Private markets, which encompass investments not traded on a public exchange, help impact-conscious investors meet their goals of job creation, education and renewable energy generation. Private markets comprise unlisted sub-asset classes, which include unlisted credit, direct property, infrastructure and private equity.
David Moore, head of alternative investments at Alexander Forbes Investments, offers two compelling examples for investing in unlisted assets in South Africa.
Port Elizabeth – cutting-edge, affordable housing
Sluggish GDP growth and depressed economic activity locally is exacerbating the already bloated housing deficit evident across the city. The lack of affordable housing options has contributed to the proliferation of informal settlements and make-shift accommodation which, despite being unsightly, is a health and safety hazard to the families who inhabit these structures.
However, a quick drive through the leafy suburb of Parson Vlei shows private market practitioners at play, aiming to remedy these problems. The suburb is home to a R51.5m affordable housing development that not only meets the housing needs of the local population but is also eco-friendly and progressive in its design:
Energy savings using heat pumps for hot water
Water savings through low-flow taps
Adjusted window-to-wall ratios
Reduced heating costs in winter using improved insulation
The development will provide cutting-edge, affordable accommodation in the order of 300 dwellings. This is an excellent example of a private market practitioner providing both a commercial return suitable for institutional investors with a commensurate amount of sustainable, social impact.
Johannesburg – qualify, affordable education
This is the most populous city in South Africa and the economic hub of the country – titles it may struggle to hold on to if cannot provide, quality, affordable education to the next generation of schoolgoers. With a bloated public education system and improper skills development, the education of our youth in the city of gold is a real risk. However, private market participation in the sector is making a real difference. Evident by matric pass rates above 90% across the Royal Schools portfolio (well above the national average), this is testament to the social benefit these private market-funded schools are having in their communities.
Private market investments such as these are providing pension fund investors with competitive, inflation-linked returns whilst simultaneously keeping children off the street and creating a more inclusive, skilled society.
“Private market investing can and is creating a real impact in South Africa. Investors are placing more prominence on impact investing as they begin to appreciate the true impact of their investment thesis in job creation, education and creating a greener, cleaner South Africa for us all,” concludes Moore.