South Africa’s private equity (PE) sector is looking to realise a notable influx of deal activity and increased investment opportunities over the next year, prompted by a resurgence in interest from both local and international investors across various sectors.
In South Africa, it is hoped that the recently formed Government of National Unity will lead to greater market stability and an improved economic climate. A move towards lower interest rates in developed markets will also increase risk appetite for investments into emerging markets.
In our view, the following sectors present investment and growth opportunities in South Africa:
ESG and impact investing
Like most commercial sectors, the rise of environmental, social and governance (ESG) considerations has similarly permeated Africa’s PE environment. Investors in PE funds are increasingly imposing sustainability and social development requirements on PE firms, and require that they take these factors into account as part of their investment objectives and throughout the life cycle of their investments. This is especially pertinent for PE firms with commitments from development finance institutions.
Impact investing is particularly relevant in South Africa, where complex social issues such as poverty, inequality and unemployment, remain rife. Investments into sectors such as affordable housing, education, food and healthcare have the potential to create long-term value for both investors and society, making South Africa attractive to PE firms with an impact/ESG mandate.
Information and communications technology (ICT)
South Africa has one of the largest ICT sectors on the continent, so it is unsurprising that PE opportunities in the sector are on the rise.
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In recent years, South African subsidiaries of foreign companies and South African-based companies have supplied most of the new fixed and wireless telecom networks established across the African continent.
Additionally, there are increasing opportunities within South African organisations looking to utilise cloud computing’s cost-effective and efficient networks, such as Software-as-a-Service and Infrastructure-as-a-Service. These recent technological advancements and rising demand within South Africa and the rest of the African continent have created a fruitful PE investment environment in the ICT sector.
In this space, Bowmans recently acted for Convergence Partners Digital Infrastructure Fund in its acquisition of 100% of the issued shares in Datacentrix Holdings Proprietary Limited alongside the Datacentrix management team. Datacentrix provides ICT integration services and solutions to the public sector and blue-chip corporates in South Africa, ensuring their success and sustainability into the digital age.
The team also advised a consortium of buyers comprising the IDEAS Infrastructure II Partnership, STOA Infra & Energy and Thebe Investment Corporation Proprietary Limited in relation to the acquisition of the shares held by Actis LLP in Octotel Proprietary Limited and RSAWeb Proprietary Limited. Octotel is a network infrastructure provider focused on the delivery of world-class fibre infrastructure.
Fintech
South Africa has become a leader in African financial innovation, and the fintech market in South Africa presents promising investment opportunities. Payment solutions have continued to dominate financial technology innovation in the country, attracting substantial investments from PE firms. This is amplified by South Africa’s relatively low costs and large market offering in the tech space.
Bowmans recently advised Swissquote Group Holding on its acquisition of 100% of the shares in Optimatrade Investment Partners. Swissquote provides a range of online financial and trading services, and Optimatrade is a South African regulated Financial Services company that focuses on making offshore investing easier and more accessible for South African investors and traders by partnering with global online financial and trade services providers.
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Renewable energy
PE funds are increasing investments into renewable energy, green hydrogen, battery storage and smart power technology projects across the continent. Green energy solutions are essential to increase access to a decarbonised, decentralised energy supply.
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This has become crucial in light of South Africa’s electricity crisis and the detrimental economic effect that prolonged load-shedding had on the economy.
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PE firms have been successfully investing in independent power producers (IPPs) that generate renewable energy that is then sold to Eskom. The lifting of licensing requirements for large-scale generation projects and these efforts to address the electricity crisis have stimulated significant growth in South Africa’s renewable energy market. As a result, renewable energy capacity has expanded rapidly, resulting in numerous opportunities for investment within the sector.
Bowmans recently advised the Evolution III Fund – an Africa-focused climate impact investment fund managed by Inspired Evolution – in relation to its investment in Equator Energy Ltd (a commercial and industrial solar provider in East Africa) via the acquisition of 33.3% of the issued shares in Energy Pulse Ltd, the majority shareholder of Equator Energy.
