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R5bn in impairments not about lack of due diligence, says government pension fund

Dec 05 2018 18:56
Sibongile Khumalo

The Government Employees Pension Fund (GEPF), which has registered impairments of over R5bn in its investments in Steinhoff’s empowerment partner Lancaster 101 and Independent News and Media SA, says it has no reason to believe it failed to conduct proper analysis before investing.

The fund said the impairment of R1.6bn in Independent News and Media SA (INMSA) loans was done after the company failed to make an interest payment at the end of August, while the collapse of Steinhoff shares compromised its R4.3bn investment in Lancaster. 

Presenting the fund’s annual report, GEPF Principal Officer Abel Sithole insisted that the impairments were not yet considered write-offs, nor were they the result of not conducting due diligence.

"There is nothing that suggests we failed to conduct due diligence before making the decision to invest," said Sithole.

"If that comes up, then we would take action. So far there is nothing suggesting that," he said.

Sithole said that in the event INMSA defaulted, GEPF would need to examine what assets were used to back the loan, in order to recoup the funds. INMSA is owned by Iqbal Survé and publishes The Star newspaper and the Cape Times, among other major titles.

"If it defaults, we would need to look at what assets are backing the loan, then you might find a way to recoup some of the money," said Sibiya.

"I understand that the PIC (Public Investment Corporation) are busy with INMSA to find a solution to the default, which could be managing the payment of the interest which has not been paid."

The GEPF is responsible for managing the pensions of government employees and has over 1.2 million members.

The fund, through the PIC, owned approximately R28bn of Steinhoff at the end of March 2017.

According to Sithole, the fund has so far lost close to R18bn as a result of the collapse of Steinhoff. Steinhoff’s shares have lost more than 95% of their value since December 2017.

The GEPF has said despite "the collapse in the Steinhoff share [price], the GEPF portfolio remains financially healthy" due to its diversified nature.

Agri Poultry will be impaired to the value of R491m and the VBS impairment is to the value of R374m.

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