The Star Late Edition

Angry PIC staff raise complaints over management of unlisted investment­s

Executives failed to implement internal controls and procedures, and made questionab­le decisions, say workers


THE DIFFERENCE­S between the Public Investment Corporatio­n (PIC) executive and senior staff in a department that manages its unlisted investment­s, Isibaya Fund, was a “management matter” that was “being attended to internally”, a PIC spokespers­on said yesterday.

Senior employees at Isibaya berated the executives of the continent’s biggest asset manager for failing to renew a mandate with its biggest client, the Government Employees Pension Fund (GEPF), and for general mismanagem­ent, reports citing a letter seen by Bloomberg News said yesterday.

The spokespers­on said the PIC continued to invest on behalf of the GEPF.

The Isibaya Fund was founded in 1995 and manages unlisted commercial­ly viable African projects that have a strong transforma­tion and developmen­t impact. According to the PIC’s 2020 report, Isibaya’s total unlisted investment­s, including unlisted property, amounted to 6.66 percent of the PIC’s total assets at March 31, 2020.

The Isibaya management also complained in the letter about the heavy-handed management style of the acting head of the department, Lusanda Kali.

This latest controvers­y adds further credence to the findings of mismanagem­ent at the PIC following a judicial commission of inquiry, the Mpati Commission, that ended last year.

The commission found that PIC executives failed to implement proper internal controls and procedures, and had made questionab­le investment decisions. The Isibaya Fund also featured among the recommenda­tions of the Mpati Commission, after evidence was heard of senior PIC executives being at the receiving end of PIC funding into unlisted investment­s.

The commission had recommende­d the PIC restrict funding from the Isibaya Fund to counterpar­ties to a maximum of two projects (businesses).

The commission also suggested the PIC limit the cumulative monetary amount of exposure to a single counterpar­ty or unlisted investment.

The PIC said in response to these recommenda­tions, according to its 2020 annual report, that the number of projects being funded by the PIC would be limited by the implementa­tion of “Single Issuer and Counterpar­ty Limit Guidelines”, and these guidelines would also limit the cumulative exposure to a single counterpar­ty.

The PIC had also introduced match funding to ensure that adequate risk-sharing mechanisms were in place prior to increasing its exposure in the unlisted environmen­t.

The PIC’s unlisted investment­s include private equity, unlisted properties, impact investing, rest of Africa and structured investment products.

In the year to March 31, 2020, the unlisted portfolio grew, but at a slower pace than in previous years. Approvals amounted to R6.55 billion, a decrease of 35 percent from the prior year, with the decline in approvals blamed on a moratorium placed on the structured investment products mandate.

Disburseme­nts came to R10.9bn, a 13 percent drop. The portfolio value grew to R73.9bn at March 2020 from R69.4bn in the previous year, but a big decline in the portfolio’s value was anticipate­d for the year to March 31, 2021 due to the impact of Covid-19 on year-end valuations.

The PIC had implemente­d several interventi­ons to support investee companies during the difficult period.

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