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Dear Mr President, I have R10 billion …

‘Let fund managers assist with R400bn infrastructure fund.’

Local fund managers can assist with the management of the infrastructure development fund President Cyril Ramaphosa has announced, says Ngoku-Sakhile Mazwi, managing director of Bayakha Infrastructure Partners, a majority black-owned specialist infrastructure fund manager.

Bayakha has just partnered with Eaglestone Advisory to launch Bayakha’s R3 billion Transformational Infrastructure Fund.

Mazwi says local fund managers with experience in infrastructure investment could support public-private partnerships, which seems to be part of Ramaphosa’s plan to stimulate the lacklustre local economy. By leveraging private funds, the extent of the infrastructure development could be multiplied.

More than 90% of South African retirement savings are currently invested in public listed companies, and both the regulatory environment and international trends suggest a higher allocation to private markets would be appropriate. Infrastructure investment could provide the opportunity to better balance portfolios, Mazwi says.

Such a partnership between government and local asset managers would not only breathe life into the struggling local construction industry and create much-needed jobs, it could also benefit local fund managers and speed up transformation in the industry, Mazwi says.

Bayakha alone has a pipeline of R10 billion worth of projects ready for execution, he says.

Mazwi is passionate about infrastructure investment because it is developmental in nature and has a high impact on communities, he says.

Such investments are highly defensive, which means they deliver returns irrespective of whether the economy is buoyant or struggling. The demand – from hospitals, as an example – for electricity from a power station that one has invested in would not suffer during an economic downturn, he says.

There have traditionally been two ways for investors to access inflation protection, Mazwi explains: opting for either a real return fund, which relies on expensive derivatives, or asset allocation, which really means playing the market and hoping to get it right in the long run.

However, the Department of Energy (DoE) offers a third and very attractive option for institutional investors through its Renewable Energy Independent Power Producer Procurement (REIPPP) Programme – an inflation-linked return that is contractually guaranteed, Mazwi says.

Added to that, there is now a secondary REIPPP market, and the rules favour majority black-owned fund managers like Bayakha – as does the  investable universe.

In terms of the REIPPP rules, all equity investors are locked in for three years from the date of commercial operations. Thereafter investors can sell their equity, provided the BEE ownership is not diluted and the DoE is informed of the transaction.

The lock-in period for the first bid round ended in December last year, and that of the second bid round will end this December. Projects in these early rounds did not have great BEE scores, but the power purchase agreements were concluded at high tariffs, providing for risk premiums associated with early investment in an industry that is new for South Africa.

Mazwi says Bayakha is eyeing the first three bid rounds for investment. There are lots of opportunities, with senior sponsors who are selling equity for various reasons. While the opportunities are across all technologies, Bayakha targets wind and photovoltaic (PV) projects.

The DoE’s special dispensation for majority black-owned fund managers to be recognised at a level of 100% black ownership further favours a company like Bayakha, Mazwi says.

The new Bayakha Transformational Infrastructure Fund has a target of 60% of its portfolio to be allocated to economic infrastructure – including the REIPPP programme, transport (including toll roads and rail), water infrastructure such as water treatment plants, and information and communication technology (ICT). A large chunk of this would probably consist of REIPPP projects due to the guaranteed inflation-linked returns, says Mazwi.

The other 40% of the portfolio will be invested in social infrastructure in the health and educational sphere, such as student housing and hospitals.

Mazwi says Bayakha specifically targets townships for the provision of multidisciplinary private hospitals. It would typically partner with established private healthcare groups on such projects and there is currently good appetite from prospective partners, he says.

The fund manager keeps an eye on developments in the health care system to assess any developing risk, he adds.

Bayakha measures returns on a financial and developmental level, and differentiates itself by verifying the developmental impact through the collection of primary data, says Mazwi. “If you go into an economy you try to understand and measure the need [for specific infrastructure],” he says.

The developmental and financial returns go together, he says. One does not sacrifice financial returns to ensure developmental returns. In fact, infrastructure development without developmental returns would carry an increased risk, he says. This could manifest in the form of strikes and community protests that could delay the project and put its viability at risk.

The objective of the Bayakha Transformational Infrastructure Fund is to generate a minimum target internal rate of return of 12% for investors (consumer price index plus 6%). The first round of fundraising is currently open and closes at the end of November. The aim is to raise R1 billion and to increase it to R3 billion within the next two years.

Mazwi says Bayakha’s newly formed partnership with Eaglestone Advisory, a leading independent infrastructure investment banking platform, has strengthened the team and put boots on the ground, especially on the rest of the continent.

Eaglestone bought 25% of the previously 100% black-owned Bayakha. As a result the partnership reflects the diversity of the South African population. Eaglestone also has a lot of experience in the local REIPPPP, says Mazwi.

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I always wondered : with the PPA backed by state guarantee, what should the cost of debt be in IPP?

This simply another clever BEE scheme targeted at the moneyed “previously disadvantaged” at my expense backed up by the taxpayer. I do not like it at all.

Same. I wonder how long Govt will try to change legislation to force a % of retirement & discretionary funds to commit to this socialist “venture”?

Johan_Buys: Why write PPA and IPP if it will take you only a little longer to write the words, these letters represent? Write the words and many more of us will understand your “message.”

Must be joking! Investing in a fund where DoE is involved and the main selling point is political correctness must rank with investing in coffee and milk culture during the the Apartheid era.

