PUBLIC INVESTMENT CORPORATION

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PUBLIC INVESTMENT CORPORATION established by
Public Investment Corporation Act of
2004 Presentation to Standing Committee of
Finance
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Discussion points
Discussion items
1. The PIC act
2. The PIC Mandate and strategic Objectives
3. The PIC Clients and Asset Under Management
4. How PIC Invests. AUM and SA GDP contribution
5. NDP Investment Focus in the Listed Portfolio 6. NDP Investment Focus in the Unlisted Portfolio
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Public Investment Corporation Act
NAME Public Investment Corporation (PIC)

Legislation Public Investment Corporation Act of 2004
Clients Public Bodies Pension Funds, Trust Funds, Short-term Insurance etc. 
Governance PIC the Board of Directors with its various committees, the managers and other stakeholders. This is a huge improvement given the history of the institution which was run by a board of three Commissioners from 1911 to 1984 and subsequently the Board was assisted by the Executive Committee.
Regulator Financial Services Board (FSP 19777)
Staff PIC Employees. PIC strives to pay average market related remuneration to attract and retain best talent.
Mandate To manage a range of segregated mandates from Government and other public institutions. Asset Classes Fixed Income, Equities. Domestic and Nondomestic assets. Expansion of Isibaya mandate ( Unlisted Investments) to 5 of GEPFs AuM.
Management Fees Average of 3bps for Listed Investments and below market related fees for Unlisted Investments
The PIC is an Asset Manager for all official
Sector Funds. Its activities differs from a DFIs
such as IDC and DBSA
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The PIC Mandate and Key strategic objectives

• Mandate
• The PIC mandate is to invest official public
  sector funds, including pension funds. The
  investment mandates are set by clients and the
  PIC objective is implement the investment
  mandates.
• Vision
• To meet or exceed our clients' investment
  objectives and commitments to stakeholders
• Mission
• The PIC having been established by an Act of
  Parliament to provide for the investment by the
  Corporation of certain monies received or held
  by, for or on behalf of the Government of the
  Republic and certain bodies, councils, fund and
  accounts will
• Deliver investment returns in line with client
  mandates
• Create a working environment that will ensure
  that the best skills are attracted and retained
• Be a beacon of good corporate governance
• Contribute positively to South Africas
  development

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PIC Top 5 Clients and Assets Under Management
Name of Client Asset under Management (31 March 2013) (R Billion) Asset under Management (31 March 2014) (R Billion) Client Holdings
Government Employee Pension Fund (GEPF) 1,252 1,432.7 89.2
Unemployment Insurance Fund (UIF) 81 93.7 5.8
Compensation Commission Pension Fund (CC) 15 15.3 1.0
Compensation Commission Fund (CC) 21 26.3 1.6
Associated Institution Pension Fund (AIPF) 14 13.9 0.9
Others 31 24 1.5
Total 1 ,404 1,606 100
UIF and CC has extended their asset allocation to
include Socially Responsible Investments (SRI).
These investments will target investments with
huge social and developmental impact such as job
creation, social infrastructure and SMMEs.
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PIC Asset Classes Where we invest in
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Evolution of the PIC Strategic Asset Allocation
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Broad Investment strategies
Strategy Investment Approaches
Alpha Strategies Listed Equities (domestic) Out sourced to external Managers. Developmental Manager Program Global Equities (Non Domestic) diversified across various regions/geographies, asset classes. Managed through third Party Managers Africa Listed Portfolio (Internally Managed) Building of the concentrated diversified portfolio which presents key African economy fundamentals Africa Listed Portfolio externally managed by third- party managers
Beta Strategies Listed Equities (Domestic) Core quantitatively managed, with tactical tilts over a period of time Listed Equities (Offshore) core managed, with allocation calls managed in house Fixed Income core Strategies Properties strategies (Yields)
Unlisted Investment Strategies Unlisted DI (investment approaches through direct, co-investments and Indirect (Fund of Funds) Unlisted Private Equity ((investment approaches through direct, co-investments and Indirect (Fund of Funds) Unlisted Debt ( mainly direct investments and co-investments)
Properties Investments strategies Property Investments ( Unlisted Investments) Co Investments, Indirectly held, Directly held, Joint ventures, Asset and Portfolio management Properties Management ( leasing, Facilities management, properties operations)
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PIC Investment activities and alignment to
Economic Growth initiatives
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Assets under Management Growth
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AuM Growth versus SA GDP since 1995

