GEPF shortfall soars to R25bn
PIC, which invests on behalf of Government Employees Pension Fund, accused of dodgy choices.
Has the company that manages R1.2 billion of retirement funds for over 1.2 million government workers invested its money properly?
Public hearings revealed that the Public Investment Corporation (PIC), which invests on behalf of the Government Employees Pension Fund (GEPF), owns 20% of all Eskom’s outstanding bonds, one-fifth of SA-listed bonds and inflation-linked debt and nearly 10% of the JSE All Share Index. Eskom has debt of R419 billion.
The PIC’s “investments in government-issued bonds and stateowned entities (SOEs) have been made in line with clients’ mandates and large portions of these are government-guaranteed,” said the PICs’ Dean Botha. “Both the government and SOEs have been honouring their debt to the PIC.” Other PIC deals highlighted at the commission of inquiry into the PIC include the purchase of shares in Ayo Technology Solutions and a plan to invest in the initial public offering of Sagarmatha Technologies, a listing that regulators eventually blocked. Both companies are linked to businessperson Iqbal Surve, said by former PIC fund manager Victor Seanie to be friends with exPIC CEO Daniel Matjila.
Seanie, who was suspended following an internal investigation into the Ayo deal, also testified that the prices paid for shares in Distell and Vodacom’s Tanzania unit were too high. Aeon Investment Management’s Asief Mohamed said: “It’s unclear if there were kickbacks, but this certainly raises the question.”
Matjila declined to comment as he is yet to appear before the commission. Surve’s spokesperson said he welcomed the opportunity to set the record straight, if the inquiry requests his presence.
The GEPF offers retirement benefits and funeral and death payouts. The gap between contributions received and benefits paid has jumped to R25 billion, the highest in three years and the fifth straight year of shortfalls (see top graph).
If the PIC got to a point where it couldn’t make sufficient returns to cover payments, government would be on the hook for civil servants’ pensions. The fallout from the scandal has been dramatic: Nine PIC directors resigned en masse earlier this month. This leaves an oversight vacuum at the PIC just as its reputation is at its lowest. Over the past year, half of the PIC’s executive committee have been suspended or resigned, including Matjila.
Ways to strengthen PIC governance suggested at the inquiry included an end to the post of PIC chairperson being held by the deputy finance minister. The GEPF isn’t obligated to hold its R1.8 trillion of assets with the PIC, and Fedusa said in September 2017 it would agitate for the PIC to be replaced if it was forced to help bail out state funds. Cosatu wants the PIC to be more transparent and free of political interference, but isn’t demanding the funds be moved, according to spokesperson Sizwe Pamla.
Local investment funds have added more assets than has the PIC in three of the last four years (see graph below).