Choose to pass

So to help the racist idea of black fund managers (instead of the best fund managers) the state (sorry, the taxpayer) will have to guarantee the return on the infrastructure projects. Then the are the local mafias demanding part of the cake in any construction projects. There are lot of problems getting payment from municipalities and individuals for electricity and water, now let’s create even more possibilities for state bailouts.

I have learned one thing about a plethora of fund managers:
‘’Nowadays to be intelligible is to be found out’’
Oscar Wilde.
‘’ Ngoku-Sakhile Mazwi’s’’ statement that there have traditionally been two ways for investors to access inflation protection, opting for either a real return fund, which relies on expensive derivatives, or asset allocation, which really means playing the market and hoping to get it right in the long run’’
Would I put my money in any fund with a mantra like – ‘’hoping to get it right in the long term’’?

Yes … I’m a reasonably intelligent in finance and trading platforms but I would need to read this very slowly and carefully to understand what it’s about other than getting funds for their business.

“Local fund managers can assist with the management of the infrastructure development fund President Cyril Ramaphosa has announced, says Ngoku-Sakhile Mazwi, managing director of Bayakha Infrastructure Partners, a majority black-owned specialist infrastructure fund manager.”

Pay me money so that I can say I helped. This sounds like a get-rich-quick scheme. Tenderpreneuring much?

Hi, I am White and support these plans that will work if properly managed. I would invest part of my Retirement savings and contribute. Mr President you understand this unlike Jacob.

Magda CEO from Sygnia please get involved so all colours can get involved which would benefit all South Africans. I hope you get to read this.

Wally Stowe

At last a positive will. I have started in areas that I can.

You guys had me worried. Thought it may have been April.

I did not bother to read the article. The heading stopped my cold. Why would you tell the president that you have R10 billion?

So that SARS can scratch and find out how you got it and grab their share.

Why? I can buy coke for you Mr President, that’s why!

State Capture 2.0

Especially when it’s not your money

Quote: “Such investments are highly defensive, which means they deliver returns irrespective of whether the economy is buoyant or struggling. The demand – from hospitals, as an example – for electricity from a power station that one has invested in would not suffer during an economic downturn, he says.”

OK….I suggest you’d better walk across to Eskom HQ, to confirm the size of profit or return on investment they made for the State. Last time I checked, Eskom pumped billions back to National Govt, in operating profits they made. NOT! And Eskom is SURELY is a defensive investment, since EVERYONE needs power???

Let’s check how Govt Hospitals are running at a profit(?) I presume Dept of Health surely contribute a ‘healthy’ profit for the State?? (And not otherwise around, where State carries every service sector)

Looks like Bayakha’s vision is more into “fund raising” (drawing money from their asset management peers) than playing the role of a bona-fide fund “manager”?

But the R10b could cover malpractice claims against the ANC-run Depts of Health

Good example V3 😉

Precisely. How would malpractice claims as an example (as operating cost) help to deliver a superior return on investment??

In SA it seems, the govt tries to defy common economic logic…

you forgot the ANC are a socialistic/communist organisation…..would rather use the tax payers money to fund their corruption then getting the private sector involved.

THIS IS MY CHALLENGE TO ALL BLACK-OWNED ASSET MANAGERS:

Time to show the lame & useless white asset management industry how its done! JUMP FIRST IN to reap the rewards. No delay!!

Once you make a superior profit on such investment-projects, you can boast about your ‘ROI’ against your lagging white competitors. How’s that?

Such investments will serve as the ultimate marketing, once you come out as WINNERS & show the fearful white AM how proper returns are made. (Money has no colour…success will flow to you, and investors’ money).

Come show us!! This will be a good story to tell.

I will be placing Bayakha Transformational Infrastructure Fund on my personal watchlist! I have great expectations.

Sounds well and good. However the returns still rely on the underlying assets performing successfully, which relies ultimately on effective, able and honest management.
Recent history has demonstrated that this has been seriously compromised and the steps that have taken place to rectify the position has not replaced the affected management ranks with persons who have the intimate knowledge of managing what are very technically based sectors – Eskom, SAA, Railways and Education just to name a few and treasury is struggling to pay day to day expenses as it is.
If these institutions that are to be the recipients of the funding cannot pay their way and are obscenely debt burdened, where will funds come from to pay guaranteed investor returns?
Sounds a bit like a Peter and Paul scenario to me.

“Peter to Paul” = taxpayers to Govt.

A distinctly overt BEE plug. Really? And we wonder why foreign investors are so sceptical.

Not a risk I would take but would be happy to see him succeed.

There is so much negativity in this country coming from the oldies, always looking for something to criticize. May be that is why some kids don’t want to call or visit their oldies because all they would hear is yadayada this yadayada that? With one foot in the grave one should enjoy life

Khande i full agree with you.

We need to be more specific to the oldie. The world is not ending. Its your world that will ending.

Grammar. PLEASE.

Its not negativity. Call it knowledge throuh experience or simply being rational.

When one foot is nearing the grave (which you can never know by the way), extreme caution is necessary.

Im so tired after typing this Im going to yadda yadd da ..

We know of our issues but slowly being exposed as we can see in the commisions. I amm 66 and white and grew up in the disgusting Apartheid era. No exposure in those days due to no free press. So much negativity in these comments. As per my earlier comment we need to come together as South Africans and help turn our Country around. We need to support our President and give him time and space. So lets not challenge Black Fund Managers but all Fund Managers to work together to set up Portfolios rather than sent Billions offshore although still needs to be part of your portfolio.

I am not a ANC supporter

Wally Stowe

End of comments.

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