A South African Take on the Vision Fund May Be Small, but It Carries No Saudi Baggage

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As SoftBank’s huge Vision Fund came under scrutiny last month over its ties with Saudi Arabia, a small South African fund quietly took a leaf from its playbook.

The limelight-shunning internet and media group Naspers on Oct. 26 unveiled plans to pour $315 million into tech start-ups in its native South Africa. That is one part of a larger $8.2 billion fund that is being overseen by the company to step up growth in its e-commerce ventures.

It is small compared to SoftBank’s $93 billion Vision Fund, which is backed in part by Saudi money. But the Naspers war chest is still worth watching.

As Africa’s largest listed firm, which started a century ago as a pro-Afrikaner newspaper, Naspers has been defined by one deal: It bought a third of Tencent for $36 million in 2001. At the Chinese internet giant’s valuation peak in January, the stake was worth over $180 billion — roughly 45 percent more than Naspers, which also owns newspapers, a Pan-African pay-TV operation and multiple online classifieds, food delivery and fintech businesses. (As an early investor in Alibaba, SoftBank’s chief executive, Masayoshi Son, offers one of the few comparable examples of such an investment home run.)

One way for Naspers to narrow the discount between its own valuation and its Tencent stake was to sell off bits of Tencent to raise funds that it could reinvest in start-ups. It did that earlier this year, and netted $9.8 billion by selling a 2 percent stake. (It retains a 31.2 percent holding.) It used some of the proceeds to create an $8.2 billion fund, but Naspers shares have since struggled amid concerns that the cash will be wasted.

That is understandable. Collectively, its new e-commerce ventures — such as Russia’s mail.ru or Germany’s Delivery Hero — lost $615 million last year. Investors could be forgiven for seeing echoes of Mr. Son’s faith in the cash-gobbling ride-hailing firm Uber in Naspers’ investments so far.

But set against Tencent, Naspers shares have outperformed, which suggests that the firm has gotten some credit. Since the fund was announced on June 22, Naspers’ 14 percent decline has wiped $12 billion off its market value. Over the same period, the value of its remaining Tencent holding has lost $39 billion, a 26 percent drop.

A focus on emerging markets means that Naspers’ version of the Vision Fund is shielded from big losses by the relatively small amounts that can be invested — in Africa’s nascent tech sector, $300 million goes a long way. And not everything it has touched has turned to dust: In May, Naspers sold an 11 percent stake in the Indian e-commerce start-up Flipkart for $2.2 billion, after investing $616 million.

The group’s Flipkart announcement was short on emotion and details, which may be a reflection of Naspers’ taciturn Afrikaner roots. That should concern investors who want clarity on what their money is doing. But that’s the same problem that stakeholders in Mr. Son’s actual Vision Fund face — without the need for hand-wringing about where the cash came from.

Ed Cropley is a columnist at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com

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