It’s time to buy South Africa Inc

The chief investment offi of South Africa’s second-biggest pension fund said it’s time to buy shares in companies that rely on the country’s economy for their earnings.

While the equity prices of SA-focused companies have plunged as a result of the coronavirus outbreak, the country’s benchmark stock index has recovered – largely due to rallies in the stocks of companies that earn their money elsewhere, so-called rand hedges.

“The greatest opportunity is what Covid has done,” said Ndabezinhle Mkhize, CIO of the R145 billion Eskom Pension & Provident Fund, which oversees the retirement savings of workers at the power utility.

“Listed property is down 50%, it’s overdone. These are the opportunities to buy good quality assets.”

The economy was already in a recession when Covid-19 struck and it is now forecast by the government to be heading for its biggest annual contraction in almost nine decades.

A lockdown, imposed on 27 March, is still partially in place and has hampered economic activity.

While the benchmark FTSE/JSE Top 40 Index, which contains most of the biggest companies traded in Johannesburg, has gained 3.4% this year, the FTSE/JSE Africa Real Estate Investment Services Index has fallen 38%, while an index of clothing and general retail stocks has declined 20%.

“If you think Covid is going to be done and dusted in two years and you have a 20-year view, you are going to buy some assets that you would not have seen before,” Mkhize said in an interview by video conference last week. “SA Inc has been decimated.”

The EPPF manages about a third of its own funds and allocates the rest of its capital to other fund managers.

Mkhize, whose fund lags only the R2 trillion Government Employees Pension Fund, says the company is looking to allocate more money to infrastructure.