Coronavirus: South Africa to ease lockdown to level 4 as of 1 May says Ramaphosa
South Africa will gradually reopen the economy on 1 May, when its lockdown will be eased to level 4, President Cyril Ramaphosa said in an address late Thursday.
By David Whitehouse
Liquidity management will decide which private equity investors in Africa are able to take advantage of the new opportunities created by the coronavirus pandemic.
That’s the message from the transcript of a private webinar for members of the African Private Equity and Venture Capital Association (AVCA) on 8 April released to The Africa Report. The speakers and the institutions they represent were not identified in the transcript.
The industry needs to develop action plans to address falling revenues at the invested companies, argued Institution A. All levers on the cost side need to be used to cope with a slowing top line. These include a hiring freeze, cutting marketing spending and reconsidering receivables credits offered to companies. Institution B said that the focus needs to be on liquidity, rather than solvency.
The participants were discussing the results of an AVCA industry survey on the impact of COVID-19.
Those results surprised Institution A.
Institution D expected the industry to take a hit on exits, but with some benefits for those making investments at lower prices. Fintech, which does not need social proximity, was seen as a beneficiary.
In the survey, hotel and leisure (90%) was cited by the fund managers as the sector that will be most affected.
Firms expect investments to take longer: 49% said that it will take between six and 12 months extra to fully deploy their capital. A further 16% said they would need more than an extra year. Almost half, 49%, said that the crisis would affect their fundraising timeline.
READ MORE: South Africa’s digital Bank Zero: on track to launch despite pandemic
The industries most likely emerge unscathed are telecoms and technology: no-one in the survey saw these as among the most affected sectors, while utilities and infrastructure scored just 2% and 6%.
The Bottom Line: Private equity investors in Africa need to plan liquidity scenarios for a prolonged crisis.
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