HOW DID YOU START YOUR CAREER?
I always had an interest in investment management. After finishing my degree, I started to work on the banking side of HSBC. The work was more relationship management, some of our clients were Steinhoff International and Distell!
But I knew from very early on that I wanted to be making investment decisions and not remain on the relationship and sale side. I then moved into Private Equity (PE) at The Public Investment Corporation (PIC), Africa's largest asset manager responsible for investing in the South African Government Employees Pension Fund (GEPF). I was more interested in the public side, but they really saw potential in me on the unlisted side. At the time, I had already passed CFA level 1, I was working on level 2, and I understood valuations, equities, and fixed income - I really wanted to be in that space. Ever since I've grown so much, and now I work for Eskom Pension Fund as an Assistant Portfolio Manager.
IS IMPACT INVESTING A BIG TOPIC IN SOUTH AFRICA?
Well, climate change is no longer something we only speak about - it is something we witness daily. We see natural disasters happen in places that used not to have any disasters, for example, the tornado in the KwaZulu-Natal province, which never happened before. At one point in time, there was civil unrest - most people were living below the poverty line, and it led to huge uprisings a couple of years ago. We heard about looting in shopping centres in Durban, and people destroying infrastructure and buildings.
It is an indication that investors like insurance companies but also pension funds, must align with the local context in which they are investing, especially in the impact space. There is an urgency on our part to invest in sustainable businesses and industries.
HOW DOES IMPACT TRANSLATE SPECIFICALLY IN YOUR PORTFOLIO?
My portfolio looks specifically at the current social ills of South Africa. We focus mainly on 5 themes: Affordable Housing, Agriculture, Education, SMSEs, and Renewable Energy. For agriculture, we are taking it a step further, we aim to create a redistribution of wealth given our history, specifically redress the Apartheid. Historically, we, as black people, used to work on farms and are very well acquainted with the agricultural spaces, however, we never had the capital to own the agricultural land. That's why we are investing in Capital Harvest, which finances black farmers, coaches them, teaches them about sustainable farming practices, and works on access to affordable foods.
DO YOU WORK WITH OTHER FINANCIAL ACTORS IN THE SECTOR?
We work with banks and look at products that promote financial inclusion. SMSEs are a bedrock for a growing economy, and while we encourage them to generate a large contribution to South Africa's GDP, it does not come without risk. Many SMSEs cannot show a track record, so unless we de-risk the investment, banks won't go in this field. We choose to work with managers that open doors for the SMSEs, not only being a financial provider but also being a sounding board in the success of these entrepreneurs. In the later processes, we can be refinanced by the bank which can take over the project. Nevertheless, we need to be very careful and therefore are not aggressive in this space - it is risky, and we need to perverse the capital to align with our fiduciary duty.
As for insurance companies, we work alongside them, more through a multi-manager.
With DFIs, it is clear that we have two different mandates with different capacities and fiduciary duties. As a pension fund, we have much less room to lose capital, so when we collaborate with the right parties, we must talk about the serious practicalities of the deal: When do they need us to come in the transaction? In which amounts? And what are the forecasted results?
Finally, we also work with the government for anything related to education and utilities. The government handled public education, but the infrastructure did not accommodate the population growth quickly enough. We invest in private education both for middle-income and less privileged populations.
As for utilities, renewable energy is a very important topic here in South Africa since we signed the Paris Agreement. As a pension fund, we are aggressively rolling out a renewable energy strategy, disinvesting away from coal and supporting the privatization of energy production as per The Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).
WHAT ARE THE CHALLENGES IN WORKING WITH PUBLIC STAKEHOLDERS?
The challenge we face at the moment is governmental regulations and changes of leadership in the government. Our government is a multiparty democracy which changes every 5 years, which means the policies are not carried through a long-term vision, but through a vision where results must appear within these 5 years.
Around 2009, the government took a strong stance about renewable energy, everyone had a mandate to start investing and putting capital in this kind of infrastructure. Only a couple of years later, the government retracted, mentioning that we had too much reserve of coal. And around 2015, again, a mandate encouraging a big deployment of renewable energy. By that time, people involved in renewables had already left as they had absorbed a loss of capital and the trust was broken.
As institutional investors, we think about long-term implementations of policies that truly benefit the people, but we cannot do it alone, we need to work with the government and DFIs and ensure that everyone is playing their role.
ANY FUTURE PROJECTs?
Water, definitely. This will become an issue in the next 5 years. We have plans to invest in domestic water infrastructure projects (e.g.: collecting rainwater). Similarly to energy, there are no private providers of water infrastructure, it is controlled by the government.
We work with Public-private Partnerships (PPE) to de-regularize the sector. Given that we don’t have a strong middle class, it wouldn't work to have it controlled purely by the private sector. A PPE ensures that the government would still be the one controlling the assets, making them more accessible to the people, and ensuring that we are working on equally accessible resources.
WHAT ARE THE MOST USED AND ABUSED CLICHÉS IN IMPACT INVESTING THAT BOTHER YOU?
Two things: That impact means low returns & that it is something for women.
There are returns in impact if done right. Every fund should be doing impact; it needs to be done across the board, even in the big PE deals, you must be thinking about what you are putting out there in society.
You should find innovative ways to minimize your pollution, absorb and create jobs, and not shy away from the non-typical ESG themes in your restriction and exclusion policies but truly come up with a thought-through value proposition.
I have been working this year with the deputy CIO about formulating a policy about how women can be accommodated in the field. We find that women quit the industry after childbirth because it's too demanding. We are looking at ways to acknowledge that women are the primary caregivers in the family and accommodate this in the workplace. Some of the recommendations were to build nurseries near the workplace, allow women to work from home, and have policies about street safety on travelling at night or too early in the morning. The next step is for our managers to adopt this so they can attract more women into the industry while keeping an element of humanity in the workplace.
