The role of the PIC in economic transformation.
THE PUBLIC Investment Corporation (PIC) has come under scrutiny for its investment, or possible investment, in Sagarmatha Technologies and also in AYO Technologies. Is it in fact fair in the context of the PIC’s role in the economy and investments that the PIC has made to date?
Let me start off by giving credit where credit is due. The PIC under its current leadership of Dr Daniel Matjila has grown its investment portfolio from R200 billion over the last decade to about R2 trillion, putting it among the top 10 of asset managers globally.
The PIC has by and large had spectacular successes, for example Naspers, but also some setbacks, such as Steinhoff. The media tends to focus only on its setbacks, which do not make up more than 5percent of the entire PIC portfolio. The PIC is the largest investor on the JSE and one would argue that it is the only investor that is capable of investing on a large scale for companies that have got ambitious plans to grow on the African continent. It must not be forgotten that the PIC is probably the only asset manager that has got more than R50bn worth of assets that is managed by black people.
Recent reports have shown that the majority asset management companies in South African remain mainly lily white. The bulk of assets under management are in companies such as Investec, Coronation, Absa, Sanlam, Allan Gray and others – all of these companies’ asset managements have built social networks with predominantly white companies in South Africa to date.
It is not just the technical valuations that cause asset managers to invest alongside PSGs but also the social networks that are developed over years predating the new democracy. This influences investment of JSE-listed companies even if in some cases the household name, through a failed attempt to expand to abroad, have wiped off more than R160bn worth of value to shareholders. Examples of these are Standard Bank’s investment in Russia, Old Mutual investment in Skandia, Investec investment in Kensington in the UK, Woolworths investment in Australia. This R160bn excludes the R200bn destruction of Steinhoff. Notwithstanding all of this, there is a fairy tale that all of these white companies are successful.
South African’s economy since 1994 has more than quadrupled, to a GDP today of about R3.5 trillion. They say a rising tide lifts all ships; with a growing economy, South African businesses benefited from this growing economy. This is evidenced, for instance, the all share index on the JSE in 1994 was in the region of 10000 and today the all share index on the JSE approaches 50 000. This is a 400 percent increase in the value of the JSE. The PIC was and remains the biggest investor on all of these stocks on the JSE, with the JSE’s entire market value of the stocks listed there being R20 trillion and the PIC making up R1.60 trillion of that.
It is synopsis that the PIC provided the capital base for virtually all of these companies that have listed in the last three decades. Furthermore, they continue to support many of these companies having shares in many of these companies even today, since the PIC with its R1.60 trillion makes up the bulk of the investments on the JSE. – SEE BUSINESS REPORT ONLINE