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It’s time to buy South Africa Inc

Nation’s number 2 pension fund says.
Image: Waldo Swiegers/Bloomberg

The chief investment officer of South Africa’s second-biggest pension fund said it’s time to buy shares in companies that rely on the country’s economy for their earnings.

While the equity prices of South Africa-focused companies have plunged as a result of the coronavirus outbreak, the country’s benchmark stock index has recovered, largely due to rallies in the stocks of companies that earn their money elsewhere, so-called rand hedges.

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“The greatest opportunity is what Covid has done,” by hammering valuations, said Ndabezinhle Mkhize, CIO of the R145 billion ($9.5 billion) Eskom Pension & Provident Fund, which oversees the retirement savings of workers at the state power utility. “Listed property is down 50%, it’s overdone. These are the opportunities to buy good quality assets.”

South Africa’s economy was already in a recession when Covid-19 struck and the economy is now forecast by the government to be heading for its biggest annual contraction in almost nine decades. A lockdown, imposed on March 27, is still partially in place and has hampered economic activity.

While the FTSE/JSE Top 40 Index, which contains most of the biggest companies traded in Johannesburg, has gained 3.4% this year, the FTSE/JSE SA Listed Property Index has slumped 46%. An index of clothing and general retail stocks has declined 19%.

Sure bet

“If you think Covid is going to be done and dusted in two years and you have a 20-year view, you are going to buy some assets that you would not have seen before,” Mkhize said in an interview by video conference last week. “SA Inc. has been decimated.”

The EPPF manages about a third of its own funds and allocates the rest of its capital to other fund managers.

Mkhize, whose fund lags behind only the R2 trillion Government Employees Pension Fund, also favors investing in inflation-linked bonds and says the company is looking to allocate more money to infrastructure, both in South Africa and abroad.

South Africa’s government is encouraging pension funds and other private investors to back an infrastructure drive. Projects worth R2.7 trillion are being considered over the next decade.

“We have now made an allocation to international private equity, a large chunk of which is in the US,” Mkhize said. “We have also followed that up with a real-assets allocation internationally.”

While the EPPF is linked to a utility that accounts for more than two fifths of South Africa’s greenhouse gas emissions, the fund intends to apply environment, social and governance principles to future investments, including the debt of its parent company.

“We would denounce whatever we need to denounce,” he said.

© 2020 Bloomberg

 

COMMENTS   21

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Maybe Anchor delisted too soon, called it wrong!

There are for sure a lot of bargains since April. Lot’s of money to be made – once in a life time opportunity. Well, 2008, 2001 and 1987 was also once in a life time, so lets make it 4 times in a life time opportunity!

Somehow the State Capturers / ANC left the Eskom pension fund alone – or did they dip in there as well.

It’s the Principal Officer, Trustees and staff that are making a killing.

Talking his book obviously. However when he entertains his friends at the braai it is offshore , Isle of Man, Barbados , gold , dollars , where to emigrate– the whole night long.Sell to the buyers

Still bullish on minerals. We are just in the eye of the storm. Once out we’re going down again until the vaccine comes.

Apologies for the very cynical comment but any asset that falls under the jurisdiction of the ANC is a long-term sell. Their track record proves that they are gargantuan value destroyers and regard private property as anathema to their philosophical proto-Marxist doctrine, so sorry ZAR and JSE but I’m out ..

Trust is worth its weight in Gold and if we measure SA Inc Gold, we will see how value has been destroyed.

Globally there is a trust deficit, the leaders and politicians have sunk us into a man created disaster. Hence the reason for calls of a Great Reset; Debt Forgiveness and Bretton Woods 2.0

https://www.rt.com/news/506887-trudeau-great-reset-conspiracy-reveal/

The government needs more money to fund any new growth, a bailout from the IMF is creeping in closer and closer, those money printing machines are going only giving false promises.

The country is better off without you. No stress. Go. Nobody needs a sour person.

‘Pamplona’ is merely a REALIST.

His ‘Spanish bulls run’ on a different continent… 😉

(Better off? HOW will the state’s loss of income tax contributions be recouped if Pamplona leaves SA?)

Thanks for the kind invite Dadepe but I’m most definitely staying, just sending my ZAR on a long holiday to cold and misty shores, they like the bracing weather and boring, honest people

I wonder if Mr Mkhize would share the percentage make up of his personal investment portfolios? Did anybody ask?

It is long overdue. Five years now.

The JSE only runs ahead of other markets during corrections or crashes.

The US stock markets, EU, China, Kospi and Nikkei can rally and yet the JSE stands still.

SA its Definitely time!!!

yup, me too would like to remain positive. You must have a strong religion 😉

I am not even going to read this BS .RSA Inc is the Titanic

What the CIO of Eskom Pension Fund is really saying:

“Please invest in SA companies, as such inflow would cause asset prices in general to rise on the JSE, which will benefit the values of our Eskom retirement fund”.

I’ve seen this before: view any label on a packet of cookies, or chocolates and read their marketing messages: like implying “we are the best”, made with “real ingredients” (implying others are fake).

SA must be best. That’s all I can compare myself to.

Interesting image used.

Just count the WHITE DOTS on the buildings’roofs in the foreground. Those are DSTV dishes & Solar Heaters!! (evacuated tube type)

The Solar sets are courteously provided by govt or the province, at no cost to residents. The DSTV dishes, howeover, are privately acquired, but it helps if the house/structure is provided by Govt….no bond = can afford other lifestyle items)

Is THIS part of the reason why SA’s national budget deficit will continue to worsen? (..in clear view).

There is a big difference between a Social State and Welfare State. Many will argue that South Africa is a Social State but the reality is that RSA is a Welfare State.

The Goverment pays for goods and services for the people. Examples include Free Housing, Free Schooling, Free Health Care even though the quality is very bad individuals are not allowed to make their own decisions about which goods and services they would like, it’s a take it or leave it and I guess having something is better then getting nothing.

A good example of this dilemma is the US where it costs the Goverment $1 Trillion in 16 different initiatives, the poverty % remains at a stubbornly high figure of 16%, the minute someone gets a job even if it is below minimum wage they Welfare Recipents lose their all welfare benefits and foe that reason people can never escape the welfare state, their is simply not enough attainable value which will sufficiently improve their lives more than the welfare state.

Eskom and it’s unions know very well that getting people off the welfare state means that a Regime Change will he the only result, unfortunately it’s easier to give something than take it away.

Indeed, now that you bring it up: SA has strong characteristics of a Welfare State. Well summed up 🙂

Words I do not associate with SA stocks

“Opportunities”
“Good”
“Quality”

End of comments.

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