The Public Investment Corporation (PIC) of South Africa sees private credit as a growth prospect in Africa, having already invested around 8 billion rand over two years. With a focus on infrastructure funding and navigating regulatory risks through intermediaries, the PIC aims to diversify its investments beyond South Africa while emphasizing private debt as a viable option.
South Africa’s Public Investment Corporation (PIC), managing approximately 3 trillion rand ($163 billion) in government pension funds, identifies private credit as a strategic avenue for growth in Africa. Over the past two years, the PIC has invested roughly 8 billion rand in African markets, aiming to expand its investment portfolio beyond South Africa, according to Chief Investment Officer Kabelo Rikhotso during a recent conference in Cape Town.
Unlike listed equities, which the PIC avoids due to their illiquid nature in many African countries, and private equity, which struggles with family-owned businesses not wanting to dilute ownership, private debt presents an attractive investment option. Rikhotso emphasized, “We do think that to play in Africa, you have to be in private markets. Private equity hasn’t worked, but private debt is working well. You fund, and you receive your interest.”
The PIC’s strategy focuses on utilizing private credit to foster infrastructure growth in Africa, where there is a significant deficit in essential services like energy, water, and digital networks. The African Development Bank estimates an unmet annual infrastructure financing gap between $130 billion and $170 billion, indicating a pressing need for investment in this sector.
To navigate political and regulatory challenges, the PIC primarily invests through intermediaries, including a recent $100 million contribution to Africa 50, an initiative under the African Development Bank aimed at mobilizing resources for infrastructure projects. Rikhotso noted, “What we’ve learned on the continent is that you can’t just go in and do it on your own. We have to buy into vehicles that give us diversified exposure.”
Currently, the PIC allocates about 12% of its portfolio to offshore investments, remaining below the regulatory cap of 45%. Within this, approximately 4% is directed towards emerging markets, mainly concentrated in China and India, indicating a strategic approach to diversification and risk management in its investment strategy.
The PIC’s focus on private credit reflects a broader trend in investment strategies aiming to address Africa’s infrastructure funding shortfall. By leveraging partnerships and private markets, the PIC seeks not only to diversify its portfolio but also to support critical development initiatives across the continent. This strategic pivot towards private debt highlights the potential for significant growth opportunities in African markets while managing risks effectively.
Original Source: financialpost.com
