In a survey published by the South African Venture Capital and Private Equity Association released last week, the industry association reports that 2016 saw a significant increase in capital employed in the venture capital asset class. The total jumped from R372 million in 2015 to R872 million in 2016, an increase of 134%.
The fourth edition of the survey, which was produced in partnership with Venture Solutions, a sub-Saharan innovation management and commercialization consultancy, surveyed 56 fund managers, only analyzing data on concluded deals and transactions between 2014 and 2016. In total, the period saw R3.5 billion in venture capital invested across 461 deals.
“The survey points towards a substantial strengthening in the position and impact of investors in VC deals”, says SAVCA CEO, Tanya van Lill. “This is based on the growth in both the number of VC investors and the number of reported deals concluded over the period 2014 to 2016 in comparison to the prior three-year period.”
In 2016, the ICT sector was responsible for the lion’s share of the deals, making up some 27% of all deal value, with the manufacturing and business services sector transactions representing 13% and 12% respectively. Despite that, the manufacturing sector delivered the largest number of transactions in terms of deal volume for the year. Fintech ivestments continued to grow, whilst energy investments decreased, delivering only 1% of total deal value in 2016. Other highlights include the number of active fund managers rising from 36 in 2015 to 53 in 2016, of which those not active prior to 2015 accounted for a total of R312 million of the investments made.
“Despite harsh trading and volatile market conditions, overall the venture capital sector has shown resilience and exceptional growth,” comments Stephan Lamprecht, Founder of Venture Solutions. “The magnitude of the SA VC asset class (R3.5 billion across 461 deals) is an indicator that it has huge potential to be a driver of significant economic growth and should attract the attention of policy makers. The introduction of the Section 12J tax incentive has already had a tangible impact in increasing the availability of risk capital for investment in smaller entrepreneur-driven businesses.”
To download a full copy of the report, please click here