Issue: December 2012 / February 2013
Expert Opinion

GEPF bullish about 2013

Support for development opportunities in SA and other African states

Oliphant . . . 2012 surprisingly good

With assets now exceeding R1 trillion, the Government Employees’ Pension Fund (GEPF) is moving to diversify its investment portfolio by supporting development in new growth sectors in South Africa and elsewhere in Africa.

The GEPF is the largest pension fund in Africa. Managing accumulated funds and reserves of R1,039 trillion -- equivalent to about one third of South Africa’s gross domestic product – its members comprise 1,2 million government employees and 360 000 pensioners. In its financial year to end-March 2012, GEPF assets yielded an average return of 11,9%. This was marginally down from the previous year’s 12,2%.

“2012 was a surprisingly good year for us,” says GEPF principal officer John Oliphant. “Given the unfavourable international economic climate, we were quite conservative about the returns that we would be able to generate. We’d thought 10% would be a favourable outcome.”

He expects “pedestrian” growth in international markets next year. This will likely impact on domestic markets, but Oliphant is nevertheless buoyant about prospects in South Africa and particularly in Africa. Key areas of GEPF focus include:

  • Supporting public and private infrastructure development;
  • Investing in unlisted companies to diversify its portfolio beyond the Johannesburg Stock Exchange, in which the GEPF is the single largest investor;
  • Expanding the GEPF footprint in Africa, which is currently confined to investment in infrastructure;
  • Enhancing the GEPF’s role in the Responsible Investment (RI) movement, in which South Africa has become an international leader.

South Africa

The GEPF’s Developmental Investment Policy, launched in April 2011, provides for 5% of its portfolio to be invested in economic and social infrastructure projects, the green economy and initiatives aimed at job creation, enterprise development and broad-based black economic empowerment.

In making new investment in infrastructure, says Oliphant, a balance should be established between the interests of the public and its capacity to pay for new projects, and the need for investors to obtain a reasonable return.

The issue has been brought to the fore by the controversy over e-tolling as the means to pay for the Gauteng Freeway Improvement Project, in which the GEPF is an investor as a holder of bonds in the South African National Roads Agency Limited (Sanral). “We hope the bonds issue will be used to develop a model for equitable implementation of the user-pays principle in future investments,” says Oliphant.

While the GEPF is geared to invest in government’s infrastructure development programme, involving initial investment of R800 billion, Oliphant emphasises that the fund is equally committed to investing in private infrastructure initiatives. An example is GEPF’s investment with the Industrial Development Corporation to support development of utility-scale renewable energy.

With some 50% of its portfolio invested in JSElisted equities, the GEPF recently approved a model to enable the fund to invest up to 5% of its funds in unlisted entities. This will give the GEPF greater flexibility in its choice of investments, and the fund’s governance structures have been strengthened to ensure mitigation of risk.

A sector in which the GEPF would like to become involved in the longer term, says Oliphant, is agriculture. With its abundance of arable land, Africa has the potential to become a major food exporter. The GEPF is therefore looking for an appropriate model to support investment in ventures such as partnerships between established commercial farmers and communities who own under-utilised land.


The GEPF is “very positive” about growth prospects in Africa, says Oliphant, and believes it is well positioned to benefit from investment on the continent. Until now, the GEPF’s presence has been largely confined to investment through the Pan African Infrastructure Development Fund. However, the GEPF recently obtained approval to invest 5% of its portfolio in other parts of Africa.

It has already made two direct investments – in a pan-African banking group and in a Tanzanian cement company -- and will look for new investments mainly through private equity firms.

Responsible Investing

The GEPF is a founding signatory of the UN-backed Principles for Responsible Investing. The fund’s board played a key role in founding the Code for Responsible Investing in South Africa (CRISA). It’s the second country in the world to introduce a guide supporting institutional investors to incorporate sustainability into their investment analysis and activities. This includes environmental, social and governance (ESG) factors.

“The era of profits and more profits at the expense of the environment and society is a distant memory,” says Oliphant. “Responsible investing is now an integral part of any long-term investing.”

The GEPF has established a special ESG unit. It has begun to engage with investee companies to ensure their compliance with ESG imperatives.

Oliphant hopes that the tragic events in the Marikana mining community will persuade more shareholders to accept that social issues are integral to their corporate sustainability.