No end to PIC s bad loans ’ to the politically connected

Entities associated with politically connected business people, including Jayendra Naidoo and Iqbal Survé, were again responsible for bad debts amounting to billions of rand written off by the Government Employees Pension Fund (GEPF).

The GEPF s annual report for ’ the year ending March reveals the pension fund wrote off bad loans totalling R11.7bn extended on its behalf to 38 entities by the Public Investment Corporation (PIC). The staggering writedowns call into question whether the state-owned asset manager should have any mandate to lend money provided by the GEPF.

MPATI COMMISSION

Many of the loans featured prominently during testimony at the commission of inquiry into the PIC headed by retired judge Lex Mpati last year.

Heading the list was the loan to Naidoo s Lancaster Group, which was written off to the tune of another R3.36bn. That brought total write-offs for the GEPF over the past three years to R9bn against total loans to Lancaster of R12.9bn.

The PIC s bad-debt expenses equate to 28% of the total loan book at the start of the year (R41.8bn). By contrast, Mercantile Bank, which has a loan book of about a quarter the size of the GEPF s, incurred bad debt expenses of 1.1% of its loan book for the year ending February.

Other questionable deals examined by the Mpati commission that incurred further writedowns for the pension fund this year include: the Kilimanjaro Sakhumnotho Consortium (R1bn); S&S Refinery (R429m); and Surve s Independent Media

(R112m). Even VBS Mutual Bank had a small legacy amount of R48.5m written off.

The GEPF also wrote off another R335mon its loan to the Musa Group, an investment holding company that acquired assets from the Bakubung ba Ratheo traditional community, who have been left penniless.

In just 12 months to the end of March 2020, a period that predates the severe lockdown and its economic consequences, the PIC extended a loan of R5.8bn to Belelani Capital, which had to be written down by the GEPF by R2.3bn.

“The company is not in the position to repay the outstanding term loan facility,” the GEPF' s report states, referring to Belelani Capital.

When asked whether the PIC should have any mandate at all to lend money on behalf of the GEPF, the fund s new principal executive officer, Musa Mabesa, said the fund was not immune to what was happening in the economy, but that the GEPF was ratcheting up its oversight of the PIC.

It is concerning [the level of the write-downs]. We are putting in plans to monitor the investee companies and we hope that fortunes change for some of these companies and we can reverse the impairment. We are working with the

PIC to rectify those and make sure we do things in the proper manner going forward,” he said.

The GEPF is currently revising its investment mandate with the PIC.

We are tightening controls there and cleaning up some of the shortcomings of the past. We will have new investment parameters and a new fee structure in place within the next year,” Mabesa said.

WE ARE PUTTING IN PLANS TO MONITOR THE INVESTEE COMPANIES AND WE HOPE THAT FORTUNES CHANGE FOR SOME OF THESE COMPANIES

R11.7bn

the total amount the GEPF wrote off during its financial year ending March

R3.36bn

in loans to Jayendra Naidoo ’ s Lancaster Group was written off by the pension fund