State pension fund holds on to the “secret” publica…
Despite the Public Investment Corporation’s (PIC) trail of tainted investments worth billions of rand, the state-owned wealth management firm’s biggest client is sticking by it for black economic empowerment and unlisted deals.
The PIC’s biggest client is the Government Employees’ Pension Fund (GEPF), which looks after the pension savings of current and retired government employees – it was last worth R2.09 trillion.
The GEPF mandates the PIC to invest government employees’ pension savings in a range of asset classes (including listed equities, bonds, real estate and unlisted companies) to generate attractive returns while supporting South Africa’s development goals.
But the GEPF’s investment relationship with the PIC was up in the air for more than a year, as neither institution had an agreement to manage investments in unlisted companies.
The PIC’s mandate to oversee the GEPF’s portfolio of unlisted investments – called the Isibaya Fund and worth more than R70 billion – expired in March 2021. And the GEPF chose not to renew it, calling into question its relationship with the PIC, since the latter had managed the former’s or Isibaya Fund’s portfolio of unlisted investments since 1997.
Started as an “impact mutual fund” focusing on infrastructure investments with economic and social benefits, the Isibaya Fund has evolved to prioritize investments in companies with a favorable profile for black economic empowerment. About 10% of the GEPF’s pension savings (worth about R2 trillion) will be reallocated to the Isibaya Fund.
The GEPF is unwilling to cut ties with the PIC as it has agreed a new mandate for unlisted investments with the state asset manager. In other words, the PIC will continue to administer the Isibaya Fund and channel GEPF funds into black economic empowerment deals.
The PIC is unwilling to disclose the financial terms of its new agreement with the GEPF on the Isibaya Fund. The PIC did not specify whether it would continue to manage 70 billion rand under the Isibaya fund as before or whether the GEPF had reduced that mandated amount.
When the PIC pressed for more information on his new mandate at the GEPF, he said so Business outsider that it will not comment beyond a statement it issued Tuesday announcing its continued relationship with the GEPF in relation to the Isibaya Fund.
The PIC was only willing to say that the new mandate would allow it to invest in companies based in South Africa and the rest of Africa on behalf of the GEPF.
In South Africa, the PIC will consider unlocking up to R500 million worth of investment per company. And in the rest of Africa, the PIC will provide investments of between $20 million (R316 million) and $40 million (R632 million).
Old habits are hard to break
The PIC’s secrecy regarding its new mandate at the GEPF for the Isibaya Fund is arguably reminiscent of its old habits.
It is the secrecy and opacity surrounding the Isibaya fund that has led to billions of dollars in tainted investments being pinned down by the PIC when Daniel Matjila was at the helm of the wealth manager from 2014 to 2018.
The fact that the Isibaya fund invests in companies that are not listed on the JSE or any other stock exchange alleviates the transparency or disclosure requirements of the PIC. The way the Isibaya fund went to work under Matjila was by opaquely picking deals.
Some of the most controversial or dumb investments the fund has made include Independent Media, AYO Technologies, Erin Energy, VBS Mutual Bank, and S&S Oil Refineries, among others. Underscoring this, the Mpati inquiry into the PIC’s governance matters found that 41% of the wealth manager’s R123 billion unlisted investments (including the Isibaya fund) were at risk and “on guard.” were underperforming” or were not performing. carry out.
The Isibaya Fund and its future leadership are critical.
The Mpati inquiry is calling for more transparency into the PIC’s investments under the fund – requiring the value of its investments to be reported online and in real time
But the PIC is off to a bad start if it is unwilling to disclose the terms of its new mandate with the GEPF for unlisted investments. DM/BM