You're listening to Strictly Business Podcast with Lindsay Williams.
91 is pleased to announce that its SA Infrastructure Credit Fund has reached a
significant milestone growing to £2 billion
in assets under management since its launch.
Let's talk about this now with Tamzi Ramukuzi, Investment Specialist,
Emerging Markets Alternative Credit at 91 in Cape Town.
Tamzi, first of all, congratulations on achieving this milestone.
I want to talk to you about one particular sentence in the press release which you
kindly sent me.
It said, this strong update reflects increasing institutional investor appetite
for real
world impact and diversification through high quality infrastructure debt
strategies.
It's very important.
I want to ask you a question that's got one sort of controversial element to it.
Why are these institutions investing in your fund?
Is it to make money?
I think obviously.
Is it to make a difference?
I hope so or is it just to look good in the annual report?
Lindsay that's a very interesting question.
I think it is a number of factors.
I mean we have seen changes in regulation to allow institutional clients to invest
a larger or a significant portion of their assets up to 45 percent in infrastructure
and
you know given the state of infrastructure in the country.
Over the years, there is a requirement or a need to invest in infrastructure.
But also, I mean, the money that is being invested with us or the assets that are
being invested with
us in order to help fund people's retirement.
So it is a combination of factors.
And that's what makes this SA infrastructure investment different from
other investments that you could do
or access in the market, is that it does play that role.
in benefiting and helping the economy as well as improving the infrastructure in
the country that can
benefit the same investors in those funds.
Another key word in the piece that you sent is availability,
because if there's no availability and there's money, then there's no point.
So the fact that you've got a pipeline,
the fact that there are projects that need to be funded is terribly important and
these projects obviously have to
be viable.
and relevant, Tansy, but your pipeline, I presume, is quite buoyant.
No, I mean, that is correct.
I mean, we have seen a number of reforms, particularly through the energy space,
and that has led to projects being implemented in the corporate and
industrial
space, where we're seeing power stations being constructed for the purposes of
selling.
to these uptakers.
So this is a new market that before regulatory changes or reforms wouldn't be
available.
So from an investor point of view,
that means that there is access to be able to invest in those particular
opportunities which wouldn't
necessarily exist a couple of years ago.
Currently, at the moment, we are seeing other sector reforms being implemented.
in the transportation space, allowing for third-party operators, particularly on the
rail.
And that is also another area that wouldn't have necessarily been available
for a fund such as
ours to invest in.
So it is particularly exciting to see the growth that we are seeing in the market as
a result of some of the
reforms that are being implemented.
And that does provide for a healthy pipeline to deploy assets to down the
line.
What about your relationship with the public sector?
Has it been good?
Is it essential?
No, I mean, that is quite important, right?
If you look at the SA landscape right now,
the main custodians of infrastructure is still public entities, so the state-owned
entities.
If you look at electricity, yes, there has been an introduction of renewables, but
ESCOM still plays a critical role in providing electricity.
You talk about logistics.
Transnet is a key player there.
And yes, there are reforms coming through, but as it stands, they are still the
largest player in that space.
And having a relationship with them and being able to invest in them is something
that is quite important.
And if you go a little bit further in terms of road and airports that we have in
the country, it's a similar aspect.
So being able to engage with the public sector.
in this is quite important because the solution to infrastructure does need both
public sector as well as
private sector participation.
Now, I love examples, people love examples.
In my experience, it tends to illustrate a strategy.
So I want you to choose one.
You mentioned Lesotho Highlands, Daal Wind Farm, Terarko,
the leading provider of data centres in South Africa, three very, very different
projects.
Maybe you want to choose one or another one outside of the ones that I've just
mentioned,
because I'm interested in what happens from the moment you identify it to the
moment it gets up and running.
Can you help me with that?
No, exactly.
I mean, so we have invested in the Aar Wind Farm.
It comprises of two, there are two separate projects.
There's one, which is 100 megawatt, which is an onshore wind farm.
And then there's another one, which is 144 megawatt wind farm.
And these projects were part of the renewable IPP program in South Africa.
They were part of the round three.
How we came about having this exposure is that it came through the relationship that
we have with the banks.
So it was a syndication opportunity.
