Unlocking Growth Through Everest Wealth Management: An Investor's Guide to Private Equity in South Africa

The Johannesburg Stock Exchange (JSE) has lost more than half of its listed companies 1 over the past 30 years. This signals a major structural change in the investment landscape. The traditional ecosystem of public equities is shrinking, forcing those seeking meaningful growth to look beyond the familiar tickers of the ALSI 2. This contraction presents a challenge: with fewer choices and higher market concentration 3, how can your investment portfolio truly thrive?   The answer lies in the engine of the real economy: Private Equity (PE), such as those offered by Everest Wealth. Once considered a fringe asset class, private equity is now a key vehicle for investing in established, innovative, and high-growth businesses. It has become an essential part of a sophisticated investment strategy 4. This guide will demystify private equity, explaining what it is, how it creates value, how it differs from venture capital, and why it is crucial for a diversified portfolio for South African investors.  
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The Shifting Sands: Why Every Investor Should Look Beyond the Public Market

Public markets have long been valued for their liquidity and transparency. However, recent trends 5 on the JSE reveal that it is facing structural challenges that investors can no longer ignore. As the growth narrative shifts, understanding this change is the first step in repositioning your portfolio for the future. 

The Shrinking Universe of the JSE

The number of companies listed on the JSE has been steadily declining – a trend with significant implications for investors.  First, it reduces the range of available investments and limits choices for diversification.  Second, the market has become increasingly concentrated, with the JSE Top 40 companies now accounting for a staggering 83% 6 of the average daily traded volume. This concentration exposes investors to significant risk, as much of their public market exposure is tied to the performance of a small group of large, mature companies.  The reasons for this shift are important. Many companies are choosing to delist or stay private to avoid the relentless pressure from public markets to deliver short-term quarterly results. This short-term focus often conflicts with long-term strategic goals 7, such as investing in innovation or expanding into new markets. For active fund managers, this environment makes it increasingly challenging to find undervalued assets and generate alpha 8, as the pool of investable stocks continues to shrink.  

The Migration of Opportunity to Private Markets

As the public market becomes increasingly concentrated, the private market is thriving. Growth opportunities are shifting into this dynamic area, creating a vibrant private investment landscape in South Africa.  

According to the Southern African Venture Capital and Private Equity Association (SAVCA), the region’s venture capital sector closed 2024 with a record R13.35 billion in active investments across more than 1,300 deals, marking a 24% year-on-year increase 9. The broader private equity market is projected to grow at a robust compound annual growth rate of 8.71%, reaching an estimated USD 7.48 billion by 2033 10. This capital is clearly flowing to fund innovation, expansion, and value creation in sectors such as technology and healthcare 11. 

This shift calls for a fresh perspective on risk. While public markets are traditionally seen as “safe” and private markets as “risky,” the real danger on the JSE lies in stagnation and missed opportunities. Is it truly safer to remain confined to a concentrated pool of mature companies, or is it wiser to collaborate with experts to access the diverse and expanding ecosystem of private businesses? For the sophisticated investor, private equity is no longer merely an alternative; it has become an essential component of long-term financial strategy. Contact Everest Advisory to see how we can guide you in your financial journey. 

Demystifying Private Equity: What is it, Really?

At its core, private equity requires a fundamental change in the investor-company relationship from passive shareholding to active partnership. 

A Clear Definition for the Discerning Investor

Private equity 12 refers to capital invested in a company that is not publicly traded on a stock exchange such as the JSE. The structure 13 typically involves a private equity firm, known as the General Partner (GP), which raises a dedicated fund from a pool of investors, known as Limited Partners (LPs). These LPs can include institutional investors like pension funds, as well as family offices and high-net-worth individuals. The GP then employs this committed capital to acquire significant, often controlling, stakes in private companies, also referred to as “unlisted assets.” 

The Goal: Active Partnership, Not Passive Ownership

The main difference between private and public equity lies in their approach. When an investor buys shares on the JSE, they are a passive owner 14. In contrast, a private equity investment is an active, hands-on partnership rather than a distance shareholder. The objective of the PE firm is to work closely with the company’s management team to enhance its operations, strategy, and profitability over a typical holding period of four to seven years. The aim is to build a stronger, more valuable business that can be sold at a significant profit, a process known as an “exit”, thereby delivering superior returns to the fund’s investors 15. Deliberate value creation lies at the heart of private equity. 

Private Equity vs. Venture capital: A Crucial Distinction

The terms “private equity” and “venture capital” are often used interchangeably, but grasping the differences between them is crucial for assessing risk and aligning investments with financial goals. Both operate in the private markets, yet they focus on different types of companies and follow distinct investment strategies.   

Venture Capital vs. Private Equity: What’s the REAL Difference? 

Differentiator 

Venture Capital (VC) 

Private Equity (PE) 

Company Stage 

Early-stage startups, often pre-revenue or with unproven business models. 

Mature, established businesses with stable cash flows and a proven track record. 

Risk Profile 

High-risk, high-reward. A large percentage of investments may fail, with returns driven by a few major successes (“unicorns”). 

More moderate risk profile. Focus is on improving and scaling already successful companies. 

Investment Size 

Smaller capital deployments, often for seed or early-growth funding rounds. 

Larger transactions frequently involve the full acquisition of a company. 

Ownership Stake 

Typically, a minority stake provides capital and guidance without taking full control. 

A controlling (majority) stake allows the PE firm to drive strategic and operational changes. 

Source of Returns 

Explosive, exponential revenue growth from capturing new markets or disrupting existing ones. 

A combination of operational improvements, strategic growth (e.g., acquisitions), and financial management to drive value creation.  

