TOLL IN­VEST­MENT YIELDS STRONG RE­TURNS

Public Sector Manager - - Feature -

Investing in South Africa’s toll road net­work is a sound fi­nan­cial de­ci­sion. It of­fers strong, long-term cap­i­tal re­turns and helps SA keep pace with the grow­ing de­mands of the na­tional road in­fra­struc­ture. The Pub­lic In­vest­ment Cor­po­ra­tion (PIC), with share­hold­ing (eq­uity and loans) in the N3 Toll Con­ces­sion (N3TC) and Trans African Con­ces­sion, achieves two ob­jec­tives with its in­vest­ment in th­ese con­ces­sions. Firstly, it guar­an­tees solid re­turns to its big­gest client, the Govern­ment Em­ploy­ees Pen­sion Fund (GEPF) with more than 1.2 mil­lion ac­tive mem­bers from some 325 govern­ment de­part­ments and 400 000 pen­sion­ers and other ben­e­fi­cia­ries. For the year end­ing in March 2016, the PIC re­ported a 10.98% re­turn on the GEPF’s in­vest­ment – which accounted for 88.2% of the PIC’s as­sets un­der man­age­ment in the re­view pe­riod. While this is lower than the tar­geted 11.04% re­turn in this pe­riod, it out­per­formed the con­sumer price in­dex (CPI) of 5.45% by 5.53%. Se­condly, this in­vest­ment shores up the fund­ing re­quire­ments for the up­keep of ma­jor eco­nomic trans­port routes and thus con­trib­utes to the ef­fi­ciency with which our coun­try does busi­ness. In essence, it en­ables on­go­ing im­prove­ments of the na­tional road net­work, which boosts the coun­try’s com­pet­i­tive­ness. Investing in in­fra­struc­ture - be it en­ergy, ur­ban-ru­ral road net­works, ports or in­for­ma­tion com­mu­ni­ca­tion tech­nolo­gies – pro­vides ac­cess to the econ­omy and the rest of the world. As an ex­am­ple, Canada’s in­vest­ments in ur­ban toll roads in dif­fer­ent parts of the Amer­ica’s of­fers a com­pelling propo­si­tion for investing in in­fra­struc­ture in a devel­op­ing mar­ket. Over the past five years, the Canada Pen­sion Plan In­vest­ment Board ac­quired stakes in toll oper­a­tors in Chile, Mex­ico and the United States. Ra­tion­al­is­ing the ac­qui­si­tions, the board cited a fit with long-term strat­egy and investing in in­fra­struc­ture as­sets that de­liver sta­ble re­turns over a pro­longed pe­riod. The long-term nature of pen­sion pay-outs there­fore al­lows fund man­agers to con­sider in­fra­struc­ture in­vest­ment as­sets which of­fer life­long rev­enue gen­er­a­tion. On this ba­sis, the PIC’s in­vest­ment as­set classes in­clude devel­op­ment in­vest­ment in cat­alytic sec­tors of the econ­omy such as road in­fra­struc­ture. Im­por­tantly, the PIC’s in­vest­ment in toll con­ces­sions can be re­garded as a de­lib­er­ate re­sponse to the de­vel­op­men­tal agenda and so­cial re­spon­si­bil­ity im­per­a­tives of the na­tional govern­ment. As a wholly-owned govern­ment en­tity and a cus­to­dian of some R1.587 tril­lion of pub­lic as­sets, this de­vel­op­men­tal ap­proach en­sures that while earn­ing good fi­nan­cial re­turns, in­vest­ments also sup­port pos­i­tive, long-term eco­nomic, so­cial and en­vi­ron­men­tal out­comes that yield a good so­cial re­turn for the coun­try. Ac­qui­si­tions in toll con­ces­sions is but one of sev­eral in­stru­ments used by the PIC to re­alise a re­turn for its clients. Its mix of listed and un­listed in­vest­ment classes is care­fully weighed up against clients’ man­dates. Nonethe­less, what is clear is that the GEPF’s as­sets un­der the PIC’s man­age­ment out­per­forms its global peers. The Toronto-based Cen­tre for Eval­u­a­tion and Mon­i­tor­ing Bench­mark­ing con­ducted a com­par­a­tive study in 2016 com­pris­ing more than 360 global funds with as­sets rang­ing from R5.733 bil­lion to R19.2 tril­lion. It showed that the GEPF’s out­per­forms its peers al­though it was the only fund with a dual man­date – achiev­ing mon­e­tary and so­cioe­co­nomic re­turns.

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