So we reached out to the banks that we have a relationship with, in this case,
NetBank,
to syndicate that particular exposure to us.
I mean, it is quite important.
I mean, when you look at what this project does, they're generating clean energy,
which is sufficient to...
to provide about 80,000 homes on average.
And this is clean power that's being added to the grid,
which is quite important given the goals that the country has in order to achieve
net zero down the line.
So it is quite important projects that come through.
The process itself, I mean, it's very hands-on.
We receive information around on the legal side,
the contracts in terms of the power purchase agreements.
that the wind farm has with the utility with ESCOM and we have to review that and
be
comfortable that it is the risk allocation is appropriate and then we also look at
the technical
aspect of the project that it is performing and that the wind resource in
the area is good in
order for the project to generate sufficient electricity.
It is a very detailed process that we follow and we review
the documents thoroughly to get that comfort.
So it is quite good to support these projects,
given the role that they play in providing electricity.
You've given us a lot of high level information, Tanzee, terribly important,
of course.
But people also like to know what's happening at ground level.
I mean, how many South Africans, for example, have been employed?
How many people have been transported?
How much energy has been generated to how many homes.
Can you give me an idea?
Give me some numbers, please.
No, definitely.
So, I mean, when we look at the portfolio overall, I mean, it has, looking at the
companies we've invested in,
they've sustained about 230,000 jobs.
And when you look at the investments we have in the transport space, particularly
with the aircrafts,
particularly in the aviation space, as well as the airports that we have
financed,
There are about 3.8 million passengers that are transported.
And last but not least, looking at the energy aspect in aggregate, yes,
I did speak about earlier on, but looking at the assets we have in that portfolio,
it's about
1 million megawatt hours of clean energy that is generated.
And this is powering on average about 380,000 homes.
Very good.
Now, if I was an institutional investor, I'd say, right, this all looks very good,
Tansy.
But on the other hand, am I stuck for 20 years in this investment or can I get out?
What's the liquidity level?
Can you address that potential question, please?
No, definitely.
So, I mean, the portfolio itself or the fund is structured or considered as an
evergreen
portfolio.
And what we do offer is a 5% liquidity per quarter.
So that's 5% of the net asset value of the portfolio.
And per annum, it's limited to 20%.
So that is what is available to all investors in the portfolio, not
necessarily
20% or 5% of that particular investor's investment.
So it is 20%.
per annum or five percent per quarter of the portfolio's net asset value.
This may be a little bit of a personal business question here Tunzey but are your
investors happy with the returns
that they've got so far?
So I mean the portfolio is going through a ramp up currently
and the returns have been good but you know the nice thing is that we have been
running this portfolio for
almost two years.
Now, and the returns, when you compare to benchmark, they have been ahead of
benchmark.
So, yes, as you said, it's a bit of a personal one, but from our side, from a
portfolio point of view,
we are quite pleased with how the portfolio has been performing.
Well, you sound happy with everything.
And you say right at the end of the press release, you say,
we continue to see a robust pipeline of new deals and are excited about the role
this fund plays in nation building and in
client.
portfolios.
Is that a fair assessment of what's happening now and in the short to medium
term?
Yeah, I mean that is a fair assessment.
I mean there is more changes that are happening particularly on the reform side
which helps in terms of
seeing pipeline projects that we can potentially provide funding to
and you know it means that we can be able to diversify the portfolio which for us is
quite important
because our offering is that the infrastructure investment should be on
a broad approach, not necessarily thinking through one thematic or being concentrated
in one area.
So the future for us looks very exciting,
and the projects that are coming through keeps us very excited to be an investor in
the infrastructure space.
I said in that question, short and medium term, but also the long term, because
these are long term projects.
Tanzi, thank you very much for your time and your explanations.
Tanzi Ramakosy, investment specialist, emerging market alternative credit.
And he was talking about the SA Infrastructure Credit Fund.
The views and opinions expressed in these podcasts are those of Lindsay Williams and
various contributors and do not reflect the policy,
position or opinion of any other agency.
organization employer or company associated with
strictlybusinesspodcast.com assumptions
made on the analyses are not reflective of the position of any other entity other
than the speaker or the author and
since we are critically thinking human beings these views are always subject to
change revision and rethinking
at any time please do not hold us to them in perpetuity