With an eye to the future the Government Employees Pension Fund (GEPF) has stolen a march on its peers in developed countries by investing in Africa’s high-growth markets.
Principal officer John Oliphant said, in the keynote address at a private equity conference in Johannesburg yesterday, that pension funds in developed markets would start looking more favourably at the African continent.
With this in mind, the GEPF had taken a strategic decision a few years ago to be the first one in. “And, when these big funds come, it may be our opportunity to exit,” he said.
He outlined the backdrop. The investment strategies of massive global funds were important to the GEPF, because the domestic state-owned fund was small in the global context.
He said pension fund assets globally were worth about $27 trillion (R239 trillion), of which a significant portion was in US pension funds. In South Africa, total pension funds were valued at about $227 billion, of which $120bn was in the GEPF.
And he explained that pension funds in developed countries had underperformed in recent years and were struggling to build their assets to match their liabilities.
He predicted they would be forced to change their current investment strategies and seek higher returns in traditionally riskier markets – including Africa – where many of the fastest-growing economies were located.
Political risk in Africa was subsiding and democracy was on the rise, Oliphant said.
He cited South Africa as an example of a country whose gross domestic product growth had accelerated with the advent of democracy.
“Democracy plus appropriate economic policies can only lead to prosperity.”
Oliphant provided few details on the GEPF’s existing investments. But he explained the broad strategy behind the choices.
Strong growth in Africa would create ongoing demand for infrastructure. By 2030, 50 percent of Africans would be living in cities, according to Oliphant. And he described energy, information and communication technology, transportation, water and sanitation as important anchors of infrastructure development.
“There are a few investments we have done in the pan-African infrastructure development projects to address this gap which are generating excellent returns.”
He identified aviation as an area with potential and said the GEPF had bought an airport in Tunisia and was in the process of buying Lanseria Airport near Johannesburg, noting that it would become a key node for Gauteng’s growth.
And he spoke of opportunities in mobile penetration, in retail and in property created by the 316 million members of the middle class.
The GEPF had created an investment framework for the South African market and planned to replicate it through Africa, Oliphant said.
In a panel discussion, participants repeatedly identified South Africa’s exchange control regime as a hindrance to investment in Africa through South Africa.