According to sources with knowledge of the development, GEPF is being advised by its manager the Public Investment Corporation, to cut the stake to about 16% following concerns that it is overexposed to a single stock.
As one of the Africa’s biggest company, Naspers’s value has grown 72-fold since 2004 on the back of the success of an early-stage investment in Chinese games developer Tencent, which listed in Hong Kong that year.
“Naspers success is dependent on the Chinese government,” said Tahir Maepa, deputy general manager for members affairs of the Public Servants Association, the biggest labor union representing contributors to the GEPF.
“It’s a huge risk, not only for the PIC, it’s a risk for the South African economy and the JSE,” he said, adding that the GEPF should “definitely” cut its stake.
The rapid growth also means Naspers accounts for almost 25% of a shareholder-weighted index on the Johannesburg Stock Exchange.
While that will be reduced when the company spins off its Tencent stake and other internet-focused assets into a new vehicle listed in Amsterdam next month, its 73% holding in that entity, known as NewCo, will only cut its weighting in Johannesburg by about a quarter, according to Naspers reports Money Web.
Furthermore, Naspers and NewCo are both reliant on the Tencent investment, which is worth more than the company as a whole.
Tencent has been struggling with a Chinese government crackdown on addiction to computer games, and regulators are currently working on an overhaul to the approval process for new titles.
Naspers currently makes up almost 21% of the value of the GEPF’s listed equity holdings.
According to Shamiela Letsoalo of GEPF, the transaction will allow investors to move “some of their weight off the JSE onto (Amsterdam’s) AEX index while at the same time continuing to lock in continued high returns.
“This will likely result in shareholders having more balanced weightings and will help to reduce any overhang.”
She said the firm will “continue to invest in South Africa’s fast-growing ecommerce and internet segment,” adding that “these differences will cause many investors to view them separately within their portfolio.”
While the debate over the stake in Naspers has been going for a sometime, any sell down is expected to be done in phases.