Public Investment Corporation invests R2.5bn in Africa

3 October 2014

The Public Investment Corporation, a South African government-owned financial services provider, plans to invest R2.5 billion on the African continent during the 2014/15 financial year.

“The commitment to invest in the rest of the continent is born out of a realisation that our collective success is premised on economic integration,’ says Nhlanhla Nene, chairman of PIC in the corporation’s annual report tabled in Parliament on 2 October 2014.

Nene says the PIC has established two funds: the Africa Developmental Investments and Private Equity Africa, which will assist the corporation to discharge its mandate to invest on the rest of the continent. He says Africa’s economic outlook has been positively changing and over the last decade, the continent’s economic output has tripled with projections that Sub-Saharan Africa will grow at an average of 5% over the next 10 years.

“This growth means that the continent will be the second fastest growing region in the world after Asia. For this reason, the PIC will, in the new financial year, also focus on developmental investments in Africa with a minimum commitment of US$500 million for developmental investments in Africa and a further US$500 million towards private equity in Africa,’ says Nene, adding that the African story presents the PIC with unique investment opportunities.

Acting PIC CEO, Matshepo More, says in the next financial year the PIC plans to invest “at least a further R2.5 billion in the rest of the continent’. “PIC’s largest transaction during the 2013/14 financial year was securing a 1.5% stake in a Nigerian listed cement company, Dangote Cement for US$289 million,’ she says.

The Dangote Cement deal also offers PIC other opportunities in the Dangote Group portfolio companies, which includes sugar, flour, oil refinery and port operations.

PIC’s first investment in the rest of Africa after the change in the corporation’s investment mandate was the US$250 million investment made in Ecobank, which has exposure to more than 30 countries in central Africa.

These investments are in line with the Government Employees Pension Fund’s investment mandate, which was changed in 2011 to require the PIC to commit 5% of assets under management for investment in the rest of Africa, and another 5% to global bonds and equities.

Investments in the rest of Africa currently represent 0.5% of the PIC’s total R1.6- trillion assets under management, which grew from the previous year’s R1.4-trillion.

More says the PIC is in good financial health “with its profitability at R209 million as at 31 March 2014, up from R130 million at the end of the 2013 financial year’, adding that the PIC has also set aside 1% of the profit after tax from the 2013 financial year for corporate social investment.

Established in 1911, the PIC is one of the largest investment managers in Africa, managing assets of over R1.6 trillion and still growing. Of total assets under management, 49% is invested in local equities, 32.4% in local bonds, 7% in cash and money-market instruments, 4.39% in properties and 5.36% in offshore equity and bonds.

During the 2013-14 financial year R11.4bn worth of unlisted investments were approved, of which R4.8bn has already been disbursed.

The PIC is increasingly expected by the government to contribute towards socioeconomic development. In this regard, Nene says PIC investments had created in excess of 7 805 direct and indirect jobs, and sustained 78 636 jobs.

“The PIC is emerging as a leader in the development of green industries by directly and indirectly funding renewable energy projects that will generate in excess of 1 558 megawatts of electricity,” he said.

The PIC has entrusted R50 billion of its funds to black asset managers as a way of spurring change in the asset management industry. It approved R6.9 billion in unlisted developmental investments in 2013/14 financial year and plans to invest at least R2 billion in social and economic infrastructure the 2014/15 financial year.