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Hands off the PIC’s funds

Oct 01 2017 06:00
Terry Bell

FINANCE MINISTER Malusi Gigaba has assured public sector trade unions and the public at large that the government has no intention of raiding civil service pension funds to keep SAA airborne.

And he dismissed rumours of a government request to the Public Investment Corporation (PIC) for R100 billion.

But his assurances did not put paid to such fears, because there was much to read between the lines at the press conference the minister hosted last Tuesday. The fact that it was admitted that there were continuing “discussions” and that there had been “approaches” regarding funding for ailing state-owned enterprises (SOEs) was enough to cause ongoing wariness.

As was the stress on promoting “transformation” and black empowerment.

The suspicion is justified because it is obvious that the government is desperate for money to meet looming debt repayments, as well as to bail out ailing SOEs.

At the same time, the reality of junk status for the economy means that interest rates on loans from the money markets are punitive.

But there does exist a huge pool of worker pension money that is administered by the state-owned PIC.

It would be naive to assume that politicians and the managers of creaking SOEs would not have their eyes on this.

The only questions are: Can this money be accessed to aid mismanaged enterprises wallowing in debt and, if so, how?

The fund at the forefront here is the Government Employees’ Pension Fund (GEPF). It makes up the overwhelming balance of the R1.9 trillion the PIC handles.

Perhaps as much as R1.6 trillion belongs to 1.2 million active members and more than 406 000 pensioners of the fund.

What seems to have been forgotten in the debates and rumours about putative raids on the PIC is that the trustees of the fund have the ultimate control over the money.

And the trustees consist of an equal number of employer (government) and worker representatives.

They are the ones who provide mandates to the administrating company, the PIC, and dictate how the pension fund money should be invested.

However, there is a degree of autonomy exercised by the PIC board, now chaired by controversial Deputy Finance Minister Sfiso Buthelezi.

This has led to demands for a comprehensive review of the PIC’s investment decisions over the past decade.

Of concern are a number of investments in unlisted (private) companies and about the decision to buy into the now heavily indebted Airports Company SA.

The Federation of Unions of SA (Fedusa) general secretary, Dennis George, maintains there is no obligation on the GEPF’s trustees to appoint the PIC to administer their members’ funds.

In other words, it is the GEPF and not the PIC that calls the tune.

However, the fund supports “socially responsible investment”. In other words, investment that is geared to the greater good and that does not harm human rights or the environment.

But that does not mean that financial benefit should be sacrificed; it merely means, on the one hand, putting pressure on companies seeking capital to behave in a responsible or ethical way.

To this end, the PIC-administered Isibaya Fund “invests in black economic empowerment and infrastructure development projects that help to create jobs, relieve poverty and transform the economy”.

Perhaps the “ongoing discussions” regarding SAA and other failing SOEs are focusing on this area.

Deeply indebted SOEs may be hoping to persuade the PIC, with the fund’s approval, “in the national interest”, to provide hefty, government-guaranteed loans at lower-than-junk-status interest rates, but which would still provide a good return to the pension funds.

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