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The chief investment officer of South Africa’s second-largest pension fund said it is time to buy shares in companies that depend on the country’s economy for profit.
While the share prices of South Africa-focused companies have plummeted as a result of the coronavirus outbreak, the country’s benchmark stock index has rebounded, largely due to rallies in shares of companies earning their share. money elsewhere, the so-called rand hedges.
“The biggest opportunity is what Covid has done,” said Ndabezinhle Mkhize, CIO of the R145 billion ($ 9.5 billion) Eskom Pension & Provident Fund, which oversees the retirement savings of workers at the state energy company. .
“Listed property is down 50%, it’s exaggerated. These are the opportunities to buy good quality assets. “
South Africa’s economy was already in recession when Covid-19 hit and now the government is forecasting that the economy will head for its biggest annual contraction in nearly nine decades. The blockade, imposed on March 27, is still partially in effect and has hampered economic activity.
While the benchmark FTSE / JSE Top40 index, which contains most of the largest companies listed in Johannesburg, has gained 3.4% this year, the FTSE / JSE Africa real estate investment services index has fallen by 38 %, while a general apparel and retail index. stocks are down 20%.
Safe bet
“If you think Covid will be finished and dust off in two years and you have a 20-year vision, you are going to buy some assets that you would not have seen before,” Mkhize said in a video conference interview 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 behind the R2 trillion Government Employees Pension Fund, also favors investment in inflation-linked bonds and says the company is looking to allocate more money to infrastructure, both in South Africa and abroad. .
The South African government is encouraging pension funds and other private investors to support an infrastructure campaign. Projects worth R2.7 billion are being considered over the next decade.
“We have now made an allocation to international private equity, a large part of which is in the United States,” Mkhize said. “We have also followed it up with real asset allocation internationally.”
While the EPPF is linked to a utility that accounts for more than two fifths of South Africa’s greenhouse gas emissions, the fund intends to apply environmental, social and governance principles to future investments, including investment debt from your parent company.
“We would report everything we have to report,” he said.
Read: Dlamini-Zuma faces legal challenge over latest blockade extension
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