Maintaining local ownership of South African companies was the best way to boost economic growth, Elias Masilela, the chief executive of the Public Investment Corporation (PIC), said last week.
The state-owned PIC, a fund manager that holds shares worth 11 percent of the market value of stocks traded on the JSE, drew criticism last year when it opposed CFR Pharmaceuticals’ R12.8 billion offer for Adcock Ingram. CFR, Chile’s largest drug maker, said in December last year that the PIC’s opposition to its takeover was for nationalist reasons.
“When you talk of growing an economy and empowering your people, it is important that as you grow the economy you keep your people in control of it,” Masilela said. “The logic is, you’ve built up this investment and if you can run it, why don’t you run it yourself?”
The PIC manages R1.6 trillion, almost all of which is South African government workers’ pensions.
The company has also intervened in companies to further black economic empowerment aims and to express discontent over management pay. The state-owned PIC wanted increased competition and had not deterred investors, he said.
Even so, foreign direct investment into South Africa fell to $4.6bn (R48.5bn) in 2012 from $6bn in the previous year, according to data from the UN Conference on Trade and Development. That compares with inflows of $30.3bn in Chile, $65.3bn in Brazil and $12.4bn in Turkey in the same period.
“If the project is too big for me or us, then you bring in help from outside,” Masilela said.
After a century of existence, the PIC three years ago had partially shifted its approach to focus on projects that would support growth by improving productivity, infrastructure and employment opportunities, Masilela said.
“Investing in the economy is consistent with making sure that you generate stable returns over a period of time. If you do bold things the likelihood is that you’re going to guarantee yourself good returns on a sustainable basis over a long period of time.”
After completing a masters in economics in Ethiopia, Masilela began working at the central bank of Swaziland, the country where he grew up. He became a senior official at South Africa’s Treasury for eight years, before joining Cape Town-based insurer Sanlam. He is a member of the National Planning Commission, which proposes future policy.
Opportunities were not only through investment into South Africa, he said.
Sasol, the biggest producer of liquid fuels from coal, plans to make a final investment decision this year for an ethane cracker project in Westlake, Louisiana, and a gas-to-liquids plant at the site 18 to 24 months later. This would make South Africa a significant exporter of technology to the US, he said.
PIC is the biggest Sasol shareholder, with a 12.3 percent stake, Bloomberg data show.
The fund manager has about 93 percent of its assets in South Africa and invests about 55 percent of assets in listed equities, 35 percent in debt and 5 percent in property. Developmental investments have been allocated 5 percent. Of its total investments, the PIC has 2 percent invested in the rest of Africa and 5 percent outside the continent.
“We’d like to develop new markets for SA Inc,” Masilela said. – Bloomberg