The Public Investment Corporation (PIC) of South Africa views private credit as a key opportunity for growth and diversification outside its home market. With recent investments totaling 8 billion rand, the PIC seeks to support infrastructure development in Africa. It is focusing on private markets due to the challenges presented by public equities and private equity, illustrating a commitment to leveraging private credit effectively.
South Africa’s Public Investment Corporation (PIC), the nation’s largest money manager, identifies private credit as a significant growth avenue across Africa. With a focus on diversification outside its local market, the PIC has allocated approximately 8 billion rand ($163 billion) to African investments in the past two years. This strategy is driven by Chief Investment Officer Kabelo Rikhotso’s acknowledgment of the potential for increased opportunities in the region.
Rikhotso emphasized that listed equities are avoided in Africa due to small and illiquid markets, while private equity presents challenges as many family-owned businesses resist dilution of ownership. He highlighted a favorable environment for private debt, stating, “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.”
Private credit emerges as a critical resource for infrastructure development on a continent that struggles with access to essential services such as energy and water. The African Development Bank estimates that Africa requires between $130 billion and $170 billion annually for infrastructure, with over half of this need currently unmet, creating an urgent opportunity for investment.
The PIC employs intermediaries, such as the African Finance Corporation, to navigate political and regulatory risks in its investments. Notably, the PIC made a recent investment of $100 million in Africa 50, an investment vehicle affiliated with the African Development Bank that aims to facilitate both public and private financing for infrastructure projects.
Rikhotso remarked, “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. You have to be in private markets and in partnerships.” Currently, the PIC has approximately 12% of its portfolio invested offshore, well below the 45% regulatory limit, with 4% allocated to emerging markets, particularly in China and India.
The Public Investment Corporation of South Africa is strategically investing in private credit across the continent as it seeks to diversify its holdings outside the local market. With significant capital already deployed, the PIC recognizes private credit’s role in addressing infrastructure development challenges in Africa. Through partnerships and intermediary investments, the PIC aims to navigate potential risks while generating returns on investments in the region.
Original Source: financialpost.com
