In 2018 South African Venture Capital Funds Invested R1.5 Billion

There is a night and day difference between the South African economy and our own – and the venture capital (VC) investments made within South Africa last year are a painful reminder of that gap.

According to the Southern Africa Venture Capital & Private Equity Association’s Industry survey, Southern African VC funds made investments of R1.5+ billion last year. This was a 31% improvement over 2017’s R1.1 billion.

Some other notable highlights (as stated in the report) include:

41% of all deals (by value) recorded were categorised as start-up capital (47% if taken by number of deals). The total number of active deals invested through seed or start-up deals likewise amounts to almost 60% of all deals to date.
There were a total of 181 new deals reported in 2018, an increase of 13.8%, in comparison to 159 new deals reported in 2017.
Growth in annual deal activity seen since 2013 remains evident despite a smaller increase in deal activity in 2018 compared to the significant increases in total deals per year reported for 2015 and 2016.
Captive Government and Independent Venture Capital (VC) Funds were responsible for over 68% of capital invested into the VC sector.
Gauteng businesses received the largest share of VC money in 2018 (R658 million), up 38% from 2017. The Western Cape saw an increase in 2018 of 14% in VC investments amounting to R433 million. Kwazulu-Natal (KZN) backed VC business have in 2018 seen a significant increase in activity in comparison to 2017, with R71 million invested in 2018. The rest of South Africa (deals outside Gauteng, KZN and the Western Cape) have also seen an increase of 28% of deal activity year-on-year.
Overall exit activity remains low. The increase in the number of deal activity coupled with low exit activity is evident of a nascent VC industry, with a range of opportunities and early-stage investment challenges that need to be addressed in order for the industry to continue to grow and mature.
A total of 79% of all deals concluded in 2018 were for investments of R10 million or less
Overall exit activity remains low. The increase in the number of deal activity coupled with low exit activity is evident of a nascent VC industry, with a range of opportunities and early-stage investment challenges that need to be addressed in order for the industry to continue to grow and mature.

Zimbabwe is some way behind

The report is pretty interesting and shows the world of difference that venture capital can make.

Unfortunately for Zimbabwe, I’m pretty confident that as long as our government remains lax on reforming the ease of doing business – where we are ranked 155 of 190 economies – we will continue to envy our compatriots across the border. For comparison’s sake, South Africa is ranked 82nd in that same metric.

Consistency of policy also makes VC funding quite difficult in our country as VC’s have no idea what will be the law of the land two weeks after putting money into a business. If a VC had put money into a business expecting that the business would be making its money in US$ on the 23rd of June, they would have been disappointed as a day later, the US$ was banned for transacting with no prior warning. Not exactly welcoming or “open for business” as a certain scarf-wearing President would claim.