South Africa has been doing very well in terms of financial and economic improvement in 2018. Both on an individual and institutional scale, the numbers have been growing and there is plenty of data to back it up. Most important aspects in terms of growth is the private equity market in South Africa. Over the course of 2018, it has been showing massive gains according to the RisCura Savca Private Equity Performance report.

This type of performance is reinforced by the general state of affairs in South Africa, in terms of personal finance and well-being. Although the country is going through a lot of economic and employment trouble as it is, most residents are still able to find a way out. According to regulated Forex brokers in South Africa, the influx of new customers from the region has been on a scale never seen before. It seems that the population has “given up” relying on the authorities to bring more jobs to the country.

Even senior analysts at RisCura are agreeing with the general population about having a “hands-on” approach to the whole economic situation. According to Gilbert Anyetei, the growth that South Africa was seeing in 2018, will not be the case in 2019 if the same problems continue to be prevalent. Problems such as weak investor confidence, high unemployment and overall supply limitations on essential commodities such as electricity and infrastructure.

However, despite the onslaught of potential setbacks, the private equity class has shown to be an extremely reliable asset class during hard economic times. Its increase in popularity and profitability is a testimony to that.

According to Savca’s CEO, Tanya van Lill, the last year was an extremely tough challenge for South Africa as a whole. The effectiveness of the private equity sector was something that pretty much saved a lot of citizens from financial ruin. What van Lill forgot to mention was the alternatives to income that South Africans have been finding. One example was already shown above, being financial markets. However, another new asset class has emerged through the newly digitalized world. Cryptocurrencies are becoming a standard asset to hold for a South African, according to a recent survey.

What van Lill did address was the primary challenges of 2019. These were mainly problems during fund-raising and deployment stages of the private equity fund management.

The problems to come

As already mentioned, the primary problems that the country will be facing will be the fundraising stages of the projects, as well as deployment procedures. The primary reason for the problem is the upcoming elections. No international investor wants to gamble on his investment should an unwanted candidate be the victor. Therefore it is expected that international investments will shrink considerably compared to local ones.

One of the primary examples of local investors “taking up the torch” is Ata Capital. Which is currently targeting R1.5 billion ( around $100 million) from local institutional investors. Judging from the state of that sector, the amount is indeed realistic.

When it comes to deployment, Van Lill mentioned the most popular industries for investors locally. Pretty much anything that deals with media, automotives, and healthcare will have some kind of financial backing not only from local but also international investors, which could lead to a boom in the industry. This, of course, carries a lot of problems as well. Even though the market may boom for these industries, it will inflate in the process, turning into a massive balloon. In time other industries will catch up to this balloon, which in time will either need to be artificially maintained or just let it pop.

2019 may see the deployment of dozens of healthcare, media, and automotive companies, but will they last?

In the end, it is obvious that South Africa will not be able to reach the same amount of progress it has been seeing over the last decade. The tumble in 2018 was already a testimony to an even worse 2019. Sure the growth may still be there, albeit it may be dwarfed by the latest achievements of the county’s economy.