I had been meaning to blog about Reinet earlier this week and then got swamped with other stuff.
Upfront I need to remind you that my primary reason for buying shares in private equity firm Reinet was a desire to get some access to the Rupert family's "deal-flow" and their ability to spot good investment opportunities and generate a return for shareholders.
I got in quite cheaply so I am up a few bucks on this investment but it was interesting to note their comments in their recent results announcement.
One of the big concerns I had was that Reinet would become something of a "value trap" along the lines of Venfin where it took a long time for shareholders to get anything significant in the form of dividends or realised profits from investments.
Bear in mind that Reinet enjoys handy "cash-flow" from its investment in British American Tobacco so there should be no reason why shareholders shouldn't get a piece of this.
I thought it was quite encouraging then that Reinet mentioned that dividends were on the cards in the coming financial years.
Saturday, May 23, 2009
Wednesday, May 20, 2009
Groundbreaking social investment fund launched
Investors in market-based solutions to social problems can now receive a financial return on their investment, rather than merely a measure of social equity. Believed to be the first funds of their kind in the world, Heart Social Investments are launched today.
Heart Social Investment funds are built around a concept called Blended Value Proposition, offering investors both a financial and social return on investment. On the other hand, the Traditional Value Proposition that most investments are built around, yields economic returns and no social benefit, and traditional private or corporate giving (philanthropy) yields social value with no financial benefit. This means that going forward corporate, private and foundation giving (philanthropy) could earn a financial return, on top of the expected social impact.
The Blended Value Proposition funds achieve the financial (as well as social) return by investing in social enterprises. The core objective of a social enterprise is to promote social and/or environmental gain and it does this through a trade that generates income. As such, there is no difference between them and any other business, as long as social enterprises are sustainable and making money. And social enterprises are therefore not dependent on ongoing handouts, like most NGOs, to have a social / environmental impact.
Heart of Healing, from today re-branded simply as Heart, was established in Cape Town by Peter Shrimpton, an ex-stockbroker and a man who understands not only money markets and commerce but also the need to make social enterprises and NGOs sustainable. Peter has spent the last five years working with NGOs and creating and incubating social enterprises that needed a leg up in terms of the requisite commercial input and counsel.
The business of giving and, in particular, charity has evolved. Peter explains: "It is an outmoded concept to continue simply giving to an organisation - charities now need to be sustainable, they need to generate income through trade."
Social enterprises are fast being lauded internationally as the way to offer a sustainable solution to the world's increasing social and environmental challenges. There are currently no figures tracking the number of social enterprises in South Africa but elsewhere in the world, the market is mushrooming. In the UK there are around 55 000 social enterprises and in the US, where there are around 1.2 million non-profit corporations, the market generated $672 billion last year.
In South Africa, the CSI (corporate social investment) market is valued at around R4-billion and the private donor market is estimated at around R17-billion. As donor fatigue increasingly prevails, it is becoming critical to find ways for people to receive a return on their generosity and on their investment. Now that charities and NGOs - social enterprises - are beginning to earn money, the market can evolve ... into funds like the Heart funds - blended value proposition funds - and so that the market can attract more investment in the future.
"This formalises, in financial terms, what Heart has been doing for some time now", says Peter. "We're taking traditional financial investment models and applying them to the social enterprise space."
Heart has created a holding company for each of the funds. The aim of the funds is to give investors the potential of earning a 10% return. Each Fund is established as a PTY Ltd legal entity by Heart with an investment committee. The central objective of the Funds will be to invest in social enterprises that are helping to bring about positive social and environmental change.
Three Blended Value Proposition Funds are being launched, to incubate, develop and establish social enterprises (just like any other business) at critical stages of their development. For the Heart Seed Fund, a closed fund, the minimum investment for a maximum of 50 investors is R20 000 to raise R1-million. The objective is to incubate a developmental project from concept to market readiness.
Heart aims to raise R5-million for the Heart Venture Fund with two lots of R50 0000 each over two years for a maximum of 50 investors. The focus is to take the social enterprise to market, after completing the Heart Seed Fund incubation process.
And for the Heart Capital Fund, the aim is to raise R30-million over three years - again with R50 000 lots over three years for a maximum of 200 investors. The objective is to fully capacitate the social enterprise.
