 50 per cent of third party funds raised during 2003 were sourced from South Africa and 48 per cent from Europe. All other sources contributed negligible amounts. In 2003 however, US sources have contributed an accumulative total of nineteen percent 19 per cent – a figure that was set to increase by more than one hundred percent 100% by 2007.
The South African Private Equity Market in 2006
The private equity market was seen to have finally matured in 2006 in South Africa. The annual industry survey conveyed several messages with respects to the growth of the industry (SAVCA, 2007).
The education imparted upon South African investors began to materialise through their injection of funds into the private equity market. Investors began to understand that private equity provides positive absolute returns and significant portfolio diversification benefits. Therefore, not only is it a hedge to high risk investments, it is also a high return field for institutional investors with large funds. This had been proven attractive to major domestic investors in South Africa.
Additionally, Black Economic Empowerment (BEE) remained a major source of activity in the industry. A socio-economic change that reflected a positive perception of private equities was the amount of participation and involvement of the blacks as well as their influence over private equity funding. Major industry players decided not only to transform themselves to suit this new dynamic form of investment that was beginning to spearhead the financial industry but also to promote BEE investment into companies.
Venture capital funding was also on the rise in 2006, though there is plenty of room for expansion in the future. The scale of activity in this sector of the financial markets compares favorably when placed next to other developing nations. Venture capitalist funding is an important investment tool that will provide opportunities for start-up entrepreneurs to venture into the realm of business.
Though investments such as these are risky, they are a vital piece of the private equity in a financial industry (SAVCA, 2007). The scale of activity in the industry compares favorably with that in many major international economies. With developing countries employing entrepreneurship as a strong factor of growth, this sits well for South Africa’s Government’s growth targets. Local and international research confirms that private equity investment is a key driver of entrepreneurial activity in any economy.
The Southern African Venture Capital and Private Equity Association (SAVCA) state that while 2005 and 2006 were periods of fund raising, the years 2007 and beyond harbor local and international “mega deals.” SAVCA looks forward to many years of heightened investment activity in the private equity market.
The advent of independent mezzanine funds is a positive sign for the development of the South African industry and the importance of captive and independent mezzanine financing in the facilitation of private equity transactions should not be underestimated (SAVCA, 2007). Taxation standards have been altered upon private equity realisation gains to allow additional investment to be channelled back into private equity funds.
Measuring the Effectiveness of the Private Equity Market
Consistent measurement of performance of private equity funds can pose as a difficult task as private equity investments’ valuations are, by their very nature, are actually highly subjective. Experienced researchers and analysts are able to evaluate prospects of private equity investment more effectively.
The overriding principle of the International Private Equity and Venture Capital Valuation Guidelines is to show a fair valuation of investments to the investor. These guidelines were released during 2005 and adopted by the majority of global private equity associations, including South African Venture Capitalists and Private Equity Association (SAVCA).
Likewise, it is also difficult to reach a conclusion on the performance level of private equity and venture capital investments in South Africa due to the limited number information (SAVCA, 2007).
In general however it is safe to conclude that private equity generates significant and positive absolute returns. It also displays significant premium relative to conventional asset classes (for example, listed equity and small cap funds). This is true for all private equity markets globally as the private equity market is geared for long-term, high-return investments.
Contrary to popular belief too, private equity has significantly a more efficient risk-adjusted performance as compared to other investment instruments. In fact, there is no or very low correlation to the performances of other asset classes. This suggests that private equity investment is extremely beneficial for serious investors. Lastly, investments in the private equity market also take time to earn returns. This can take up to ten years. An investor may wait for a decade to have his or her profits to materialize after initial fees have been deducted.
Latest Performances of the Private Equity Market
In 2007, analyses have been seen as showing favorable insights that have taken place in the private equity market, (KPMG & SAVCA, 2007). All indicators point towards private equity becoming an important tool in the financial industry in South Africa. With much encouragement, private equity can be seen as the sector spearheading financial cash flow and economic growth in the next decade or so.
