Satu's trust in pension money wanes

2011-11-13 11:53

Pretoria – The South African Teachers’ Union (Satu) is worried that public servants’ pension contributions are being invested to achieve political objectives rather than get optimum returns.

This follows a statement last week by the Public Investment Corporation (PIC) – which handles the investment of pension fund contributions – that the continued existence of cement manufacturer AfriSam, in which it invested a total of R6bn in 2008, is being threatened by high indebtedness.

The PIC and Worldwide Africa Investments (WAI), under the chairmanship of Phuthuma Nhleko, the former MTN chief executive, are engaged in a court battle with two other shareholders, black empowerment group Bunker Hills Investments and the Swiss cement group Holcim, about the conversion of AfriSam’s debt into equity. The PIC currently has a 20% stake and R4.7bn worth of preferential shares. AfriSam owes WAI R3.7bn.

The two creditors' plans to convert the preferential shares and debt into equity would increase the PIC’s stake to more than 90%, AfriSam chief executive Dr Stephan Olivier told Sake24 last week.

That is the major objection being raised by Bunker Hills – which currently owns 37% of AfriSam, and Holcim which owns 15% – that their interests are likely to evaporate.

Bunker Hills previously obtained a temporary court order to prevent the conversion which had apparently been contractually agreed to. The case returns to court for a final order at the end of the month.

Meanwhile AfriSam has to settle R11bn worth of debt – which it is attempting to restructure – early next year. This is not the first time since 2006 that its debt is being restructured.

Satu is worried about the apparent exposure of the PIC investments and has asked whether the investment decision at the time was taken on pure motives.

The initial 2006 transaction was extremely politically charged. At that stage it was the biggest BEE deal yet seen.

When the deal was announced, analysts asked whether the sale of Holcim’s 85% stake to empowerment partners had not been an excuse by the Swiss company to disinvest, because it did not see its way to work with black partners without having control. President Thabo Mbeki responded furiously. He praised Holcim because it was prepared to do more than the minimum for empowerment. Analysts considered the transaction expensive and asked where the money would come from.

In 2007 the deal was initially concluded with offshore funding. Few details were released other than that Holcim had provided bridging finance.

In July 2008 AfriSam announced the PIC investment when the economy was overheated and cement was selling like hot cakes.

The investment was made at a time when the PIC was exerting strong pressure over companies in which it was a shareholder, such as Barloworld, in order to accelerate BEE.

It was preceded by the Telkom empowerment deal, which was also facilitated by the PIC and from which people close to Mbeki derived benefit.

Satu chief executive Chris Klopper said the union would officially send questions regarding the AfriSam investment to the trustees of the pension fund trustees. These questions were: What was the motivation for the investment? What yield was expected? Had any valuation being done to determine whether the company's management was capable of producing the expected return?

Klopper said he doubted whether the necessary due diligences had been done. He said Satu had long been concerned about the AfriSam investment. It would be wrong for political considerations to play a role when investing pension fund monies. The trustees under whose jurisdiction the funds fell should see to it that members' interests were the only consideration.

Sake24’s attempts to get an interview with the PIC have been unsuccessful.

The government pension fund has undertaken to respond to questions on the issue this week.

- Sake24

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