Use of Debt 

Minimal to no use of debt (leverage) in the capital structure. 

Often uses significant leverage to finance acquisitions, in what is known as a Leveraged Buyout (LBO). 

 

The Value Creation Playbook: How PE Aims to Grow Businesses

A common misconception is that private equity is merely a source of capital. In reality, the funding is just the beginning. The true value of a PE partner lies in the deep operational expertise, strategic guidance, and industry networks they bring to the table. This active management approach is executed through a well-defined “playbook 16” focused on three key levers of value creation. 

Lever 1: Operational Improvements

This is about fundamentally improving the business and making it more efficient. PE firms bring a fresh perspective and deep industry knowledge to optimise core functions. This may include implementing best-in-class financial controls and reporting systems, upgrading technology to boost productivity, streamlining supply chains, or strengthening the senior management team with key strategic hires. 

Lever 2: Strategic Growth

This lever focuses on expanding the company’s revenue and market presence. Growth may occur organically, by helping the company launch new product lines or enter new geographic markets. It can also be frequently inorganic through “bolt-on acquisitions,” a strategy in which the portfolio company acquires smaller, complementary businesses to consolidate market share, access new technologies, and achieve powerful synergies. 

Lever 3: Financial Engineering

This involves optimising the company’s balance sheet and capital structure to support growth and maximise returns. By managing debt levels intelligently and ensuring the company is capitalised efficiently, PE firms can provide a stable financial foundation for executing ambitious growth plans.  To see these levers in action, consider the partnership between the PE firm RMB Ventures and the South African retailer Studio 88 17.. This was far more than a simple capital injection. Over a 10-year partnership, RMB Ventures collaborated with the founder-led business to implement a comprehensive growth strategy. This collaboration led to exponential results: the store count grew from 100 to an impressive 770, while both profits and revenue increased sixfold.  This case is a compelling illustration of the ‘value creation playbook’ we at Everest Wealth adapt and apply to drive growth within our own portfolio companies. 

The Language of Private Equity: Key Terms to Know

Navigating the world of private equity requires familiarity with its unique terminology. Understanding these key concepts 18 will empower investors to engage in more meaningful conversations with financial advisors and fund managers. 
  • General Partners (GPs): These are the professionals within the private equity firm who raise funds, source investment opportunities, manage the portfolio companies, and make the buy-and-sell decisions. 
  • Limited Partners (LPs): These are the investors, such as institutions, family offices, and high-net-worth individuals, who provide the capital managed by the GPs. Their liability extends only to the amount they invest. 
  • Unlisted Assets: This is a simple term for the private companies that a PE fund invests in. They are “unlisted” because their shares are not traded publicly on a stock exchange. 
  • Fund Lifecycle: A private equity fund typically has a lifespan of about 10 years. This lifecycle includes an initial fundraising phase, a multi-year investment period for deploying capital, a holding period for growing the portfolio companies, and a final exit phase, when investments are sold and profits returned to LPs. 
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Conclusion: Finding Growth in a New Landscape

The South African investment landscape is undergoing a profound transformation. As opportunities on the JSE continue to narrow, discerning investors must adapt their strategies to capture growth elsewhere. Private equity has moved to the very centre of long-term value creation, offering a disciplined, partnership-based approach to investing directly into businesses that fuel innovation and employment. 

Private equity should be viewed as a strategic allocation, an essential component for building a resilient and growth-oriented portfolio for the decades ahead.  

To discuss how a strategic allocation to private equity could fit within your portfolio, contact an Everest Wealth advisor today. 

Frequently Asked Questions (FAQ) For the South African Investor

For investors new to the asset class, several common questions and concerns naturally arise. Addressing these directly can help build confidence and clarity.  
  1. Is private equity too risky compared to the JSE? Private equity carries different risks, not necessarily greater risks. While individual private companies can fail, a well-diversified portfolio within a fund managed by experienced GPs can mitigate this company-specific risk. By contrast, the main risk of the JSE today lies in market concentration and the possibility of missing out on some of the economy’s most significant growth areas. 
  1. How long is my money locked in for? PE is an illiquid, long-term investment. Capital is typically “locked in” for the life of the fund, usually around 10 years. This long investment horizon is a feature, not a flaw; it allows GPs the time needed to implement their value creation strategies and exit investments under optimal conditions. 
  1. What is the minimum investment required? Historically, minimum capital commitments were prohibitively high, limiting access to large institutional investors. However, this is changing. Some funds and platforms are now making private equity more accessible to accredited or qualified investors, though the entry threshold remains much higher than for purchasing publicly traded shares. 
  1. How do PE firms make money? PE firms (GPs) earn income in two main ways, aligning their interests with those of their investors (LPs). They charge an annual management fee to cover operating costs, and their primary profit driver is carried interest, a share of the fund’s profits earned only after the LPs have received their initial capital and a pre-agreed preferred return. 
  1. How do I choose a private equity firm in South Africa? Due diligence is critical. Investors should look for a firm with a management team that has a proven track record, sector expertise, a clear value creation strategy, and a commitment to robust governance. Consulting the latest SAVCA industry survey 19 can also provide valuable insight 

Important Notice and Disclaimer

This article is provided for general information and educational purposes only and does not constitute financial advice as defined by the Financial Advisory and Intermediary Services Act, 2002 (FAIS Act). The content should not be relied upon as a basis for making any investment decisions. 

Please consult with a licensed financial advisor to determine if such investments are appropriate for your individual circumstances.  

Everest Wealth (Pty) Ltd is an authorised Financial Services Provider (FSP 795) and a registered credit provider NCRCP 21504 

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