PIC shifts emphasis to 'developmental' portfolio

THE Public Investment Corporation (PIC), which manages R1-trillion in government social funds, has unwound substantial black empowerment investments in favour of building a "developmental" portfolio, which includes infrastructure and job-creating investments, Parliament’s finance portfolio committee heard yesterday.

The shift in emphasis is in response to a change in strategy by the PIC’s biggest client — the R900bn Government Employees Pension Fund — which decided in 2010 that 5% of assets under management must be made in "developmental investments". These are housed in the Isibaya Fund.

Isibaya Fund general manager Roy Rajdhar and top PIC executives briefed the finance committee on the PIC’s strategic plan yesterday.

Mr Rajdhar said since the shift in emphasis "much of the black economic empowerment portfolio had been unwound and funds deployed into developmental areas".

In particular, the unwinding of the PIC’s role in funding empowerment deals in Telkom and MTN two years ago had freed up about 4% of its assets under management.

PIC CEO Elias Masilela said after the meeting that "the problem with these deals was that they were not broad enough".

"What we are looking at now are projects that are broader and have a wide socioeconomic impact, instead of focusing on shareholder transactions. We are not ruling out shareholder transactions but they are no longer the priority."

The PIC’s funding of the purchase of a 15% stake in Telkom by a consortium aligned to the African National Congress (ANC) had been particularly controversial, given the evidence of political favouritism that emerged and the role that ANC politicians had played in securing the deal for the successful consortium.

The Government Employees Pension Fund’s new developmental investment policy is a comfortable fit with evolving state economic policies, which seek to encourage pension funds to invest in infrastructure projects. In the case of the pension fund, R17bn has been committed so far, of an overall target of R70bn.

The policy says such investments must be in economic infrastructure; social infrastructure; economic growth — including investments in small and medium enterprises and black empowered enterprises; and environmental sustainability, such as renewable energy.

In addition to the Isibaya Fund, which will focus on domestic investment, the PIC has set aside a further 5% of assets under management for investment in Africa. The Africa strategy is in its early stages and the intention was to "enter with caution and in conjunction with partners" Mr Masilela said.

Initially, the PIC would collaborate with the Development Bank of Southern Africa, the Industrial Development Corporation and other established institutional investors.

However, the PIC would potentially take on a major role as a private-equity investor in African infrastructure, Isibaya Fund manager Koketso Mabe said. "With only $10bn in private equity invested in Africa last year, if the PIC invests $4bn over time, we will contribute 40% of the total," Mr Mabe said.

Mr Rajdhar said this provided big possibilities for the PIC to become an anchor investor in African projects, seen as increasingly attractive by private-equity investors.







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