PIC puts its money on transforming economy
Shift in focus has boosted balance sheet, helped create jobs and empowered black-owned companies
Public Investment Corporation head Dan Matjila says the entity’s financial success debunks the myth that the pursuit of transformation comes at the expense of excellence.
AS intensive efforts are under way to avoid a credit ratings downgrade and strengthen fragile economic growth that, optimistically, is estimated at less than 1% this year, it is important that everyone continues to play a role in ensuring that a solid platform for growth is in place.
Finance Minister Pravin Gordhan and our shareholder minister and chairman, Deputy Finance Minister Mcebisi Jonas, have ably led the country’s efforts to avoid a recession (two consecutive quarters of contraction) and a ratings downgrade to junk status.
The results of their interventions were recognised earlier in the year when the country avoided a downgrade to subinvestment grade status.
On Wednesday, Gordhan will provide another update on what has been achieved to strengthen our fiscal position since he delivered his budget in February.
We appreciate his leadership towards creating an enabling environment for economic operators like ourselves to thrive.
As one of the community of entities reporting to the Treasury, we share the optimism that SA can emerge from its low-growth and job-shedding trajectory. Our optimism is based on evidence from the operations of the Public Investment Corporation (PIC), the state-owned asset manager I have had the privilege of leading since 2014.
We are forging ahead in making our contribution to the twin goals of developing and transforming the economy and the financial services industry.
We fully embrace the minister’s challenge to asset managers and owners to recast our investment strategies to focus on “sustainable returns over the longer term” and to make these assets work for all stakeholders.
A year ago, our mission was reoriented to sharpen and strengthen our focus on accelerating economic transformation through support for developmental objectives, job creation, black economic empowerment and small and medium-sized enterprises.
Our latest annual report that we have just tabled in Parliament shows evidence not only of success, but that we are doing so from a stronger financial position.
This debunks the commonly held myth that pursuit of transformation comes at the expense of standards and excellence.
Not only have our revenues grown, but we’ve also done so with a clean audit outcome and not one cent of our funds going into wasteful and fruitless expenditure.
Since the inception of its developmental investment approach, the PIC, which manages nearly R2-trillion in assets from its clients including the Government Employees Pension Fund, the Unemployment Insurance Fund and the Compensation Commissioner Fund, facilitated the creation of more than 132,000 jobs including almost 11,000 new ones.
The employment beneficiaries included 14,000 youths and 169 jobs for people with disabilities. We also contributed to the retention of thousands of jobs in various companies in which we are invested.
In the past financial year, 85% of our procurement budget was spent on black-owned firms, 60% of our brokerage business was directed towards empowered brokers, and 60% — or R2bn — of private equity fund commitments for investments were committed to broad-based black economic empowerment private equity firms.
We approved transactions worth R38.5bn in our unlisted portfolio — a record figure. After receiving approval for our panAfrican strategy, we approved R4.6bn of transactions for this.
With a focus on investments in clean energy (renewables), healthcare (hospitals), education (higher education student loans and accommodation) and housing (properties and units), the unlisted areas aim to accelerate economic transformation.
Our listed portfolio accounts for 12% of the JSE equities market capitalisation and more than 42% and 50% of government bonds and state-owned companies, respectively. This has enormous transformative potential.
Another shift in our mandate has been to play a more proactive and activist role in investee companies — listed and unlisted – and we adopted an investment approach that goes beyond enhancing financial returns.
We want to target sectors that have a demonstrable effect on stimulating economic growth, and we have moved away from aiming at moderate-average social effect to a very strong focus on socioeconomic transformation and job creation.
Given our 12% grip on the JSE’s market capitalisation, we are in a position to drive transformation in the companies in which we are invested.
This influence is exercised through two instruments: our voting power and our right to the appointment of nonexecutive directors to drive progressive corporate strategies based on the highest standards of corporate governance.
These principles are in line with our mandate.
In the past financial year, our team monitoring environmental, social and governance commitments by investee companies has consistently voted against board resolutions seeking to award executive pay that is obscenely excessive.
Our strong balance sheet enables the PIC to take advantage of investing in emerging opportunities that come as a result of corporate restructuring. As Africa’s largest public asset manager and one with a longrange view, we don’t take this role for granted.
In our activities, we are guided by the highest standards of corporate ethics and prudent risk management.
We frown upon reckless adventurism among our professionals and those working for our partners.
The PIC has never placed its clients in a position in which they fail to honour their obligations to their members as a result of our investment decisions. The rigour of our transaction processes is one of our hallmarks.
Under my watch, these processes will be continuously strengthened to ensure we transform the economy without weakening the PIC’s balance sheet, its main asset.
A YEAR AGO, OUR MISSION WAS REORIENTED TO FOCUS ON ACCELERATING TRANSFORMATION
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This issue was at the forefront of the competition authorities’