The PIC of South Africa Highlights Private Credit in Africa as a Significant Investment Opportunity

South Africa’s largest asset manager views private credit as a promising avenue for growth in Africa while aiming to expand beyond its domestic market.

The Public Investment Corporation (PIC), which manages government pension funds totaling approximately R3 trillion ($163 billion), has invested around R8 billion in various projects across Africa over the last two years, with plans to further increase this investment, according to Chief Investment Officer Kabelo Rikhotso, speaking at a conference in Cape Town on Thursday.

Read: PIC’s assets under management hit a record R3 trillion

The PIC steers clear of listed equities in other African markets due to their generally small size and liquidity issues, Rikhotso noted. Private equity is also not a viable choice, as many African businesses are family-run and prefer not to accept cash infusions that could dilute their ownership stakes. However, there is strong demand for credit.

“We believe that if you want to engage in Africa, you need to operate within private markets,” Rikhotso stated. “While private equity has faced challenges, private debt has been performing well. You provide funding and receive interest in return.”

Read: PIC aims for more than just returns

The PIC primarily invests through intermediaries, such as the African Finance Corporation, to manage political and regulatory risks, Rikhotso explained. Recently, it allocated $100 million to Africa 50, an initiative under the African Development Bank that focuses on mobilizing both public and private financing for infrastructure projects.

Read: PIC enters the affordable residential rental sector through Divercity investment

“Our experiences on the continent have taught us that you can’t enter and operate independently,” Rikhotso remarked. “We must engage with vehicles that allow us to diversify our investments. It’s essential to be involved in private markets and forge partnerships.”

The PIC currently has around 12% of its portfolio invested internationally, which is below the 45% regulatory cap imposed on private fund managers. Approximately 4% of this allocation is directed towards emerging markets, with significant positions in China and India, according to Rikhotso.

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