"In South Africa's financial market where trillions of rands are traded, R36-million is chickenfeed", says Peter, "but we want to prove that it works. We're not going into the financial market to challenge the industry. We're giving them an option they don't have at the moment ... we are challenging the donor market."
Peter adds: "We need to create a capital structure that can drive positive social change. Without it, we will not be able to begin addressing the huge and daunting number of social problems we face right now. Investment in social projects and social enterprises must now earn a return so that the business of giving can be more sustainable."
Heart Social Investments are different from other investment funds linked to a social / environmental cause, because they invest in social enterprises, not corporates being socially responsible.
Find out more information here - http://www.heartofhealing.co.za/index.php?option=com_content&task=view&id=566&Itemid=336
Tuesday, May 19, 2009
Private equity shows growth despite economic down turn
SAVCA and KPMG today released the annual Industry Performance Survey reporting on the 2008 calendar year. The survey shows that South Africa’s private equity industry breached the R100 billion mark for the first time during 2008, despite the global economic meltdown and a slowdown in local merger and acquisition activity. In addition, R29.2 billion in commitments remain undrawn and can be used for further investment.
Growth in BEE private equity deals grew 38.1 per cent from R11.8 billion in 2007 to R16.3 billion in 2008.
These are some of the findings of a joint KPMG and SAVCA (South African Venture Capital and Private Equity Association) survey into the private equity sector released today.
Private equity has attracted foreign direct investment (FDI) into South Africa, amounting to R23bn over the last three years.
Taking into account the absence of the large public-to-private deals, as seen in 2007 (for example: Edcon, Alexander Forbes, Primedia and Consol), it was no surprise to see private equity investments falling in 2008 from R26.1bn in 2007 to R23.1bn in 2008. Fundraising also decreased from R15.4bn in 2007 to R7.2bn in 2008.
“These figures are a positive reflection on the achievements of the SA private equity industry,” says Warren Watkins, KPMG’s head of private equity markets for Africa. “Although SA is not immune to developments in the global economy, we currently appear to be better off than other private equity markets. This could be due to SA’s ongoing infrastructure spend and limited “credit crunch” exposure.”
The survey also found that funds valued at R68.6 billion were under the management of captives-government or entities that are either black owned, empowered or influenced. This is up 16.3 per cent from R59 billion in 2007.
The private equity sector maintained a lingering exuberance from 2007 through the first half of 2008 and then became more subdued in the second half. The net result was overall growth of 19.5% on R86.3 billion held at December 2007 to R103.1bn.
There is reason for cautious optimism for South Africa, says Watkins, in particular with respect to the prospect of lower interest rates arising during 2010, and the forthcoming FIFA 2010 Soccer World Cup.
“The scale of activity in our industry continues to outperform most of the major international economies, which bodes well for South Africa’s government stated growth targets, as local and international research confirms that private equity investment is a key driver of entrepreneurial activity and growth in any economy,” says SAVCA executive officer J P Fourie.
The survey has found that South Africa’s funds under management (excluding undrawn commitments) relative to GDP of 3.2% was higher than 2007 and again greater than the global average of 2.7%.
This is the tenth year in which KPMG and SAVCA have produced the private equity survey. Funds under management were R30.7 billion in 1999, with R103.1 billion reported in the current survey. This represents a 14.4% compound annual growth rate.
For the full survey, visit www.kpmg.com
Growth in BEE private equity deals grew 38.1 per cent from R11.8 billion in 2007 to R16.3 billion in 2008.
These are some of the findings of a joint KPMG and SAVCA (South African Venture Capital and Private Equity Association) survey into the private equity sector released today.
Private equity has attracted foreign direct investment (FDI) into South Africa, amounting to R23bn over the last three years.
Taking into account the absence of the large public-to-private deals, as seen in 2007 (for example: Edcon, Alexander Forbes, Primedia and Consol), it was no surprise to see private equity investments falling in 2008 from R26.1bn in 2007 to R23.1bn in 2008. Fundraising also decreased from R15.4bn in 2007 to R7.2bn in 2008.
