Government not yet considering PIC as investment partner for SAA | Fin24
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Government not yet considering PIC as investment partner for SAA

Jun 15 2017 18:34
Liesl Peyper

Cape Town – Government has not considered using the Public Investment Corporation (PIC) as a minority equity partner for the ailing national carrier SAA.

In a written response to a parliamentary question posed by Alf Lees from the Democratic Alliance (DA), Gigaba said he has not investigated the possibility of using the Government Employees’ Pension Fund (GEPF) through the PIC as a possible public entity partner for SAA.

Gigaba earlier said in Parliament that a minority equity partner for SAA will not necessarily be from the private sector, but may also be a public entity. This sparked fears that the government would consider the PIC for this purpose.

READ: No decision yet on equity partner for SAA - Gigaba 

Former finance minister Pravin Gordhan first alluded to the possibility of a minority equity partner for SAA in his 2016 Budget. Since then, SAA has consulted with Bain and Abacus to consider options for the national carrier in an effort to bring it back to health, which include a possible merger between SAA and SA Express.

Gigaba in his response said the study undertaken by Bain and Abacus has been completed and the next steps are for National Treasury and the Department of Public Enterprises to review the options and recommendations and then decide on how to proceed.

He pointed out that the PIC does not directly hold equity investments in state-owned entities, but does invest in bonds issued by SOEs.

“A significant portion of the PIC's bond-holdings in SOEs is government-guaranteed,” Gigaba said.

READ: SOEs: Is the PIC in too deep? 

“Importantly, SOEs have never defaulted on any of the PIC's bond investments. The PIC undertakes all investment decisions in the best interest of its pensioners and clients and in line with client mandate requirements and the investment risk parameters stipulated by client mandates,” Gigaba said.

He emphasised that all investments the PIC make are also subject to a “robust due diligence” process which includes a credit analysis and risk and legal reports.

“The aim of the PIC remains to safeguard pensions of public servants and ensure that reasonable returns are generated for contributors,” Gigaba said. 

Lees questions Gigaba's response

Lees said the reply "does not go far enough to give comfort to the millions of members of the GEPF who stand to be financially prejudiced by investment of their money in a massive loss making SOE like SAA".

"If Minister Gigaba wanted to give peace of mind to the members of the GEPF he should simply have said that the GEPF funds would not be used to prop up loss making SOE’s including SAA," Lees told Fin24 on Thursday.

"It is trite for the minister to say that the PIC has not invested in equity of SOE’s, but simultaneously to say that the PIC holds bonds issued by SOE’s and then fudges this by saying that a 'significant' portion of these bonds is government guaranteed.

"How much is guaranteed and in any event how safe are government guarantees given the recession that the country has entered and the ratings downgrades?"

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saa  |  pic  |  malusi gigaba  |  state owned enterprises


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