The Public Investment Corporation (PIC) has embarked on a strategy to significantly increase its unlisted investments.
The plan is to ramp up the unlisted asset share of the total portfolio of R2.5-trillion from the current 5% to 25%, which is regarded as the global norm.
At present, 95% of the PIC’s investments are in listed assets. It invests on behalf of its main clients, which include the Government Employees Pension Fund (GEPF), which has about R2-trillion of the assets; the Unemployment Insurance Fund; and the Compensation Fund.
The PIC told members of the National Council of Provinces’ select committee on finance during a briefing on Tuesday that it had negotiated a new investment mandate with its clients that provided for the new framework for unlisted assets.
Acting CEO and chief technology officer Makano Mosidi — CEO Abel Sithole is on leave — said the emphasis on unlisted investments would drive job creation and transformation.
“The biggest focus in the next five years will be whether we can move that 5% to the visionary 25%. The unlisted side is going to drive most of our activities so that we actually achieve the two objectives of maximising returns and ensuring that we can achieve the transformational goals and aspirations of our country.”
Newly appointed chief investment officer Kabelo Rikhotso added that in terms of the new mandate, four separate funds had been set up to manage the unlisted investments to replace the previous single structure, which covered everything. These are a fund of funds; private equity and debt investment in SA worth R4bn; investments outside SA worth R8bn; and investments in the agriculture sector of about R7bn.
“All these funds have different sectors of the economy that they need to focus on,” he said.
The GEPF’s unlisted investments in SA declined 4% to R47.4bn from the previous R49.5bn in 2020/2021.
Rikhotso said the PIC would continue to invest in well-functioning state-owned enterprises (SOEs) that were catalytic for economic growth. He noted that the PIC’s exposure to Eskom in the form of bonds was R86bn and the total value of its exposure to SOEs was R125bn.
It has an indirect exposure of 30% in the Takatso consortium, which is buying SAA through its 30% investment in Harith General Partners.
Questioned about the recent precautionary suspension of COO Vuyani Hako, Mosidi stressed that he had not been found guilty of anything yet and that the suspension had been effected to ensure that the process of investigation into allegations of misconduct was credible. The investigations were quite advanced.
The PIC has so far not given any reasons for the precautionary suspension.
Deputy finance minister and PIC chair David Masondo gave MPs feedback on the implementation of the recommendations of the commission of inquiry led by former judge Lex Mpati.
The commission made 377 findings and recommendations, which were largely aimed at correcting deficiencies in policies, governance, oversight and investment processes. Of these, 331 required action by the PIC and the others by the Treasury, the GEPF and the criminal justice system.
He said that 77% of the PIC-related recommendations had been implemented and independent forensic investigators had been appointed where necessary. Some matters had been referred to the Hawks for criminal investigation and others related to previous PIC investment decisions were before the courts.
Retired Constitutional Court judge Yvonne Mokgoro was appointed to oversee the implementation by the PIC of the recommendations of the commission, which found “substantial impropriety” had occurred at the PIC. The commission’s report, released in March 2020, found that the PIC’s board was divided and conflicted and merely acted as a rubber stamp for the decisions of former CEO Dan Matjila, whom it accused of dishonesty and material nondisclosure.
Masondo said the PIC had accepted the global settlement offer by Steinhoff and was concluding a settlement agreement on behalf of the GEPF.
He noted the growing stability in the PIC’s top executive management with the appointment of senior officers. The recruitment of a CFO was under way.
The PIC recently announced that Sholto Dolamo, executive head of research and project development, and Lusanda Kali, acting executive head of developmental investments and private equity, had resigned with effect from June 30.
On PIC-owned poultry producer Daybreak Farms, Masondo said the PIC had recently recommended the appointment of a new board at Daybreak to restore governance and to ensure the company performed optimally.
Correction: June 15 2022
An earlier version of this article gave the incorrect figure for the PIC’s assets under management. The correct number is R2.5-trillion.
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