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Biggest Investor in South African Stocks Wants Local Ownership

Maintaining local ownership of South African companies is the best way to boost economic growth, said Elias Masilela, who heads a fund manager that holds shares worth 11 percent of the market value of stocks traded in Johannesburg.

Masilela’s state-owned Public Investment Corp. drew criticism last year when it opposed CFR Pharmaceuticals SA (CFR)’s 12.8 billion rand ($1.2 billion) offer for Johannesburg-based Adcock Ingram Holdings Ltd. (AIP) CFR, Chile’s largest drugmaker, said Dec. 17 that the PIC’s opposition to its takeover was for nationalist reasons.

“When you talk of growing an economy and empowering your people it is important that as you grow the economy you keep your people in control of the economy,” said Masilela, 49, in an April 1 interview in Johannesburg. “The logic is, you’ve built up this investment and if you can run it, why don’t you run it yourself.”

The Pretoria-based Public Investment Corp. manages 1.6 trillion rand, almost all of which is South African government workers’ pensions. The company, of which Masilela is chief executive officer, has also intervened in companies to further black economic empowerment aims and to express discontent over management pay.

The state-owned PIC wants increased competition and has not deterred investors, Masilela said.

Even so, foreign direct investment into South Africa fell to $4.6 billion in 2012 from $6 billion in the previous year, according to data from the United Nations Conference on Trade and Development. That compares with inflows of $30.3 billion in Chile, $65.3 billion in Brazil and $12.4 billion in Turkey in the same period.

Development Focus

“If the project is too big for me or for us then you bring in help from outside,” Masilela said.

After a century of existence, the PIC three years ago partially shifted its approach to focus on projects that will support growth by improving productivity, infrastructure and employment opportunities, Masilela said.

“For me, investing in the economy is consistent with making sure that you generate stable returns over a period of time,” Masilela said. “If you do bold things the likelihood is that you’re going to guarantee yourself good returns on a sustainable basis over a long period of time.”

After completing a masters in economics in Ethiopia, Masilela began working at the central bank of Swaziland, a country that neighbors South Africa where he grew up. He then became a senior official at South Africa’s Treasury for eight years, before joining the Cape Town-based insurer Sanlam Ltd. (SLM) He is also a member of South Africa’s National Planning Commission, which proposes future policy for South Africa.

Exporting Technology

Opportunities are not only through investment into South Africa, Masilela said. Johannesburg-based Sasol Ltd., the world’s biggest producer of liquid fuels from coal, plans to make a final investment decision this year for an ethane cracker project in Westlake, Louisiana, and a gas-to-liquids plant at the site 18 to 24 months later. This will make South Africa a significant exporter of technology to the U.S., he said.

“We are exporting key technology which is going to change the U.S. forever,” Masilela said. “We’ve always been an exporter of dividends, we’re now going to be an importer of dividends.”

PIC is the biggest shareholder in Sasol, with a 12.3 percent stake, according to data compiled by Bloomberg.

The fund manager has about 93 percent of its assets in South Africa and invests about 55 percent of its assets in listed equities, 35 percent in debt and 5 percent in property. Developmental investments have been allocated 5 percent.

African Opportunities

Of its total investments PIC has 2 percent invested in the rest of Africa and 5 percent outside the continent.

In Africa outside of its home market, West Africa has the biggest share of its investment because of the region’s potential for economic growth, Masilela said. The economy of Nigeria, Africa’s most populous country, has expanded an average of 8.2 percent annually since 1999.

PIC has invested in four companies on the continent outside of South Africa, namely Ecobank Transnational Inc. (ETI), Dangote Cement Plc (DANGCEM), Camac Energy Inc. (CAK) and Tanga Cement Co. It plans to announce more investments “soon,” Masilela said, declining to give further detail.

The lack of large stock markets in these countries means PIC will mostly invest through private equity, property and infrastructure, he said. The company’s investment in Africa is welcomed, he said and doesn’t generate the opposition that some investments from countries like China do.

“Yes, there may be a selfish end in developing those economies, because we would like to develop new markets for S.A. Inc.,” he said. “But we do it in partnership with receiving economies. This is completely different from what the Chinese are doing, the Chinese go there with a mentality to conquer.”

To contact the reporters on this story: Janice Kew in Johannesburg (TOP40) at jkew4@bloomberg.net; Franz Wild in Johannesburg at fwild@bloomberg.net

To contact the editors responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net Antony Sguazzin, Karl Maier

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