The Public Investment Corporation of South Africa is actively exploring private credit as a growth avenue in Africa, having invested about 8 billion rand in recent years. The organization is prioritizing private debt over equities and private equity to tap into investment opportunities amidst extensive infrastructure needs on the continent, aligning with strategies to mitigate risks through established partners.
South Africa’s leading asset manager, the Public Investment Corporation (PIC), views private credit as a significant growth opportunity across Africa. As it seeks to expand beyond the South African market, the PIC has invested around 8 billion rand (approximately $520 million) in African projects over the last two years, according to Chief Investment Officer Kabelo Rikhotso, speaking at a conference in Cape Town.
Rikhotso emphasized that the PIC avoids investing in publicly listed equities across Africa due to the small size and illiquidity of those markets. Furthermore, private equity is generally not viable because many African businesses are family-owned and resistant to external capital that would dilute their ownership. However, there is a noticeable demand for private credit, which is deemed favorable.
He stated, “Private equity hasn’t worked, but private debt is working well. You fund, and you receive your interest.” This approach aligns with the increasing recognition of private credit as a viable means to finance much-needed infrastructure development on the continent, which has extensive unmet needs in sectors like energy, water, and logistics.
The African Development Bank estimates that the continent requires between $130 billion and $170 billion annually for infrastructure investments, a significant portion of which remains unfulfilled. The PIC mitigates political and regulatory risks by primarily investing through intermediaries, such as the African Finance Corporation. Recently, it allocated $100 million to Africa 50, a division of the ADB focused on mobilizing financing for infrastructure projects.
Rikhotso remarked, “We have to buy into vehicles that give us diversified exposure. You have to be in private markets and in partnerships.” Currently, the PIC holds about 12% of its investments offshore, notably less than the regulatory ceiling of 45% for private fund managers, with about 4% targeted at emerging markets, particularly China and India.
The Public Investment Corporation is strategically leveraging private credit to enhance its investment portfolio in Africa, particularly in infrastructure development. With a clear avoidance of equities and private equity due to market limitations, the PIC’s focus on private debt presents a promising approach to meet the continent’s substantial financing needs. By collaborating with established intermediaries, the PIC aims to ensure diversified exposure and minimize risks in its expansion efforts.
Original Source: financialpost.com
