PRETORIA South Africa's government pension fund could invest as much as $3.8 billion in African private equity, its chief executive said, as the continent's top public pension manager looks for higher returns beyond its home market.
The Public Investment Corporation (PIC), which manages more than 1 trillion rand ($125 billion) on behalf of civil servants, is currently looking for potential private equity partners, Elias Masilela also told Reuters in an interview.
"We are in the process of identifying partners who are going to be vehicles in investing the money on the rest of the continent," he said in an interview in Pretoria on Wednesday, ahead of next week's Reuters Africa Investment Summit.
Masilela said the state-run PIC has been given the green light to invest 10 percent of its portfolio outside South Africa, with half of that - about 50 billion rand - earmarked for Africa.
Given the lack of liquidity in many sub-Saharan markets, as much as 60 percent of the Africa money - or 30 billion rand ($3.8 billion) - could go into private equity, he said.
"(African) markets are characterized by thinly listed equities. So what is likely going to drive us going forward is private equity, developmental funding and property," he said.
"The numbers have not been fully worked out yet, but you can see anything between 40 and 60 percent in private equity and developmental investing," he said, adding that the rest could go into equities and property.
With annual economic growth rates of 5 percent or more, but underdeveloped capital markets in many countries, Africa is increasingly becoming a target for private equity investors.
U.S. firm Carlyle Group CYL.UL recently opened offices in Johannesburg and Lagos and is expected to announce the closing of its first Africa fund, while London-based Helios is likely to deploy capital after closing a $900 million Africa fund in June.
Masilela declined to name the private equity investors the fund was in talks with or the timeline for when the funds would be deployed.
The PIC is likely to be a player in infrastructure investments as countries on the continent build and revamp their roads, dams, hospitals and power stations, he said.
Under its former CEO, Brian Molefe, the PIC was known for using its substantial stake holdings to lobby corporate South Africa for more blacks in senior management.
Masilela said the transformation of corporate boardrooms was still a priority, although he preferred a "behind-closed-doors" approach, rather than "public spats" with business leaders.
South African companies are encouraged to increase the percentage of black senior managers under rules to redress imbalances created by the apartheid regime.
One of the biggest investors in South African equities, the PIC's holdings account for about 10 percent of Johannesburg's market capitalization. ($1 = 7.9777 South African rand)
(Editing by David Dolan)