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PIC, GEPF face pressure to invest in ailing SOEs - researcher

Aug 04 2017 07:17
Liesl Peyper

Cape Town – The Public Investment Corporation (PIC) and Government Employees Pension Fund (GEPF) are likely to come under increased pressure to make investments in struggling state-owned enterprises, as private sector funding is drying up.

Charles Collocott, a researcher at the Helen Suzman Foundation, said in a briefing notice on Thursday that such potential investments would be considered “less than prudent” and he urged GEPF members or pensioners to voice their concerns directly with the Fund.

“If the GEPF Board of Trustees acts as they should in representing their members and pensioners, irresponsible investment decisions will not be made,” Collocott said.

Recently there have been indications that the mandate of the PIC, which manages assets of over R1.8trn, including the GEPF with R1.6trn under its own management in turn, could change.

The GEPF has more than 1.2 million active members and over 400 000 pensioners and beneficiaries.

Finance Minister Malusi Gigaba at a briefing on the sidelines of the ANC Policy conference remarked that the PIC should play a bigger role in driving radical economic transformation, “instead of it being seen as an instrument for empowerment of a few elites”.

Gigaba however never clarified the reference to “a few elites”.

In addition to these utterances there has been speculation that the PIC could be the potential equity partner to recapitalise SAA. Although National Treasury did not confirm or deny the possibility outright, it said it was considering “all avenues”.

The GEPF subsequently issued a statement in which it said the Fund had not been approached with a proposal to be an equity partner in SAA and urged its members “not to panic or read too much into this speculation”.

There is however reason to be concerned because neither Gigaba nor his deputy Sfiso Buthelezi, who is now chairperson of the PIC in his capacity as deputy finance minister, are beyond reproach.

There have been allegations that Gigaba has a close relationship with the Gupta family. He was also mentioned in a report released in May this year, entitled Betrayal of the Promise: How South Africa is being stolen, outlining his role in the reconfiguration of the boards of state-owned entities when he was appointed as Minister of Public Enterprises in November 2010.

According to the report, Gigaba “repurposed” the boards of state-owned enterprises so that the governance and management would serve a purpose “different to its formal mandate”.

Buthelezi on the other hand is implicated in former Public Protector Thuli Madonsela’s report on mismanagement at the Passenger Rail Agency of SA (Prasa) for having allegedly contravened legislation in the awarding of contracts when he was a board member.

“Fortunately for GEPF members and pensioners, the Fund is a juristic entity, separate from government and governed by a board of trustees and Financial Services Board (FSB) rules,” Collocott pointed out.

The assets of a retirement fund are administered for the main purpose of providing the benefits promised in terms of the registered rules of the fund and the trustees hold the assets in trust for the people who will ultimately benefit from them.

“Against this background, GEPF members and pensioners would want to rely on a dedicated board of trustees to look after their interests and not to succumb to political pressure … in an attempt to divert funds to investments which may not be suitable for pension funds,” Collocott added. 

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