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.