• Economic Growth drives Asset Growth? And the
  reverse is true
• Rule of Thumb

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SA GDP and PIC AuM since 2004
PIC has a significant influence in the economy
Year GDP (current prices R m) AuM (R m) AuM/GDP
2004 1 415 273 377 340 26.7
2005 1 571 082 445 077 28.3
2006 1 767 422 584 539. 33.1
2007 2 016 185 706 639 35.0
2008 2 256 485 775 366 34.4
2009 2 406 401 730 334 30.3
2010 2 659 366 907 025 34.1
2011 2 917 539 1 029 643 35.3
2012 3 155 195 1 169 447 37.1
Average 32.7

• Asset Base more than 1/3rd of SA GDP
• PIC can make a difference by investing prudently
  in the economy

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The Virtuous Cycle of Economic growth Assets
Growth
Economic Growth
Asset Growth/Returns
Developmental Investments
Growth in AuM
Investment in Catalysts for Economic Growth
There is positive correlation between our
investment returns and the performance of the
economy
Prudent Asset Allocation
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Active Investment Approach to stimulate Economic
Growth
Traditional Approach ( Last 20 years) The New Approach ( Now and going Forward)
Passive investment strategy Active Investment approach through Developmental investments and alignment with key government economic priorities
Benchmark driven approach, very low focus on being active in sectors that stimulate growth Developmental Investment focus within Benchmark parameters. Economic stimulus.
Unlisted Investment approach was mainly focused on large narrow based BEE funding. Moderate to average social impact focus Unlisted Developmental Investment Policy well defined and broaden to cater all aspects of development ( Allocation 5), strong focus on Job creation Active Listed DI approach
Lower risk portfolio, on average over /- 15 CARG over 20 years Alignment with government policies to exploit investment opportunities created by government, eg NGP, NDP policies
Expected targeted portfolio returns gt15 High social impact
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SA GDP composition detail by ranking(Top 5)
GDP G C I Ex - Im
1 General government services (18.4, ZAR191bn)   Food, beverages tobacco (26, ZAR498bn))   Manufacturing (18, ZAR105bn)   PGM's (14.4, ZAR102bn)   Crude oil (15.8, ZAR131.5bn)
2 Education (17.9, ZAR186bn)   Transport (16, ZAR307bn)   Community, social personal services (17, ZAR102bn)   Gold (9.9, ZAR71bn)   Motor vehicle parts accessories (7.7, ZAR64.2bn)
3 Social protection (12.9, ZAR131bn)   Utilities (16, ZAR300bn)   Transport, Storage communications (15, ZAR91bn)   Iron ore (8.6, ZAR61.5bn)   Radio, tv communications (7.2, ZAR60bn)
4 Health (10.5, ZAR110bn)   Miscellaneous goods services (11, ZAR220bn)   Finance, insurance real estate (15, ZAR90bn)   Coal (8.1, ZAR57.4bn)   Motor vehicles (7.1, ZAR59bn)
5 Public order and safety (10.2, ZAR106bn)   Health (10, ZAR182bn)   Mining quarrying (13, ZAR75bn)   Motor vehicles (7.5, ZAR54bn)   Petroleum products (6.0, ZAR50bn)
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Targeted Sectors to stimulate GDP growth The
Smart Approach to Investing
Targeted Sectors PIC Approaches Partners Partners Partners
Targeted Sectors PIC Approaches Government SOEs and DFIs Private
Oil and Gas Sectors Targets investing companies both locally and internationally with significance influence in the sectors Department of Energy, Department of Minerals, PPPs PetroSA, DBSA, IDC Sasol, JSE Listed Oil and Gas companies
Manufacturing and Beneficiation (industrials) Target established companies for expansion in manufacturing of motor vehicles, processing and assembling, mineral beneficiation and domestic supply of inputs. Greenfields projects in manufacturing Department of Trade and Industry, Department of Minerals, PetroSA, DBSA, IDC
Financial Service sector Targeting collaboration with Banks insurance companies to co invest in developmental investments, and expansion capital for companies that needs to grow National Treasury FSB, SARBS, DBSA, IDC, AFDB, IFC, AFDB, the BRICS Bank JSE Listed Banks, ( both top and lower Tier banks)
Economic Infrastructure Sectors (power, construction, water, ICT) POWER generation (Build and list Power utility companies, IPPs in Gas, Coal, Nuclear Clean Technology in the Long Term Department of Transport, Department telecommunication and ICT Department of Higher Energy, Department Water affairs ESKOM, SANRAL, TELKOM, DBSA, IDC, AFDB, IPPS, PPPs JSE Listed energy companies , Unlisted companies in downstream energy, Telecom, ICT and water sectors
Social Infrastructure (Health, Education Affordable Housing) Investments into education (Built Operate and Transfer -20years) in partnership with the government. Investment in hospitals, PPPs, affordable housing to middle income households Department of Human Settlement, Department of health, Department of Higher Education, Department of Basic Education. DBSA, IDC, AFDB Health care and Pharmaceuticals companies eg Adcock, Aspen
