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DUDUZILE RAMELA: There’s been talk in South Africa about economic recovery and improving investor confidence. The Mineworkers Investment Company invests directly into privately held businesses, and holds insights on where money is actually going and how this impacts the economy.
Mineworkers Investment Company chief investment officer Nchaupe Khaole joins us to talk about how they see the current environment and how global uncertainty is influencing their decisions – and where they’re still finding opportunities to invest.
Thank you for your time this morning. From where you sit, are you actually seeing signs of recovery?
NCHAUPE KHAOLE: Good morning Dudu, and thanks for having me on your show. From where we sit we do see signs of a recovery. I think it’s fair to say that the reform agenda, the current government of national unity and the work that’s been undertaken through the office of the president, have certainly resulted in what I would call ‘cautious optimism’ and renewed business confidence. But growth does remain muted.
[With] the Middle Eastern conflict, I seem to recall that Treasury was projecting that our real GDP growth rate for this year will be 1.6%, which, inasmuch as it is positive, is still well below the 3% we need to meaningfully reduce unemployment.
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So while there are green shoots that we should celebrate, we can’t ignore the fact that, as your previous commentator indicated, the situation in the Middle East not only poses risks to global economic growth, but certainly we on the southernmost tip of the African continent will not be insulated from the effects thereof.
DUDUZILE RAMELA: Micro, small and medium enterprises are said to be great stimulators to an economy. And so there’s a lot of focus on MSMEs. But from a private-market perspective, what is actually holding them back from accessing funding, because that’s one issue they complain about a lot?
NCHAUPE KHAOLE: True from what we’ve seen. So a few years back we launched an initiative called Khulisani Ventures where we looked to invest in black-owned, highly scalable and innovative ventures.
Inasmuch as we attracted a great deal of interest from funders who needed capital, we noticed a trend that was alarming, I’d say. There’s generally a mismatch between the type of funding that entrepreneurs require and the type of funding that is available from institutions such as ourselves.
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For instance, the Mineworkers Investment Company is an entity that’s been around for 31-odd years and our net asset value stands at just over R9 billion at current count, which means that in order for us to deploy capital in an opportunity there has to be a reasonable prospect for us to make a meaningful return on that capital.
Now, if the investment opportunity presented by an SME does not allow us to make a reasonable return on that capital, it makes it a bit difficult to deploy into such opportunities. So the need for more scalable opportunities to really take advantage of the capital that’s available is something that is definitely required.
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DUDUZILE RAMELA: Fair enough. Speaking of reasonable prospects, where then are you still seeing real opportunities in South Africa, and where are you holding back?
NCHAUPE KHAOLE: I would say there are certain themes that we find of interest. They present opportunities for investors such as ourselves to make a reasonable return on our capital. Those themes are in and around driving greater digital inclusion, [as] I call it.
Digital infrastructure and connectivity are high up in terms of the themes we look to get behind.
Last year we were part of a consortium that bought out of Telkom. That is in keeping with that digital infrastructure theme. We have a business called TooMuchWifi, which does connectivity predominantly in townships and peri-urban areas.
The demand for connectivity in those areas is certainly driving increased investment opportunities. You will have had heard of the likes of Fibre Time and Net Nine Nine that are also looking to take advantage of opportunities in that space – not too different from us.
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Financial inclusion remains a critical theme. If I cast my mind back to the conversation you were having just now around SME funding, that does speak to a need for greater financial inclusion and a coming up with financial products that are innovative and can truly meet the needs of the entities who need the capital.
Education and healthcare still feature prominently, and we believe that food security, given some of the emerging risks, will equally be an interesting area to deploy capital into.
DUDUZILE RAMELA: Fair enough. Mineworkers Investment Company chief investment officer Nchaupe Khaole, thank you for your time, sir.
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