Inspired Evolution specialises in clean energy infrastructure, energy access, and resource efficiency investments.
Bowmans also recently acted for Adenia Partners in relation to (i) its acquisition of a majority stake in the Herholdts Group, a leading distributor of electrical and solar equipment in South Africa, and (ii) its indirect acquisition of Enfin AM and Enfin Developers, a South African-based solar financing solutions provider.
Agribusiness
Agribusiness has come to the fore as a profitable investment sector in South Africa. For context, the sector’s overall contribution, including the value chain, was around 10.3% of South Africa’s gross domestic product at the end of 2023.
The value of these investments is compounded by the positive impact of technology and big data. Considering climate change and water shortages, the agricultural sector is at an advantage by implementing new technology that efficiently manages and ensures an optimum environment for agricultural growth, ultimately yielding a valuable investment return.
As a result, these resources continue to contribute to South Africa’s economic resilience and attractiveness as a PE investment hub, promising long-term opportunities for growth and development in a resource-rich environment.
Bowmans recently advised US private-equity firm Paine Schwartz Partners’ portfolio company, AgroFresh Inc. – a US-based company and global leader in the post-harvest agricultural space – on its acquisition of South Africa-registered Tessara (Pty) Ltd from private equity firm Carlyle Group Inc. This transaction was recently awarded ‘Private Equity Deal of the Year’ at the South African DealMakers Awards.
Bowmans also acted for Phatisa in relation to its investment in the Lona Food Group, a South African-based citrus grower and exporter.
Supply chain logistics
According to Mordor Intelligence1, the size of the freight and logistics markets in South Africa was US$13,79bn in 2024, and is expected to reach $19,9bn by 2030, growing at a compound annual growth rate of 6.29% during the forecast period.
The increasing demand for supply chain and logistics services is partly due to the predicted boost in intra-African trade, which is slowly starting to take off after the implementation of the African Continental Free Trade Area (AfCFTA) in 2021.
Further, global trade is recovering as interest rates begin to decrease and economies improve. The development of digital logistics solutions and telematics systems has also increased efficiency in supply chain logistics, boosting interest in the sector and providing good opportunities for PE funds to exit their investments.
Bowmans recently advised on the disposal of a minority shareholding in a significant warehousing, distribution management, and logistics company.
Consumer goods and retail
While high inflation, interest rates and unemployment have put pressure on consumer spending in the last few years, interest rates are now decreasing and consumer spending is on the rise. Further, with AfCFTA now operational, free trade across the continent is expected to increase in the next few years. All of this has boosted PE investment in the consumer goods and retail sector, with investors looking for opportunities to acquire companies on a growth trajectory.
Bowmans recently advised Capitalworks on its acquisition of 100% of the shares in The Building Company (Pty) Ltd, a South African company offering building materials, hardware and related products to retail customers.
Healthcare
PE investors in the healthcare sector have been capitalising on the growing demand for quality healthcare services and the need to address the healthcare infrastructure gap in South Africa.
Investments are being directed towards the building of hospitals and clinics, healthcare insurance services, and related industries, such as medical equipment and pharmaceutical manufacturing. The demand for digital healthcare is also booming, with the sector having a considerable impact on providing continuous access to healthcare for South Africans in rural areas.
Bowmans recently advised Next176 (Pty) Ltd on its agreement for future equity with Kena Health (Pty) Ltd. Next 176 is a venture-building strategic investment company that focuses on sustainable investments that impact lives. Kena Health offers a technology-driven healthcare platform in South Africa.
The PE landscape in South Africa continues to evolve rapidly, driven by changing global and local market dynamics, technological advance-ments, and shifting investor preferences. Investors in South Africa still have challenges to overcome, but optimism surrounding the country’s new government and renewed political landscape, its diverse high-growth sectors, ambitious workforce and rich natural resources are just some of the key areas of opportunity for PE investments in South Africa.
Augustyn, Peter, Hassan and McDougall are Partners | Bowmans.
1 https://www.mordorintelligence.com/industry-reports/south-africa-freight-and-logistics-market