“These figures are a positive reflection on the achievements of the SA private equity industry,” says Warren Watkins, KPMG’s head of private equity markets for Africa. “Although SA is not immune to developments in the global economy, we currently appear to be better off than other private equity markets. This could be due to SA’s ongoing infrastructure spend and limited “credit crunch” exposure.”
The survey also found that funds valued at R68.6 billion were under the management of captives-government or entities that are either black owned, empowered or influenced. This is up 16.3 per cent from R59 billion in 2007.
The private equity sector maintained a lingering exuberance from 2007 through the first half of 2008 and then became more subdued in the second half. The net result was overall growth of 19.5% on R86.3 billion held at December 2007 to R103.1bn.
There is reason for cautious optimism for South Africa, says Watkins, in particular with respect to the prospect of lower interest rates arising during 2010, and the forthcoming FIFA 2010 Soccer World Cup.
“The scale of activity in our industry continues to outperform most of the major international economies, which bodes well for South Africa’s government stated growth targets, as local and international research confirms that private equity investment is a key driver of entrepreneurial activity and growth in any economy,” says SAVCA executive officer J P Fourie.
The survey has found that South Africa’s funds under management (excluding undrawn commitments) relative to GDP of 3.2% was higher than 2007 and again greater than the global average of 2.7%.
This is the tenth year in which KPMG and SAVCA have produced the private equity survey. Funds under management were R30.7 billion in 1999, with R103.1 billion reported in the current survey. This represents a 14.4% compound annual growth rate.
For the full survey, visit www.kpmg.com
Thursday, May 14, 2009
Innovation Summit
The ‘jury’ in the October 2008 ‘Innovation On Trial’ court case held at Emperor’s Palace in Johannesburg found INNOVATION NOT GUILTY on the charge of armed robbery and perjury. However, in mitigation of this verdict, the ‘jury’ (conference delegates made up of members from the triple helix), was unanimous in agreeing that successful innovation cannot happen without proper innovation management systems and processes. Opened by the Deputy Minister of Science and Technology, Derek Hanekom, the 2008 summit set the stage for annual national deliberations on innovation and its facets, in order for our country to become more competitive, boost economic growth and address social issues such as job creation and poverty.
Ruda Landman acts as MC and chairs discussions in this year’s event set to take place in an innovative simulated television recording studio. The 2009 event brings together some of our country’s foremost minds who will be delivering on how, if designed correctly and with a purpose, innovation can produce the required results companies need, based on their own culture and landscape.
This year’s event sees the inclusion of an exciting exhibition. Launched by the SA Innovator Magazine, this incredible expo called Innovation Investor Exhibition 2009, walks the innovation commercialisation process and brings together relevant stakeholders: inventors, investors, venture capitalists and financiers, Patent and IP attorneys, Designers, Government institutions and agencies.
CEOs, government and other leading figureheads will be treated to an array of workshops which will empower them to not only use innovation as a tool in planning for their organisation’s future but also to in a cup shell... design their own entire cuppa – tea… naturally... literally!
SA’s 2nd National Innovation Summit themed: Innovation by design…innovate for you future with a purpose, will be hosted at the Maropeng Conference Centre, nestled in the award-winning world heritage site, Cradle of Humankind on 18th and 19th August.
Contact information:
www.innovationsummit.co.za
Wednesday, May 13, 2009
IDC CONCLUDES EUR 60M LOAN WITH EUROPEAN INVESTMENT BANK
The Industrial Development Corporation of South Africa Limited (IDC) has received a EUR 60 million credit line from the European Investment Bank (EIB) to finance private sector small and medium sized enterprises. The funds will support viable projects undertaken by small and medium enterprises businesses in the industrial, resources and services sectors.
The agreement was signed in March 2009.
EIB Vice President Plutarchos Sakellaris, who is responsible for lending operations in South Africa, said: “This loan is a strong signal of the EIB’s commitment to supporting the private sector and encouraging the creation of employment in South Africa. Moreover, the Bank is confident that by working in partnership with the Industrial Development Corporation we can help to stimulate the South African financial markets by diversifying IDC’s funding base and enhancing the provision of finance to SMEs.”
Commenting about the loan, Qhena said the line of credit will improve access to funding SMEs in the country.
“This credit could not have come at a more opportune time when the cost of raising funds is extremely high given the market volatility and the liquidity crisis,” Qhena said.
