The Public Investment Corporation (PIC), Africa’s largest fund manager is looking to increase its rural and township economy pipeline, with a particular emphasis on black-owned enterprises.
To this end, the money manager, which has about R3-trillion assets under management, has gone to market looking to invest in non-bank financial intermediaries focused on rural and township development.
The asset manager has now invited written proposals from intermediaries that provide financial and nonfinancial support to SA enterprises “and provide pragmatic and innovative solutions in addressing those challenges”.
The PIC said investments in intermediaries would be facilitated through the PIC Early-Stage Fund. The fund was developed with the aim of bridging the funding gap that exists in early-stage businesses that have the potential to facilitate new industry creation, and contribute to economic growth and employment creation.
“The PIC Early-stage Fund makes direct and indirect investments ranging between R75m and R250m. To ensure that funding is provided across the spectrum, businesses requiring funding below R70m are funded through venture capital funds and nonbank financial institutions,” the PIC said.
“The responses to the request for proposals will shape the PIC’s interventions to stimulate the development of rural and township economies across SA’s provinces,” it said.
“The PIC, through its investments, seeks to provide financial support (not exclusively) to historically disadvantaged individuals (specifically black people, women, youth and people living with disabilities) who run businesses within the rural and township economy. This will be done solely through intermediaries.”
The interested intermediaries will need to have experience in fundraising and deployment of capital in early-stage businesses operating rural and township markets.
The asset manager, which reports to the minister of finance, said the intermediary will provide funding to transformed SA enterprises with strong developmental impact in rural and township economies.
“The PIC’s term of debt will be 5-7 years, priced at a minimum of Jibar+1%, targeting a return of Jibar + 3% per annum,” it said.
“The PIC’s term for equity will be 5-10 years, with a minimum return of 9%, targeting a return of 11%. Intermediaries must demonstrate their ability to outperform the above-mentioned returns,” the PIC said.
“Intermediaries must demonstrate their appetite for, and participation in, priority and high-growth sectors including, but not limited to, energy and related sectors, social infrastructure, water and waste, manufacturing, agribusiness & bioscience, transport and logistics, mining and beneficiation, ICT, health, etc.”
Players in industries such as gambling, ammunition and sin industries will be excluded from benefiting from the PIC’s investments.
Unlisted portfolio under governance scrutiny
“Furthermore, the intermediary may not invest PIC monies in feasibility studies and project preparation. The funding needs to go to businesses that are operating, looking to expand or grow new markets.”
The PIC’s multibillion-rand unlisted portfolio is under governance scrutiny. The new CEO of the PIC, Patrick Dlamini, has been mandated by the board to clean up its unlisted portfolio, which has courted controversy.
The R3-trillion that the PIC manages belongs to the Government Employees Pension Fund (GEPF), with the remainder from the Compensation Fund, the Unemployment Insurance Fund and other clients.
Of this, 95% is invested in listed markets and 5% in unlisted investments. In April, the PIC told parliament that more than 40% of its unlisted portfolio was in distress after a sustained period of underperformance.
The entity, which reports to the finance minister, has injected about R100bn in more than 150 private-owned companies over the years.
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