The new boss of the continent’s largest pension fund says it has concluded deliberations with the National Treasury and finance minister Tito Mboweni that can open the door to revisions in how the fund invests the nearly R2-trillion entrusted to it by the nations’ public servants.
Musa Mabesa was announced as the new principal executive officer of the Government Employees Pension Fund (GEPF) on Monday, succeeding Abel Sithole, who has taken the reins at the Public Investment Corporation (PIC).
“We have finalised consultations with the Treasury on the outcome of the asset-liability modelling we undertook of the fund, which our board is reviewing. The next step, over a period of time, will be to align the strategic asset allocation to match the liability profile of the fund,” says Mabesa.
The strategic asset allocation determines how the GEPF allocates money to asset classes locally and offshore and has major implications not only for fund, but also for the growth prospects of the local economy.
Since its creation in 1996, the fund has overwhelmingly invested in local assets including equities, fixed income instruments, and property.
According to the last audited financial accounts of the fund, to end-March 2019, the intended and actual strategic asset allocation can be seen below:
| Asset class | Guideline (%) | Actual (%) |
| Cash and money markets | 0-8 | 4 |
| Domestic bonds | 26-36 | 33 |
| Domestic property | 3-7 | 5 |
| Domestic equity | 40-55 | 50 |
| Africa (ex-SA) equity | 0-5 | 2 |
| Foreign bonds | 0-4 | 1 |
| Foreign equity | 1-5 | 5 |
| Total | 100 | 100 |
Source: GEPF 2018/2019 Annual Report
The fund only has a 6% (out of an allowable 9%) exposure to investments outside the continent. Returns from the local equity market as measured by the JSE all share index, have averaged just 3.21% per annum for the five years ending March 2019, a far cry from the long run average of approximately 15%.
The fund also has one-third of its portfolio in domestic bonds. At the end of March 2019, this amounted to R368.5bn held in SA government bonds, all of which are now sub-investment grade. The fund held an additional R84bn in the bankrupt state power utility Eskom.
Sithole previously indicated that the fund’s overwhelming exposure to the local economy was sub-optimal, as has been evinced in recent years by lacklustre economic growth and diminished returns. This had expedited the need for the fund to diversify its investments and generate returns uncorrelated with the local economy and equity market.
Mabesa did not care to elaborate on what, if any, changes would be made to the strategic asset allocation.
Mabesa initially joined the GEPF in 2011 as a fund accountant after early work experience with the SA Weather Service and SA Institute of Chartered Accountants (Saica).
He completed his articles with the auditor-general after completing his BCompt (Accounting) and qualifying as a chartered certified accountant — the British equivalent of the CA(SA) designation. He also has a master’s degree in professional accounting from the University of London.
After a brief stint with EOH, Mabesa rejoined the GEPF and was appointed head of corporate services in November 2016, a role he says prepared him to understand “both the operations and strategy of the fund”.
Asked whether the revelations and recommendations flowing from the lengthy PIC Commission report has prompted any changes in the GEPFs’ relationship with the state-owned asset manager, Mabesa says the new PIC board under chair Reuel Khoza has “enhanced” the relationship of trust between the two organisations.
“There is a lot of engagement between us, and we appreciate the transparency they provide. We are satisfied they are taking the right steps to look after our interests, being cognisant that the PIC is an independent organisation. They are the investment manager, we give them a mandate, and they execute,” says Mabesa.
Among some changes Mabesa has overseen since taking up the role in an acting capacity in July is the strengthening of the fund’s oversight of its investments with the PIC through the consolidation of its master custodian accounts.
On the administration side, the fund is working with various government departments (the ultimate employer of public servants) to speed up the payment of claims.
“We were not as efficient as we should be, but we are also reliant on the employer to provide the correct documentation in order to pay out benefits to people retiring or exiting the fund,” says Mabesa. “There are some big challenges in getting the correct information to pay these claims, so we are enhancing our engagement with the employer departments to make the process smoother.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.