“We are particularly pleased that this loan will further enhance our commitment to development finance and addressing market failures.”
“IDC’s expertise in project evaluation ensures that the EIB funds are directed towards projects which promote economic growth and job creation, as well as being environmentally and socially sustainable.”
The IDC’s relationship with the EIB dates back to the mid ‘90s and over the years provided four credit lines totalling about EUR 165 million to IDC for private sector small businesses in South Africa.
The agreement was signed in March 2009.
EIB Vice President Plutarchos Sakellaris, who is responsible for lending operations in South Africa, said: “This loan is a strong signal of the EIB’s commitment to supporting the private sector and encouraging the creation of employment in South Africa. Moreover, the Bank is confident that by working in partnership with the Industrial Development Corporation we can help to stimulate the South African financial markets by diversifying IDC’s funding base and enhancing the provision of finance to SMEs.”
Commenting about the loan, Qhena said the line of credit will improve access to funding SMEs in the country.
“This credit could not have come at a more opportune time when the cost of raising funds is extremely high given the market volatility and the liquidity crisis,” Qhena said.
“We are particularly pleased that this loan will further enhance our commitment to development finance and addressing market failures.”
“IDC’s expertise in project evaluation ensures that the EIB funds are directed towards projects which promote economic growth and job creation, as well as being environmentally and socially sustainable.”
The IDC’s relationship with the EIB dates back to the mid ‘90s and over the years provided four credit lines totalling about EUR 165 million to IDC for private sector small businesses in South Africa.
Tuesday, May 5, 2009
Vox Telecom
Do any of the private equity players know if there is any substance to the rumour that Lerekeo Metier intends to delist Vox Telecoms shortly?
I know that up until the middle of January 2009 they were quite active in buying Vox shares on the open market.
Anyone heard anything?
I know that up until the middle of January 2009 they were quite active in buying Vox shares on the open market.
Anyone heard anything?
Private equity needs to adapt
The global credit crisis has produced a mixed bag of fortunes for private equity - the investment class in which capital is invested in private companies. On the downside, corporate earnings have declined but on the up, reduced company valuations have produced a range of investment ‘bargains’. Profitable exit from deals is likely to be delayed due to the downturn, however, with a slowdown in the number of companies listing on stock exchanges, companies which may previously have gone public are now good prospects for private equity investors.
This was reported by the South African Venture Capital and Private Equity Association (SAVCA) and Sanlam Private Equity (SPE) at a jointly-hosted media briefing in Johannesburg today which examined the state of private equity locally and globally.
Private equity currently…
What is certain, said Cora Fernandez, deputy CEO of SPE and chairperson of SAVCA, is that experienced managers have demonstrated their ability to adapt in a changing and challenging market. “Globally, merger and acquisition activity has slowed and mega deals have evaporated. Investors remain cautious since earnings visibility is a major challenge and debt markets have improved marginally. There is no shortage of debt for good deals, but the amount of debt offered has come down along with gearing levels. We have, in essence, gone back to private equity basics.”
She said that private equity players in developed markets were now looking to mid-size companies for investment opportunities, with a hive of activity currently underway in underperforming assets and secondaries.
“The private equity industry in SA is far better placed than its more mature counterparts in the first world. South African private equity deals have never been geared to the same extent as the gearing levels seen in developed markets. As a result, we don’t expect to see a high level of underperforming or distressed assets, work outs or turnarounds,” said Fernandez.
She said that South Africa’s industry may be small by international standards - it makes up only one percent of global activity - but it does contribute a significant 2.8 percent to GDP which contributes to expansion and development in the country. “It is sophisticated and well-organised with a well established network of highly experienced players, deep and liquid debt markets and solid legal framework.
“Currently, the biggest challenge facing us in the aftermath of the financial crisis is fundraising. Locally, investors into PE funds are largely pension funds and endowments, many of which are currently reviewing their asset allocation strategies in search of greater liquidity. More than 50 percent of capital raised by PE funds in the past two years was sourced offshore, principally the US and European countries. The full extent and consequences of this risk is only likely to be felt in the next 12 to 18 months.”
