South Africa’s largest asset manager, the Public Investment Corporation (PIC), is focusing on private credit as a promising growth opportunity in Africa, looking to expand its investments beyond its home market.
With a mandate to manage government pension funds worth approximately R3 trillion, the PIC has deployed around R8 billion in investments across the continent over the past two years, and it plans to increase that amount, according to Chief Investment Officer Kabelo Rikhotso, speaking at a conference in Cape Town on Thursday.
While the PIC is steering clear of listed equities in African markets due to their limited size and liquidity, and private equity is not an option due to the prevalence of family-owned businesses resistant to external capital that could dilute their ownership, the appetite for credit in Africa is growing.
“We believe that to be successful in Africa, you need to focus on private markets,” Rikhotso stated. “Private equity hasn’t yielded the expected results, but private debt is showing promise. You invest, and you earn your interest.”
Private credit is gaining attention as a viable option for financing infrastructure development in Africa, where there is a significant gap in access to energy, water, transportation, and digital infrastructure. According to the African Development Bank, annual infrastructure funding needs on the continent range between $130 billion and $170 billion, with more than half of that demand still unmet.
The PIC primarily invests in private credit through intermediaries like the African Finance Corporation to mitigate political and regulatory risks, Rikhotso explained. One of its recent investments includes a $100 million commitment to Africa 50, a development finance vehicle backed by the African Development Bank (AfDB) that mobilizes both public and private sector financing for infrastructure projects.
“What we’ve learned is that going it alone is not the right approach,” Rikhotso added. “We need to invest in vehicles that provide us with diversified exposure. Our strategy is to be involved in private markets and forge strong partnerships.”
Currently, the PIC has about 12% of its portfolio invested internationally, far below the regulatory limit of 45% for private fund managers. Of this, 4% is allocated to emerging markets, with China and India receiving the largest share of its offshore investments.
As the PIC continues to explore opportunities in Africa, it is betting on private credit as a key asset class to unlock the continent’s growth potential and address its infrastructure challenges.
Main Image: Shore Africa
