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Gigaba slams R100bn PIC bailout reports as untrue, malicious

Sep 25 2017 10:12
Fin24 and Bloomberg

Cape Town - In a statement issued on Monday, the finance ministry said Minister of Finance Malusi Gigaba "has noted with concern" reports in the media that National Treasury wants to use R100bn of the funds in the Public Investment Corporation (PIC) to bail out failing state-owned enterprises.

"The minister would like to clarify that these reports are untrue. No formal or informal request has been sent to the PIC for such funds.

"The minister finds these reports malicious and unconstructive. Such untrue reports deviate attention from what is important - finding a long-term solution that will ensure that SOEs continue to contribute to our economic development without being a burden on the fiscus," said the statement.

Gigaba has called an urgent meeting with the PIC board to deal with this matter and other pressing issues, according to the statement, which added that more information on the meeting will be provided soon.

Bloomberg earlier reported that Treasury is pressuring the PIC to provide as much as R100bn to fund struggling state-owned enterprises, according to two people with knowledge of the situation.

The PIC, which manages state-employee pension funds and has about R1.86trn in assets, has been asked by the Treasury to buy its entire R12bn stake in Telkom to pay for a bailout of South African Airways (SAA), said the people, who asked not to be identified as the talks are private.

PIC chief executive officer Daniel Matjila has rejected the request, saying a purchase of the 39% shareholding would leave the company overexposed to the landline provider, they said.

Matjila is willing to buy about R2bn worth of Telkom shares, which would boost the PIC’s stake to about 18%, the people said.

Labour unions and the Economic Freedom Fighters (EFF) reacted with indignation and shock to reports that PIC funds may be used to fund SOEs, which are allegedly riddled with mismanagement and corruption. Labour federation Cosatu, the Federation of Unions of SA (Fedusa) and the Public Servants Association called for vigilance to prevent workers' pension funds managed by the PIC from being used for this purpose.

The EFF also wants Gigaba to be stripped of what it calls his unilateral powers to appoint board members to the the PIC, while Fedusa has indicated that it feels there is no legal barrier preventing it from withdrawing its members' funds from the PIC.

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