Fernandez said that, despite these challenges, private equity remains a great source of foreign direct investment and of growth and expansion finance. “This is very good news for the financial services sector and the economy. It essentially means that we can use foreign capital to finance and stimulate growth in SA.”
Looking ahead…
Looking ahead over the next few years, J-P Fourie, executive officer of SAVCA said that more equity-only deals were a strong possibility in South Africa and around the world. “But raising funds in a climate of depressed corporate earnings will be a challenge. We will also see the lifecycle of a private equity deal increase as companies take longer to convert investment funds into tangible business results.”
He said that it looked likely that huge write-downs would be made, particularly in the highly leverage Europe and US, and that highly profitable exits would present a massive challenge. “Private trade sales will far outstrip listing exits or sales to other private equity funds and, unfortunately, some new, young private equity firms could fall victim to a low appetite for private equity fund raising.”
On the plus side, many international players are still extremely interesting in the value which emerging markets can offer. “Because, unlike the stagnant or declining growth in Europe, the US and Australia, there is still good growth in China, Brazil and India and, to a larger extent, the African continent.”
The SAVCA KPMG annual private equity and venture capital industry survey results will be published later in May. For more information visit www.savca.co.za or www.spe.sanlam.com.
This was reported by the South African Venture Capital and Private Equity Association (SAVCA) and Sanlam Private Equity (SPE) at a jointly-hosted media briefing in Johannesburg today which examined the state of private equity locally and globally.
Private equity currently…
What is certain, said Cora Fernandez, deputy CEO of SPE and chairperson of SAVCA, is that experienced managers have demonstrated their ability to adapt in a changing and challenging market. “Globally, merger and acquisition activity has slowed and mega deals have evaporated. Investors remain cautious since earnings visibility is a major challenge and debt markets have improved marginally. There is no shortage of debt for good deals, but the amount of debt offered has come down along with gearing levels. We have, in essence, gone back to private equity basics.”
She said that private equity players in developed markets were now looking to mid-size companies for investment opportunities, with a hive of activity currently underway in underperforming assets and secondaries.
“The private equity industry in SA is far better placed than its more mature counterparts in the first world. South African private equity deals have never been geared to the same extent as the gearing levels seen in developed markets. As a result, we don’t expect to see a high level of underperforming or distressed assets, work outs or turnarounds,” said Fernandez.
She said that South Africa’s industry may be small by international standards - it makes up only one percent of global activity - but it does contribute a significant 2.8 percent to GDP which contributes to expansion and development in the country. “It is sophisticated and well-organised with a well established network of highly experienced players, deep and liquid debt markets and solid legal framework.
“Currently, the biggest challenge facing us in the aftermath of the financial crisis is fundraising. Locally, investors into PE funds are largely pension funds and endowments, many of which are currently reviewing their asset allocation strategies in search of greater liquidity. More than 50 percent of capital raised by PE funds in the past two years was sourced offshore, principally the US and European countries. The full extent and consequences of this risk is only likely to be felt in the next 12 to 18 months.”
Fernandez said that, despite these challenges, private equity remains a great source of foreign direct investment and of growth and expansion finance. “This is very good news for the financial services sector and the economy. It essentially means that we can use foreign capital to finance and stimulate growth in SA.”
Looking ahead…
Looking ahead over the next few years, J-P Fourie, executive officer of SAVCA said that more equity-only deals were a strong possibility in South Africa and around the world. “But raising funds in a climate of depressed corporate earnings will be a challenge. We will also see the lifecycle of a private equity deal increase as companies take longer to convert investment funds into tangible business results.”
He said that it looked likely that huge write-downs would be made, particularly in the highly leverage Europe and US, and that highly profitable exits would present a massive challenge. “Private trade sales will far outstrip listing exits or sales to other private equity funds and, unfortunately, some new, young private equity firms could fall victim to a low appetite for private equity fund raising.”
On the plus side, many international players are still extremely interesting in the value which emerging markets can offer. “Because, unlike the stagnant or declining growth in Europe, the US and Australia, there is still good growth in China, Brazil and India and, to a larger extent, the African continent.”
The SAVCA KPMG annual private equity and venture capital industry survey results will be published later in May. For more information visit www.savca.co.za or www.spe.sanlam.com.
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