Real Estate Provide best and quality offices for all the Government departments and other public official sector entities Department of Public works National Treasury, Municipalities Various departments DBSA, IDC, AFDB Various both listed and unlisted property companies and funds
SMMEs Investments into SMMEs, support to SMEs financing intermediaries Department of SMEs, Department of Trade, Municipalities NEF,DBSA, IDC, Various SMME finance intuitions, eg Business Partners, WDB, etc.
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Developmental Investment Approach
For social, economic or environmental impact
Where Developmental Investment portfolio will sit
Charity, grants, Government transfers
Developmental Investment
Investor expects only principal returned
Development finance institutions
For financial return
For no financial return
Most investments occur here (including the main
part of the PIC portfolio)
N/A
Not for social, economic or environmental impact
Proof of the pudding is in the eating.
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Developmental Investing for Economic
Transformation (DIET)
DIRECT Developmental Investing for a Radical
Economic Transformation
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The GEPF DI, NGP and NDP (the Link)
National Development Plan Sets long term vision
for overall economic andocidevelopment in South
Africa. Integrates economic, social,
demographics, environmental and governance
elements into a coherent framework
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NGP/NDP Alignment to PIC Developmental
Investments
NDP Chapter Objectives Actions How PIC respond to the NDP Initiatives PIC Key Achievements
ECONOMY AND EMPLOYMENT Focus on sectors and clusters that have high potential for growth stimulation Decrease unemployment through investment in Agriculture and Agro-processing. (Increase youth and rural employment) Mineral Cluster Improve growth and income distribution Manufacturing promote localisation and diversification Finance Sector Partnerships to provide project finance Broaden ownership of assets to historically disadvantaged groups. Priority Sector Pillar Currently R3 Billion Committed. Since inception R967 million was invested in Agriculture, Agro processing industries, Mining Beneficiation and tourism sectors. Private Equity R 5 Billion committed through the current mandate. Since Inception R22,8 billion was invested in financial services and transformation across various sectors Dinamane R1. 5 Billion committed through the current mandate across all sectors with a focus on SMMEs.. Since inception R697 million was invested across all sectors with a focus on SMMEs High job creation impact Since inception in excess of 53 270 jobs have been created. Some of the key contributors (2014/14FY) are   Through the construction of the renewable energy, currently the labour force is sitting at 24 183 of which 13 303 are from the local communities Dinamane has created an excess of 10 000 jobs through the SMMEs funding and support Priority sector has created a total of 4 107 jobs (permanent and seasonal) in the agricultural sector. Majority of the seasonal workers were employed for a period of over 6 months. The investee companies managed to employ 144 youth. In 2013/14 financial year over 309 SMEs were created and financed and 21 467 loans were distributed to the small scale entrepreneurs in rural communities Over 10 communities and Employee trust have been formed and financed as a way of broadening assets ownership by the historical disadvantaged groups In addition The PIC provides enabling opportunities for BBBEE partners to participate in the broader economic market through a loan agreement that will afford them equity of an investee company and/or by taking an equity stake of certain investee companies with a plan to exit to a BBBEE parties in the near future
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NGP/NDP Alignment to PIC Developmental Investments
NDP Chapter Objectives Actions How PIC responds to the NDP Initiatives PIC Key Achievements
ECONOMIC INFRASTRUCTURE Increase electricity capacity and access, including investing in renewables. Increase access to clean water. Improve public transport, ports and rail. Competitively priced and widely available broadband. Optimise coal, shale gas and fuel resources. Economic Infrastructure R5 billion committed through current investment. Since inception R3.8 billion was invested in Transport Logistics, ports, Rail, Telecoms, water, ICT Broadband, Energy, Resources infrastructure and , shale gas sectors PIC investment to Lanseria and Road Concession which is N3 Toll Concession, Track and South African Toll Roads Company-Bakwena Platinum Infrastructure Bonds support through Fixed Income department
