Where South Africa’s largest investor is putting its cash

South Africa’s biggest money manager sees private credit as a growth opportunity in Africa as it seeks to diversify outside of its home market.

The Public Investment Corporation (PIC), which oversees government pension funds of about R3 trillion, has deployed about R8 billion to investments elsewhere in Africa in the past two years and is looking to increase that, Chief Investment Officer Kabelo Rikhotso said on the sidelines of a conference in Cape Town on Thursday.

The PIC avoids listed equities in other African countries as those markets are mostly small and illiquid, he said. Private equity isn’t an option either, as many businesses in Africa are family-owned and not interested in cash injections that would dilute their stake, he said. But there is appetite for credit.

“We do think that to play in Africa, you have to be in private markets,” Rikhotso said. “Private equity hasn’t worked, but private debt is working well. You fund, and you receive your interest.”

Private credit is increasingly seen as a vehicle to fund infrastructure development on a continent that lags behind others in access to energy, water, logistics networks and digital infrastructure.

The African Development Bank estimates that $130 billion to $170 billion is needed for infrastructure annually, more than half of which is unmet.

The PIC invests mainly through intermediaries such as the African Finance Corp. to mitigate the political and regulatory risks, he said.

It recently invested $100 million in Africa 50, a unit of the ADB that mobilizes public and private financing for infrastructure development.

“What we’ve learned on the continent is that you can’t just go in and do it on your own,” Rikhotso said. “We have to buy into vehicles that give us diversified exposure. You have to be in private markets and in partnerships.”

The PIC has about 12% of its portfolio invested offshore, less than the regulatory limit of 45% that applies to private fund managers.

About 4% of that is in emerging markets, with China and India holding the largest weightings in its portfolio, Rikhotso said