By looking at the statistics in general, it is safe to say that the initial investor apprehension in investing in South Africa’s developing economy has dissipated a great deal and confidence in the market has begun to develop. Further future results that are favorable in nature will allow private equity to become a driver of growth in its own right. Since private equity is a two-way economic multiplier, economists look forward to not only a hefty development in the financial structure but also in the projects that are being finances, i.e. companies with high growth potential.
South Africa’s private equity industry recorded a record high R56.2 billion in funds under management as at 2006 year-end (KPMG, 2007). This represented an increase of 32% from R42.5 billion at the end of 2005. Even more encouraging, funds under management have grown at a compounded annual rate of 9% over the last seven years. This can be seen as the way forward for the industry in the future.
Undrawn funds posed for future investments have also received the long-end of the stick whereby, a significant amount of funds have been reserved for future promising projects with high growth potential. Records show that R26 billion in undrawn commitments are available for future injection into the private equity market (KPMG, 2007). This represented an increase of 63% of undrawn commitments at the end of 2005 – a significant increase of undrawn funds from R16 billion.
Independents have experienced an increase their total funds under management by 58% (KPMG, 2007). Independent funds were recorded at R22 billion at the end of 2006 as compared to R13.9 billion at the end of 2005. Additionally, captive financial services funds held under management also experienced an increase. From R13.9 at the end of 2005, captive funds increased by 26% to R17.5 billion at the end of 2006. Captive government funds experienced an increase of 44% during the same year. They increased from R7 billion at the end of 2005 to R10.1 billion at the end of 2006.
In total R11.2 billion worth of funds were raised in 2006. This was nearly an aggregate equivalent to the amount of funds raised during the years from 2001 to 2005.
Earlier we had spoken of foreign investor uncertainty with regards to private equity investment in South Africa’s financial markets. Year 2006 marked a milestone where the penetration of foreign funds came mainly from the US investors. South African sources have contributed to 45% of all funds that have been raised to date and the funds have yet to be returned to investors. The source of US funds overtakes Europe as the highest provider of foreign funds to South Africa.
In addition to all of this, investment spending by private equity firms experienced an increase by 33% in 2006. The actual figures recorded were R4.5 billion during 2005 to R6 billion during 2006.
When referring to Black Economic Empowerment (BEE), government and fund managers that are owned by the “blacks” and are empowered by them or are influenced by them have recorded at R48.4 billion under management at the end of 2006. This represents an increase of 42% over the preceding year. In 2005, R34.1 billion funds were recorded. In 2006, 86% of funds under management fall under BEE. Investment in entities that are black-owned, empowered or influenced has increased by 23% from R3.1 billion during 2005 to R3.8 billion in 2006. Further explanation follows in the next section.
The Private Equity Market and Socioeconomic Well-being in South Africa
With the apparent success that is attributed to private equity and its role in portraying a successful financial market, private equity investment has also had its positive side-effects with respects to the socio-economic state of South Africa.
Amidst the development of South Africa’s private equity industry is the significant role it played in the development of Black Economic Empowerment (BEE). The BEE is defined in the Financial Sector Charter means the economic empowerment of all black people, including women, workers, youth, people with disabilities and communities living in the rural area. This empowerment is done through integrated socio-economic strategies.
With such encouraging financial concerns with regards to BEE, private equity investment is a core runner in the South African market when it comes to the diversification of funds. Here are several methods how BEE twinned with private equity has synergised to become leading indicators in the financial market (KPMG, 2007).
- Private equity transactions enable higher gearing, whereby a combination of private equity investment and bank loans allow the implementation of an appropriately geared financial structure, allowing management of the investee company to acquire a significant stake in the company. This leveraged model also creates opportunities for the involvement of black management and other BEE parties in the ownership and management of the investee company.
- The vast majority of transactions concluded by the industry have a significant BEE component and the majority of private equity fund managers have a BEE element to their own shareholding structure.