ENVIRONMENTAL SUSTAINABILITY AND RESILIENCE Protect ocean resources. Decrease greenhouse gas emissions. Reduce volume of waste Better agricultural technologies and agro-processing. Environmental Infrastructure R5 Billion committed through current investment. Since inception R8,6 billion was invested in renewable energy, shale gas, green economy, recycling focus. Direct investment to nine (9) renewable energy projects in South Africa of which one is currently operating (soutpan). Invested in the construction of 318 MW of solar energy in Limpopo and Northern Cape and development of a fuel bio-ethanol plant in the Free state
INCLUSIVE RURAL ECONOMY Improve infrastructure and service delivery in rural economies. High agricultural potential land Improving small scale and commercial agriculture and link to the markets Social Infrastructure ( R5 Billion Committed) Social Housing improving living standards and priority sectors Building of 100 bed Private hospital in Shoshanguve, Lakes hospital in Mpumalanga. Just Veggies investment that is building the capacity of rural farmers through the Community Trust model. The company is incubating the communities that has benefited from the Land Reform programme and have no capacity or skills for farming.
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NGP/NDP Alignment to PIC Developmental Investments
NDP Chapter Objectives Actions How PIC responds to the NDP Initiatives
SOUTH AFRICA IN THE REGION AND THE WORLD Boost intra-regional trade and implement a regional integration strategy Build partnerships across the African continent. MoUs signed with various African strategic Partners ( AFDB, EBID, PTA, IDC, DBSA) Smart State strategy Rest of Africa Private Equity R5, 2 billion) committed through the current mandate. Since inception, R2,6 billion was invest in financial services and transformation across various sectors Africa Development Investment (DI) US500 (R5, 2 billion) committed through current investment. Since inception R2 billion was invested in Energy, transport and logistics, social infrastructure and other related sector, water and information communication technology Strategic investments across all regions which capture the African themes Signed MoUs with strategic partners such as AFDB Fostering economic integration in African continent through investments into infrastructure, telecommunication and Energy
TRANSFORMING HUMAN SETTLEMENTS Better spatial planning Upgrade all informal settlements. Social Infrastructure ( R5 Billion Commitment) Affordable housing, Education and Health care Investment that provides affordable housing to date over 70 000 housing units have been developed. An investment into home loan financial service company with a target on affordable housing loans to government employees and middle to lower income households (Gap Housing)
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NGP/NDP Alignment to PIC Developmental Investments
NDP Chapter Objectives Actions How PIC responds to the NDP Initiatives
IMPROVING EDUCATION, TRAINING AND INNOVATION Improve the quality of education Focus on early childhood development. Eradicate school infrastructure backlog Expand higher education system. Further vocational training (non- Social Infrastructure ( R5 Billion Commitment) Affordable housing, Education and Health care 19 200 learners have received quality education through an investment with School and Education Investment Fund
HEALTH CARE FOR ALL Improve life expectancy Improve primary healthcare Prevent and reduce the disease burden Implement National Health Insurance Build human resources in the health sector Social Infrastructure ( R5 Billion Commitment) Affordable housing, Education and Health care Construction of three Private Hospitals of which two might open during the 2014/15 financial year. In rural areas and secondary towns.
SOCIAL PROTECTION All children should enjoy access to nutrition, health care, education, social care and safety. Create opportunities for the unemployed. Address the skills deficit in the social welfare sector. Mandate retirement savings for all workers, and maintain the government social assistance net Social Infrastructure ( R5 Billion Commitment) Affordable housing, Education and Health care Education and training support providing training in the social welfare sector
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How we deliver...?
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• Conclusion

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Conclusion

• We believe that we have a bigger and important
  role to play in the economy through our
  investment activities
• Our developmental investment strategies are well
  aligned to government key priorities and most
  importantly policy of regional integration with
  the rest of the continent
• The goal remains to be the best modern asset
  manager of choice for all official sector
  entities both in South Africa and Globally.
• Investing for the good cause to the livelihoods
  of all South Africans and rest of Africans
  remains our key priorities, while at the same
  time delivering sustainable long term returns to
  our clients