Africa-Press – South-Africa. Zirk Gous, the spokesperson for the Association for Monitoring and Advocacy of Government Pensions (AMAGP), said South Africa’s top asset manager lost billions through bad BEE deals.
Gous was referring to the Government Employees Pension Fund (GEPF), whose investments are managed by the Public Investment Corporation (PIC).
The PIC is an asset management firm wholly owned by the government of the Republic of South Africa, represented by the Minister of Finance.
Its clients are primarily public sector entities, including the GEPF, Unemployment Insurance Fund (UIF), and Compensation Commissioner Fund (CC).
The PIC manages a diversified investment portfolio comprising multiple asset classes. These include listed equities, real estate, capital market, private equity and impact investing.
It has R2.7 trillion in assets under management, making it the largest pension fund manager in South Africa.
Gous told Biznews that the PIC and GEPF have a transformation policy in place, for which they use the Isibaya fund.
The PIC said that through Isibaya, it promotes development and inclusive growth through its Unlisted Developmental Investments, which create both social and financial returns.
Social returns include facilitating job creation, economic empowerment, and transforming the companies and sectors where the PIC invests.
Gous said it is international best practice for funds to invest in unlisted entities. However, in South Africa, it manifests in only investments in BEE companies.
He said Isibaya has a large number of investments, and many of them perform poorly, which was highlighted in a judicial commission of inquiry into allegations of impropriety at the PIC.
“The finding of this commission is that 44% of the Isibaya investments are at risk of failing or are failing. It is indicative of the risk as identified by the commission,” he said.
Gous said looking at the PIC and GEPF’s annual statements and annual reports is a horror story, and that they have impaired billions.
He highlighted that a large part of the impairments come from the Isibaya fund, illustrating how risky those investments are.
“Now, if that is not high risk, please advise me what is considered high risk. The Isibaya fund is really bad, bad news,” he said.
Gous added that the money lost through bad deals belongs to state employees and vulnerable pensioners.
R52 billion lost through bad investments
Daily Investor analysed the information Gous shared with Biznews by looking at the annual reports and other financial data.
It showed that over the past nine years, the GEPF reported cumulative investment write-downs of R52 billion.
These write-downs were primarily due to impairments within private unlisted investments by the Public Investment Corporation.
This means that the overwhelming majority of these asset impairments were due to investments by the Isibaya fund.
Gous stated that the fundamental problem within these organisations is that they are under “total political control”.
Gous was referring to the fact that the Public Investment Corporation is an asset manager that the South African government wholly owns.
Although the PIC is not the owner or beneficiary of the money in the GEPF, it has a mandate to invest it on behalf of its beneficiaries, government employees.
Because the South African government wholly owns the PIC, the government employees’ pension money could easily be used to advance the government’s agendas.
This can lead to the PIC making politically driven investments, such as Black Economic Empowerment (BEE) investments, which result in significant financial losses to the fund.
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