Private Credit in South Africa; 2025 in Review and the Road Ahead

The year 2025 marked a turning point for private credit in South Africa. As institutional funders sought diversification beyond traditional equity and bond markets, alternative assets moved from the fringes of portfolio construction into mainstream allocation strategies. The SAVCA Private Equity Industry Survey 2025 found that 86% of local private equity firms are now considering or actively pursuing private credit – up sharply from just 50% the year before. African private capital deal volume rose 23% year-on-year in Q2 2025, underscoring accelerating appetite for the asset class across the continent. 

Globally, private credit assets under management have surged past US$1.7 trillion, with Preqin forecasting the asset class will exceed US$2.6 trillion by 2029 at a compound annual growth rate of nearly 10%. South Africa is positioning itself as a meaningful participant in this expansion. The Public Investment Corporation, the country’s largest asset manager, has signalled its intent to deploy capital into private credit opportunities beyond its home market, while a growing number of specialist fund managers are building dedicated strategies across direct lending, mezzanine finance, and structured credit. 

Traditional portfolios built around listed equities and government bonds come with inherent volatility and increasingly correlated drawdowns. Alternative assets – spanning private equity, private credit, real estate, and infrastructure – offer access to return streams that behave differently from public markets, providing genuine diversification rather than simply adding more of the same risk. 

Private credit stands out within this category. Returns are delivered through regular interest payments and scheduled principal repayments, creating predictable cash flows that contrast sharply with the daily mark-to-market swings of listed securities. Senior-secured lending provides structural downside protection through collateral and covenants, while shorter investment tenors relative to private equity improve portfolio liquidity. For South Africans navigating an economy that grew just 1% in 2025, the ability to generate consistent, above-inflation returns with lower volatility has proved particularly attractive.

The chart below tracks the cumulative growth of R10,000 invested across three benchmarks over the past decade: the JSE All Share Index, the S&P 500 in rand terms, and the Fortified Capital Plus product, linked to prime plus 4.5% compounded monthly. The shaded area marks the COVID-19 period. 

Over a full decade, the picture is striking. The S&P 500, even on a price-only basis and benefiting from significant rand depreciation, grew R10,000 to approximately R36,000. The JSE All Share, weighed down by years of sideways drift, reached roughly R23,000 – with most of that gain concentrated in a late 2024–2025 rally driven by surging gold prices and improved sentiment following the Government of National Unity. The Fortified Capital Plus, by contrast, compounded steadily through every market environment – including the COVID-19 drawdown that saw both equity indices fall sharply – to reach approximately R42,000. No single negative period. No drawdowns. Just the quiet power of consistent, above-inflation compounding.

The broader investment industry is increasingly aligned on the role of private credit. At the SAVCA Private Equity Conference in Cape Town, industry leaders noted that the asset class extends well beyond traditional mid-market lending, encompassing any loan that is not publicly listed – which means there is significant scale for individuals to participate. Panellists highlighted the irony of low economic growth coexisting with high demand from mid-cap SMEs hungry for flexible capital – precisely the gap that private credit is designed to fill.

Fund managers across the spectrum point to growing synergies between private credit and private equity, with the combination offering a balanced blend of growth and income while enhancing risk-adjusted returns. Mezzanine specialists report rising appetite for structures that blend debt-like security with equity-like upside, particularly in sectors where pockets of growth persist despite broader macro headwinds. Internationally, the US private credit market – now estimated at US$3 trillion in AUM and projected to reach US$5 trillion by 2029 – has evolved into a critical pillar of commercial lending. South Africa’s alternative lending market is following suit, growing at approximately 14% annually and expected to reach US$1.95 billion by 2029.

One of the most compelling growth stories intersecting with private credit in South Africa is the rapid expansion of community schemes. With more than 56,000 registered sectional title schemes and the number continuing to rise – driven by urbanisation, affordability considerations, and a preference for secure, managed living – this sector represents a substantial and growing pool of structured lending opportunities. Body corporates require funding for maintenance, upgrades, and capital expenditure: needs that are predictable, secured against real assets, and well-suited to private credit structures.

The sectional title boom identified by property commentators in 2025 is not a passing trend. As South Africa’s middle class continues to gravitate toward estates and complexes offering security, convenience, and community, the financial infrastructure supporting these schemes – from levy funding to building refurbishment finance – will need to scale alongside them. Private credit, with its flexibility and tailored structuring, is uniquely positioned to serve this market.

The outlook for private credit in South Africa is underpinned by structural tailwinds that show no sign of abating. Basel III-driven bank retrenchment from mid-market lending continues to create space for alternative providers. The SARB’s easing cycle – 150 basis points of cuts since September 2024, bringing prime to 10.25% – is improving borrower capacity while private credit rates remain attractively above public market alternatives. And as Regulation 28 of the Pension Funds Act continues to evolve, institutional allocations to alternatives are expected to grow further.

For funders seeking consistent, inflation-beating returns with lower correlation to listed markets, private credit in South Africa offers a compelling proposition – one that the evidence of the past decade has only strengthened.