South Africa’s private equity professionals have long been expected to move beyond their local market. This has been an expectation in part borne out of the depth and breadth of South Africa’s private equity market, and in part because it has been the norm for some time now for many of the country’s institutionally structured private equity funds to include a potential allocation for deals outside of the country. Although, to date, these carve outs have been sparingly used. Mid to large buyout firm Ethos has gone beyond its home territory investing directly into non-South African entities as has Brait, although the latter has only done so via portfolio companies’ that are headquartered in South Africa.

Part of the hesitation to move beyond home borders can be explained by risk. “It is the goal of most [South African PE funds] to conquer sub Saharan Africa, but if they misfire on their pan African expansion plans by moving too quickly to do deals north of the border, it will be a long time before their investors allow them a second chance, if at all. Anybody can execute a deal north of the border; there are many intermediaries in the major hubs in Africa, including South Africa, who are working on raising finance for pan African investment opportunities; but you have got to have active day-to-day control and if that is facilitated via a local partner in a joint venture, that adds an additional level of risk at the portfolio company level. Investors will typically look for their general partners to have a local presence, unless the fund documentation limits the percentage of capital that can be invested outside of South Africa, in which case the investors may be happy to accept that risk; implying that they can live with that small percentage of the fund being written off,” says Warren Hibbert, partner of MVision.

Others attribute the hesitation to the fact that South Africa...

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