TOLL INVESTMENT YIELDS STRONG RETURNS
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.