South Africa Urges PIC to Invest in Social Development Projects

JOHANNESBURG (Capital Markets in Africa) – The Public Investment Corporation, which manages South African state-worker pensions, should consider investing a portion of its 1.93 trillion rand ($143 billion) in assets into projects that will boost job creation and support people on lower incomes, a parliamentary committee said.

That shouldn’t include providing funds for ailing and mis-managed state-owned companies that won’t deliver a return on investment, the standing committee on finance said in an emailed statement on Wednesday. The PIC currently invests mainly in government and corporate debt and publicly-traded companies, owning about 13 percent of Johannesburg’s stock exchange.

The findings of the committee come after the Pretoria-based PIC came under pressure from the National Treasury to buy the government’s shares in fixed-line provider Telkom SA SOC Ltd. to pay for a bailout of South African Airways. PIC Chief Executive Officer Daniel Matjila rejected the request, saying a purchase of the 39 percent shareholding would leave the company overexposed to the landline provider, two people familiar with the matter said last month.

The Treasury eventually agreed to give the carrier funds to avoid default on a 3-billion rand loan without resorting to selling assets to the PIC. Matjila told the committee on Tuesday that the money manager would consider a future investment in the airline if it returns to operating as a viable business.

Company Funds
The PIC should carry out an inquiry into who was behind recent allegations that Matjila used company funds to finance a personal project related to someone he was in a relationship with, the committee said. The board, which includes Chairman and Deputy Finance Minister Sfiso Buthelezi, summoned Matjila to explain himself and accepted his response at a meeting last month.

Finance Minister Malusi Gigaba has said he won’t ask Africa’s biggest money manager to provide funds for state companies that would risk the pensions of government workers, who include teachers and nurses. He has demanded a probe into claims of irregularities at the PIC and asked for a list of all its investments.

If Gigaba wants an investigation into PIC’s investments, the minister must consult with labour groups and show that the probe would be in the interests of the public, the committee said.

Source: Bloomberg Business News