For two decades, South Africa’s private equity industry has relied on three primary exit routes: trade sales, sales to other financial sponsors and listings. Today, all three face constraints. Strategic buyers have become more selective, holding periods have lengthened and the IPO window has opened only rarely. The result is a growing liquidity bottleneck, with mature assets held in ageing funds and investors waiting longer for distributions.
Globally, secondary transactions have evolved from a niche outlet for forced sellers into a credible fourth exit route and an established portfolio-management tool. For South Africa, the opportunity is to unlock capital, give investors greater exit flexibility and keep capital moving through the private equity ecosystem. Realising it will depend on the market’s ability to support transactions with robust governance, disciplined pricing, and a deep enough pool of buyers.
Secondaries in the mainstream
In the first half of 2026, global secondary transaction volume reached a record US$118 billion, up 15% year on year and more than 60 times what South African private equity. General partner (GP)-led transactions accounted for 53% of that volume, the first majority since 2021; the balance came from limited partners (LPs) selling fund interests.
Behind this growth are distributions falling short of limited partners’ (LPs) expectations or taking longer to materialise. Annual distributions to LPs have fallen to around 10% of portfolio value, well below the long-term average of approximately 25%. Warburg Pincus estimates US$4 trillion of private equity inventory globally against annual exits of only about US$500 billion. As a result, investors are prioritising distributions to paid-in capital (DPI), the cash actually returned, over internal rates of return (IRR), which need not reflect cash realised.
Secondary transactions offer two routes to liquidity. In an LP-led transaction, an existing investor sells its interest in a private capital fund to a secondary buyer. In a GP-led transaction, the fund manager transfers one or more portfolio companies into a continuation vehicle, letting existing investors cash out or roll over. The manager keeps assets with further growth potential while offering investors a route to liquidity. Pantheon notes that GP-led volume grew at 49% a year between 2023 and 2025, against 19% for broader M&A, suggesting continuation vehicles are now a structural feature of exits rather than a cyclical workaround.
The South African case for a secondary market
South Africa’s private equity industry invested R26.6 billion across 228 deals in 2024. Exits hit a record 52, but proceeds fell 16% to R17.1 billion. Many funds raised between 2013 and 2018 are at or beyond end-of-life.
Fundraising is suffering too. Capital raised fell 70% to R8.4 billion, the lowest since 2017, as distributable capital dried up. Exits returned 1.5x cost (1.7x in 2023), and LPs are favouring Europe and the US, where one-year IRRs roughly double the 6% elsewhere. Re-ups hinge on DPI, not IRR.
Traditional exit routes offer limited relief. Only one private equity-backed company, Optasia in 2025 has listed on the JSE in six years and South Africa’s smaller exchanges have not filled the gap. As trade buyers retreated, sponsor-to-sponsor sales became the largest exit route (19 exits, R5.7 billion). Listed vehicle Ethos Capital recently traded at about R4.25 against net asset value of R7.44 a share, a 43% discount that reflects illiquidity.
Secondaries are not new to South Africa. In 2013, Barclays Africa sold its R2.3bn interest in Absa Capital Private Equity Fund I to a HarbourVest-led syndicate, then the country’s largest fund secondary. The precedent shows such deals can be done locally; what is lacking is a consistent pipeline that offers a dependable route to liquidity.
Governance will determine whether the market earns trust
Continuation vehicles carry an obvious conflict. The manager sits on both sides of what is, in substance, a related-party transaction, often with reset fees and carried interest, so disclosure alone is not enough. Local LPs already resist structures that reward managers for holding assets rather than realising them, which is why the 10-year closed-end fund remains the norm.
Good practice is well established: an independent valuation or fairness opinion, a competitive price-setting process, approval by the LP advisory committee, full disclosure of changes to fees, carry and term, and an adequate election period. LP portfolios traded at an average of 87% of NAV globally in H1 2026, but emerging-market exposures cleared at discounts of 35% or more, and allocators are already probing unrealised marks in older local funds.
Done well, a continuation vehicle lets a manager back a strong business for longer while giving investors a fair exit. Done poorly, it delays price discovery. The difference lies in the process.
A market cannot develop without buyers
Demand may be the bigger constraint, even globally. Dedicated secondaries funds raised a record US$155 billion in 2025, yet Ardian expects limited dry powder to leave part of the volume brought to market unclosed. Secondary activity across Africa is estimated at well below US$100m (about R1.6bn) a year, less than a tenth of what South African private equity alone realised from exits in 2024. Development finance institutions (DFIs), the largest source of African fund capital, are often barred by their mandates from secondaries.
South Africa is better placed. Since 2023, Regulation 28 has allowed retirement funds to hold up to 15% in private equity, and domestic rand funding shields local funds from the currency losses eroding dollar-funded capital elsewhere on the continent. But secondaries demand different skills from primary fund selection: valuing individual assets, pricing time and risk, and negotiating with a manager on both sides of the table. Even global LPs are catching up: ILPA has issued updated guidance urging investors to
build the protocols and underwriting capability to make continuation-vehicle elections, often under compressed timelines.
Preparing for the fourth route
South Africa does not need US-scale secondaries. Nor is demand confined to mega-funds: mid-market buyout funds made up 36% of global LP-led volume in H1 2026, more than any other fund type, according to Campbell Lutyens. It needs a credible, transparent, and repeatable way to create liquidity: fund documents drafted with secondaries in mind, independent pricing, better cash-flow data so trustees can see what private equity returns, and institutions willing to buy and sell. The assets, the institutions and the needs are in place. What remains is the infrastructure, and the confidence to use it.
By Oreratile Gaoraelwe, Analyst at Tamela