- Given the clarity of Codes of Good Practice on Broad-Based BEE, as to how a company may treat its ownership arising from a private equity fund as if that ownership were held by black people, the industry is well poised to further increase its already significant contribution on this vital socio-economic process.
Private equity therefore played a significant role in enabling less fortunate members of society engage in financial investment. Such a boost will continue to allow private equity to spearhead its performance in the financial industry for years to come. There were several note-worthy with respects to BEE and the private-equity market in South Africa. However, what were the statistics to support this claim and to recognise private equity investment as a significant investment tool in the market? (KPMG, 2007):
Statistics show that total funds under management of participating fund managers that themselves are black owned, empowered or influenced companies (i.e ., have at least 5% black ownership) increased by 41%. This represented an increase from R27.1 billion at the end of 2005 to R38.3 billion at the end of 2006.
The 41% increase represents 83% of total “qualifying” funds under management and is also an increase from the 76% at the end of 2005. The increase mentioned above has been mainly as a result of the increase in funds under management by empowered fund managers.
Private Equity a Leading Indicator of South Africa’s Financial Health
A fair amount of research conveyed that South Africa’s private equity industry has now increased in funds to a total fund size under management of R56.2 billion (inclusive of undrawn commitments of R26 billion). This reflects an increase of 32% from funds under management at 31 December 2005 of R42.57 billion (inclusive of R16 billion undrawn commitments). Such an increase in fund management indicates that private equities market has the potential to spur the financial market due to its hefty funds and growing investor interest.
The increase also represents compound annual growth of 9% of total funds under management over the last seven years.
The highest growth has been seen in the total funds under management with an increase of approximately RM8.1 billion from December 31, 2005 to December 31, 2006 (KPMG, 2007). This represents a significant raise of 58% during 2006. Such an increase is definitely a leading indicator for the financial industry’s well-being in South Africa.
Other statistics indicate that the amount of funds raised in 2006 equalled the amount of funds raised over the past five years (KPMG, 2007).
- Fund raising activity during 2006 overwhelmed financial analysts with the amount overshadowing all previous years. The amount of funds raised during 2006 amounted to approximately the same figures raised over the previous five years.
- Investment activity increased by 33% in 2005 levels while 2006’s exit activity also exceeded all previous levels.
- The total of all captive funds accounts for approximately 61% of the total funds under management at 31 December 2006. Independent funds make up the remaining 39% of total reported funds under management at 31 December 2006.
- Financial Services’ total funds under management also increased by R3.6 billion from 31 December 2005 to 31 December 2006.
- The 26% increase is likely as a result of the continued increased private equity investment allocations by financial services groups to meet their BEE charter obligations.
- Funds under management by Captives – Government also increased by R3.1 billion from 31 December 2005 to 31 December 2006 resulting in a 44% increase.
There are several pointers that are note-worthy in this short study regarding South African private equity. Private equity in the financial sector has developed substantially over the past decade to represent a potent ingredient of financial health. Furthermore, the milestones that have been achieved are set to further entice future investors into the investment segment.
Due to overall increased activities in the market by various indicators, it can be said that the private equity investment market is set to spearhead the financial industry as a leading component of the sector. Not only has the developments in the past led to several financial milestones, the socio-economic dimension of the country has also improved.
Above all, investor anxiety has been reduced by two-fold. Firstly, investors no longer feel threatened at the prospects of investing in a “new” and uncertain sector of the economy. Large funding and long-term maturity periods for returns are less of a concern now with the proper understanding of private equity investment. Secondly, foreign investors have mustered up the confidence to inject funds into the economy as a form of investment in a rapidly growing nation.
However, a decade of statistics is insufficient to determine whether private equity financing will remain a favorable investment in the South African market. There are other factors they will determine its success, including economic recession and / or even technology booms. Further studies will be able to determine if private equity financing will eventually affect the economy positively.
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