Power crisis could swell pensioners’ returns, says Sanlam CEO

SANLAM CEO Johan van Zyl says he sees “opportunity” in South Africa’s power crisis, as the private sector steps in to fill the gap left by a flailing Eskom.

Van Zyl — who will hand over Sanlam’s reins later this year — says although it may be tempting to read Eskom’s problems as a warning that the state is failing, he sees it differently.

“A whole lot of mines [are now] trying to generate their own energy,” he says. “I see a number of deals coming about, I see us being able to invest pensioners’ money into those deals, getting superior rates for them over the next 20 years. [Investors] don’t have to put it all into buildings.”

In an extensive interview with Business Times, Van Zyl says that although “it’s always a challenge” for business to deal with the government, he does not believe South Africa is in a particularly bad place.

“If [the rule of law] falls down, then of course we’re in trouble, but I don’t think we’re there at all. In the next few years I just see more and more opportunity.”

During his 13-year tenure, Sanlam’s shareholder returns have been 1 971%, more than double those of the JSE All-Share index.

Van Zyl says that in principle, business does not even mind bad political leadership as long as the private sector “knows what to expect”.

In August Van Zyl will be replaced by Ian Kirk, who until recently was the CEO of short-term insurance subsidiary Santam.

Under Van Zyl’s leadership, Sanlam has expanded aggressively into a number of emerging markets — including India and several African countries.

Although sentiment has shifted, and capital is now retreating to large developed markets, Van Zyl says there is no reason to change strategy.

“We still think emerging markets will win, simply because they’ll have superior growth,” he maintains.

Although capital has flowed to the US in recent times, over the longer term the US economic growth rate is likely to drop, partly because “they don’t have the population growth”.

“India’s growth may go down — it has already, from about 8% to 6%, which is still a great growth rate; [it’s] the same in Africa,” he says.