PIC and GEPF still need AYO dividends to keep S Africa’s pensioners in the black
IN THE 2021/2022 financial year, Ayo Technology Solutions (AYO) contributed almost R95 million to the Government Employees Pension Fund (GEPF) in the form of dividends.
AYO, the country’s single largest most transformed ICT investment company, announced its results earlier this week, and despite posting a loss made the decision to pay out dividends.
This, of course, has been greeted with some scepticism by the armchair traders who are vocally outspoken on everything AYO.
However, if we look beyond the obvious and remove the disparaging external chatter, there are sound reasons for the technology giant to dip into its reserves to bolster its shareholders’ pockets, especially those of the pensioners whose hard-earned money it is, through the GEPF, which is managed by the Public Investment Corporation (PIC).
The PIC is one of AYO’s biggest investors, so why would it not want a return on this, which is, in turn, delivered to the GEPF?
The PIC is the guardian of more than 80% of the GEPF’s some R2.3 trillion portfolio, R4.3 billion of which was invested in AYO in December 2017 when it listed on the JSE. AYO deploys a hybrid dividend policy, which has paid Africa’s largest asset manager around R400 million in dividends from 2018 to now, of which around R95m was in this financial year.
In a year where the GEPF was forced to re-evaluate its actuarial factors, reducing them in line with the lessthan-expected economic assumptions from November 1, 2022, a healthy dividend such as AYO’s contribution, should be good news.
Wallace Mgoqi, AYO’s chairperson, had this to say about the dividend payout: “Sometimes I feel that we just cannot win whatever we do. AYO has been needlessly criticised in the media for all sorts, and by certain members of the PIC too, yet despite all the odds, it has continued to grow its revenue and, as a result, pay dividends.
“The past three years have been tougher – economically speaking – than most since we listed on the JSE, yet we can be counted on by the market and our shareholders to come through for them. “These are the sort of investments that should make a lot of sense (and cents) and should be applauded, not bedevilled.”
South Africa’s economic woes will continue in the short to medium term.
A set of factors that include increases in interest rates, the ongoing and worsening situation at Eskom, which has an enormous impact on industry, and the country’s ability to dig itself out of a deep economic hole compounded by the government’s hefty loan/debt burden expected to reach R5.2trln by 2023/24 (that’s next year), contribute to difficult times ahead.
Not least of all that unemployment remains at unacceptably high levels.
While the GEPF, like AYO, also increased its revenue in the 2021/2022 financial year, coming off a loss, like many companies in the country, and an increasingly shrinking base of contributors paying for an increasing base of retirees and other claims, “GEPF has a mandate to grow its asset base, as does the PIC in managing this important fund.
“Therefore, neither should look the proverbial gift horse in the mouth, nor should the PIC bite the hand that feeds it,” said Mgoqi. As has been reported on several occasions, the PIC has moved to reclaim the funds it invested in AYO, which seems strange given the continuing and dependable return on its investment.
Much of the PIC’s alleged motivation behind this move has relied on what has now been shown to be false, wrong, and discriminatory reporting by much of South Africa’s mainstream media.
AYO has joined a lawsuit that will see the report from the Mpati Commission, which looked at alleged wrongdoing at the PIC itself (not AYO), take on a formal review through the courts.
AYO has had some other mentionable wins of late too, with the Competition Tribunal and the Equality Court of South Africa agreeing there may well be a case for South Africa’s banks to answer to, in how they have treated AYO – which had contributed to the company’s constrained end-ofyear results in this and the previous financial year.
The bottom line: With a consistent and reliable track record of dividend paying and an asset pipeline base waiting to get going, the PIC and the GEPF need AYO dividends to keep pensioners in the black.