GEPF TRIES TO GET R1 bil­lion In­de­pen­dent loan re­paid

CityPress - - Business - JUSTIN BROWN [email protected]­

The Gov­ern­ment Employees Pen­sion Fund (GEPF) is in­ves­ti­gat­ing ways of get­ting the R1 bil­lion loan it made to In­de­pen­dent Me­dia and re­lated en­ti­ties re­paid.

GEPF prin­ci­pal ex­ec­u­tive of­fi­cer Abel Sit­hole said this comes af­ter the me­dia com­pany de­faulted on a pay­ment that was due in Au­gust.

The GEPF is South Africa’s largest pen­sion fund, with 1.2 mil­lion ac­tive members who are gov­ern­ment employees and 450 322 pen­sion­ers and ben­e­fi­cia­ries. As at the end of March this year, the fund has

R1.8 tril­lion in­vested on be­half of all its members, pen­sion­ers and ben­e­fi­cia­ries.

“There are ne­go­ti­a­tions to find other ways to get re­pay­ment … We still ex­pect pay­ment,” Sit­hole said dur­ing an in­ter­view with City Press this week.

“[In­de­pen­dent Me­dia] is not the only nonperforming as­set [in the GEPF port­fo­lio], we have plenty of those … If an as­set man­ager gets 60% of its de­ci­sion right, then they are do­ing well.”

In­de­pen­dent Me­dia is one of South Africa’s largest news­pa­per com­pa­nies and pub­lishes The Star, Pretoria News and Cape Times, among other pub­li­ca­tions.

A GEPF of­fi­cial said dur­ing a me­dia con­fer­ence that the term of the loan was seven years and that In­de­pen­dent Me­dia had only de­faulted on one por­tion of the pen­sion fund’s loan.

“We are cur­rently in ne­go­ti­a­tions to re­struc­ture that pay­ment,” the of­fi­cial added.

It could prove dif­fi­cult for the GEPF to get any pay­ment for the cap­i­tal or in­ter­est from the In­de­pen­dent Me­dia loan be­cause the doc­u­ments that went with Sa­gar­matha Tech­nolo­gies, which failed to list on the JSE, showed that by De­cem­ber 2016 In­de­pen­dent Me­dia had ac­cu­mu­lated losses of

R617 mil­lion. That year, the com­pany made a loss of R534 mil­lion af­ter losses of R97 mil­lion in 2015 and R69 mil­lion in 2014.

An­other fac­tor that will make it dif­fi­cult for In­de­pen­dent Me­dia to re­pay any GEPF debt is that as at De­cem­ber 2016, its total li­a­bil­i­ties – al­most R2.8 bil­lion – were greater than its nearly R2.4 bil­lion as­sets. The com­pany is tech­ni­cally in­sol­vent in that if it were to sell all its as­sets it would not be able to pay off all its debts.

In in­di­ca­tion of the dire sit­u­a­tion the com­pany faces, the GEPF has im­paired the full loan it has with the com­pany to zero. The pen­sion fund im­paired a total of al­most R7.4 bil­lion of its as­sets for this fi­nan­cial year, up from al­most a R1 bil­lion in im­pair­ments in the pre­vi­ous fi­nan­cial year.

Apart from that loan, GEPF also has a 25% stake in the me­dia group, held on its be­half by the Pub­lic In­vest­ment Cor­po­ra­tion (PIC). Sit­hole wasn’t able to say what the fund val­ued that stake at.

About the PIC in­vest­ment at Ayo Tech­nol­ogy So­lu­tions, Sit­hole said the GEPF had been fol­low­ing up on “some of the ques­tions that had been asked”.

The PIC man­ages a sig­nif­i­cant por­tion of the pen­sion fund’s as­sets.

“We want to get more clar­ity around the de­ci­sion­mak­ing process,” he said.

“The broad an­swer is that when [the PIC] in­vested in Ayo at the time, the prospects for Ayo were in­dica­tive that they were very prof­itable. Since then there have been de­vel­op­ments, cer­tain busi­ness prom­ises that they ex­pected to be re­alised have not been re­alised and led to a reval­u­a­tion of the as­set,” Sit­hole said about the ques­tions the GEPF was ask­ing of the PIC re­gard­ing how the Ayo in­vest­ment was val­ued.

Re­gard­ing the

R18 bil­lion that the pen­sion fund lost ow­ing to the im­plo­sion of Stein­hoff, Sit­hole said what the fund learnt from that fail­ure, which re­lated to in­vest­ments in gen­eral, in­cluded the re­quire­ment for rigour in the anal­y­sis of the in­vest­ments one makes and the due dili­gence that fol­lows.

An­other key les­son was that the GEPF’s in­vest­ment in Stein­hoff was largely a pas­sive one, where the pen­sion fund fol­lowed in­vest­ment trends when it bought a stake in the in­ter­na­tional re­tail hold­ing com­pany. Sit­hole de­fended the GEPF’s pas­sive ap­proach to in­vest­ment and track­ing in­vest­ment trends, say­ing gen­er­ally the ap­proach had “paid off hand­somely”.

The GEPF is part of the class ac­tion to re­claim Stein­hoff in­vest­ment losses.

Pres­i­dent Cyril Ramaphosa has set up an in­quiry to probe the af­fairs of the PIC. Sit­hole said to date the pen­sion fund had not been asked to par­tic­i­pate in the PIC in­quiry.

“We are con­cerned about gov­er­nance is­sues at the PIC,” he added.

The GEPF held R87.6 bil­lion in Eskom bonds at the end of March this year. Last month, Eskom re­ported its lat­est in­terim re­sults, which showed the poor fi­nan­cial state the power util­ity was in along with a gloomy fore­cast.

“What we want to see is an Eskom that is sorted out in terms of its gov­er­nance and man­age­ment,” Sit­hole said.

As at De­cem­ber 2016 In­de­pen­dent Me­dia’s total li­a­bil­i­ties

– al­most R2.8 bil­lion – were greater than its nearly R2.4 bil­lion as­sets. The com­pany is tech­ni­cally in­sol­vent

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