South African Pensioners Protest Against Eskom-Related Loss

JOHANNESBURG (Capital Markets in Africa)  – South Africa’s Public Investment Corp. was reckless with pensioners’ funds when it invested about 90 billion rand ($6.6 billion) in bonds of state-owned utility Eskom Holdings SOC Ltd., according to the Association for Monitoring and Advocacy of Government Pensions.

Other poor decisions by Africa’s biggest money manager included the provision of financial support to business ventures of media tycoon Iqbal Surve, AMAGP representative Albert van Driel told a commission of inquiry in Pretoria on Monday. Retirement funds lost about 6.3 billion rand in those investments, he said, including on the acquisition of a stake in Surve’s Ayo Technology Solutions Ltd.

“The PIC should not be allowed to invest pensioners’ monies in those cases,” Van Driel said. “There is no mandate to invest in politically driven investments that yield no returns.”

The PIC, which oversees South African government worker pension funds, is being scrutinized after a year in which half the executive committee was suspended or resigned. That included Chief Executive Officer Daniel Matjila, who quit in November. Last week, Lufuno Nemagovhani, the head of the money manager’s internal audit department, told the commission that the Ayo investment breached the PIC’s own policies.

State Reform
The inquiry comes against a backdrop of efforts to reform South African state-owned companies following a string of scandals under former President Jacob Zuma, who was replaced by Cyril Ramaphosa just under a year ago. A judicial probe into graft during Zuma’s rule is happening concurrently with the examination of the PIC.

“The PIC is cautious not to discuss details relating to the Ayo transaction and others that the commission will be looking into,” Deon Botha, head of corporate affairs, said in an emailed response to questions.

The fund manager’s decision to invest in Eskom bonds went against its mandate due to their low-investment rating, Van Driel said. Furthermore, it was widely known at the time that the Johannesburg-based utility was at the center of a series of financial and corruption scandals, he said.

Eskom is currently battling to pay for a rising repair bill at two new coal-fired power stations that are still being built, compounding its already bleak financial situation.

PIC Pressure
“Every time the state of the government is in trouble and they don’t have cash to do something, then they put pressure on the board of the PIC,” Van Driel said. South Africa’s main Government Employee Pension Fund “is not a piggy bank to support risky politically inspired transformation projects or to save bankrupt state-owned enterprises.”

A solution, he said, could be to allow the GEPF to use different investment brokers to compete with and challenge the PIC.

“We’ve come to the conclusion, due to a number of things that went wrong at the PIC,” he said, “that it cannot be tolerated anymore that the PIC is the main and the only investment agent for the GEPF.”

Source: Bloomberg Business News