South Africa's Government Employees Pension Fund is being encouraged by its manager to reduce its 245 billion rand ($16.5 billion) stake in Naspers Ltd. because of concern the fund is overexposed to a single stock, according to four people with knowledge of the matter.
The fund's shareholding is about 16%, said three of the people, who asked not to be identified as the talks are private. Any decision is ultimately up to the GEPF, which is managed by the Public Investment Corp.
Naspers' value has grown 72-fold since 2004 on the back of the success of an early stage investment in Chinese games developer Tencent Holdings Ltd., which listed in Hong Kong that year. That's turned Naspers, a Cape Town-based internet technology investor once focused on South African newspapers, into a 1.53 trillion rand ($101 billion) global entity. But it's also made the company dependent on China, where it has little influence.
The shares gained as much as 1.9% in Johannesburg as Tencent gained in Hong Kong.
"Naspers success is dependent on the Chinese government," said Tahir Maepa, deputy general manager for members affairs of the Public Servants Association, whose 240,000-members make it 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. Furthermore, Naspers and NewCo are both reliant on the Tencent investment, which is worth more than the company as a whole.