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PIC says it will continue to invest in SOEs, but may reassess some details

Dec 07 2018 21:28
Khulekani Magubane, Fin24

The Public Investment Corporation, Africa's largest state-run asset manager, has told Parliament’s standing committee on public accounts (Scopa) that it is in the process of reassessing its investments in state-owned entities, and will continue to invest in them because of its mandate.

The corporation, which manages assets worth more than R2trn on behalf of public servants, met with Scopa on Thursday evening for the first time since its CEO Dan Matjila resigned in late November.

The PIC has R183bn invested in various state-owned enterprises.

Some MPs on Thursday said they were concerned that the asset managers investments in parastatals could expose it to the risks of huge losses, as many SOEs are in dire straits financially.  

The PIC delegation said it had a R94bn exposure to Eskom. However, the team said they took comfort in the fact that that exposure has not increased significantly since it got to that figure.

The corporation's CFO and acting CEO Matshepo More told the committee that the PIC would continue to work with state-owned entities because of its mandate. 

"The credit ratings of entities we invest in is receiving our attention. Our biggest client is a pension fund, so it is likely that what we invest in is inflation-linked. A guarantee from government protects the downside. These entities fit into our development mandate of our assets," said More.

More said that the state of power utility Eskom did worry the PIC. He defended the corporation's resolve to stick with state-owned entities, even when it was unpopular, like their investment in the SA National Roads Agency.

"We are deliberating on the matter and this is a risk. We don’t have a final solution, but we are deliberating. We caught a lot of criticism for investing in Sanral, but it is a critical mandate they have a is linked to development," More said.

David Ross of the DA asked the delegation how it viewed South African Airways. In late September 2017 unions expressed concern that PIC funds could be used to bail out the cash-strapped airline.

Deputy minister of finance Mondli Gungubele said National Treasury and the PIC were having ongoing discussions about SAA’s future.

"I would appeal that we interact in my capacity as PIC board chair. There is general openness on the best way to save SAA. The disagreement is two schools of thought. The salvation of SAA is possible and there is general openness on the appropriate action to take," said Gungubele.

Mnyamazeli Booi of the ANC criticised the PIC’s assistance to Eskom, who provided a R5bn short-term loan to the power utility earlier in the year, which has been paid back. 

"We have a situation where Eskom has load shedding because of financial challenges and yet you recently gave them R5bn. What are they buying, pizzas?"

More maintained that the assistance that the PIC provided to Eskom was above board and transparent.

When it granted the loan in mid-February the PIC said if it did not the power utility risked a default that would have "collapsed the domestic economy". 

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