The Public Investment Corporation (PIC)‚ which has R1.85-trillion in assets under management‚ is to take a more cautious approach to investing in state-owned enterprises (SOEs).
It invests on behalf of the Government Employees Pension Fund (GEPF)‚ the Unemployment Insurance Fund‚ the Compensation Fund and other funds‚ and currently has an exposure of about R197-billion in state entities‚ some of which have been placed on negative watch by credit rating agencies.
The PIC holds more than 50% of the bonds issued by major entities and has begun tightening its purchases of the bonds of some due to their poor financial management.
Deputy Finance Minister Mcebisi Jonas‚ who is the chairman of the PIC‚ told members of parliament’s standing committee on finance on Tuesday that the PIC intended to exercise “enhanced due diligence” of poorly managed state entities.
He told MPs that several had huge problems and the PIC would have to adopt a cautious approach if state-owned entities did not improve.
“The board has taken a view that we have to heighten our due diligence‚” in relation to SOEs in which the PIC was already invested or planned to invest‚ Jonas said. “Nobody can deny that there are huge problems with SOEs. We must be more hesitant‚ more focused and reflective in our decisions to continue to invest if we do not see … change in some of them.
“Some of the SOEs are not making progress at the pace that we think they should be‚” Jonas said. “We cannot continue investing in the same manner that we have been doing as if nothing is happening in these SOEs.”
The PIC’s investments in state entities include the Airports Company of SA (R3-billion)‚ Industrial Development Corporation (R8-billion)‚ Development Bank of Southern Africa (R16-billion)‚ Trans Caledon Tunnel Authority (R19-billion)‚ Eskom (R89-billion)‚ Land Bank (R10-billion)‚ Transnet (R26-billion) and the South African National Road Agency (R26.3-billion).
PIC CEO Daniel Matjila and his team of executives briefed the committee on the PIC’s strategic and performance plans.
He signalled an adjustment to the structure of the PIC’s investment portfolio‚ which he said was too exposed to JSE volatility. More focus would be given to developmental investments‚ real estate and unlisted investments.
The PIC’s listed domestic investments make up about 70% of its total portfolio‚ unlisted investments about 20% and offshore investments 10%.
PIC investments make up about 12.5% of the JSE’s market capitalisation and it holds 28% of the bond market capitalisation and 25% of SA’s government bonds.
Growth of assets under management is forecast to be below inflation until 2020. Unaudited growth for 2015-16 was 2.8%.
Matjila said the corporation would be exerting pressure on the boards of companies in which it had a presence to use their cash resources to drive economic growth.
He assured Democratic Alliance finance spokesman David Maynier and Economic Freedom Fighters MP Floyd Shivambu that he had not met any members of the Gupta family to discuss investments‚ and as far as he was aware‚ neither had his executives.
The PIC agreed to give the committee its investment policy statement so MPs could use it to evaluate its performance.
The GEPF will also provide the investment mandate it gives to the PIC to the committee.
PIC cautious on investments
It invests on behalf of the Government Employees Pension Fund (GEPF)‚ the Unemployment Insurance Fund‚ the Compensation Fund and other funds‚ and currently has an exposure of about R197-billion in state entities‚ some of which have been placed on negative watch by credit rating agencies.
The PIC holds more than 50% of the bonds issued by major entities and has begun tightening its purchases of the bonds of some due to their poor financial management.
Deputy Finance Minister Mcebisi Jonas‚ who is the chairman of the PIC‚ told members of parliament’s standing committee on finance on Tuesday that the PIC intended to exercise “enhanced due diligence” of poorly managed state entities.
He told MPs that several had huge problems and the PIC would have to adopt a cautious approach if state-owned entities did not improve.
“The board has taken a view that we have to heighten our due diligence‚” in relation to SOEs in which the PIC was already invested or planned to invest‚ Jonas said. “Nobody can deny that there are huge problems with SOEs. We must be more hesitant‚ more focused and reflective in our decisions to continue to invest if we do not see … change in some of them.
“Some of the SOEs are not making progress at the pace that we think they should be‚” Jonas said. “We cannot continue investing in the same manner that we have been doing as if nothing is happening in these SOEs.”
The PIC’s investments in state entities include the Airports Company of SA (R3-billion)‚ Industrial Development Corporation (R8-billion)‚ Development Bank of Southern Africa (R16-billion)‚ Trans Caledon Tunnel Authority (R19-billion)‚ Eskom (R89-billion)‚ Land Bank (R10-billion)‚ Transnet (R26-billion) and the South African National Road Agency (R26.3-billion).
PIC CEO Daniel Matjila and his team of executives briefed the committee on the PIC’s strategic and performance plans.
He signalled an adjustment to the structure of the PIC’s investment portfolio‚ which he said was too exposed to JSE volatility. More focus would be given to developmental investments‚ real estate and unlisted investments.
The PIC’s listed domestic investments make up about 70% of its total portfolio‚ unlisted investments about 20% and offshore investments 10%.
PIC investments make up about 12.5% of the JSE’s market capitalisation and it holds 28% of the bond market capitalisation and 25% of SA’s government bonds.
Growth of assets under management is forecast to be below inflation until 2020. Unaudited growth for 2015-16 was 2.8%.
Matjila said the corporation would be exerting pressure on the boards of companies in which it had a presence to use their cash resources to drive economic growth.
He assured Democratic Alliance finance spokesman David Maynier and Economic Freedom Fighters MP Floyd Shivambu that he had not met any members of the Gupta family to discuss investments‚ and as far as he was aware‚ neither had his executives.
The PIC agreed to give the committee its investment policy statement so MPs could use it to evaluate its performance.
The GEPF will also provide the investment mandate it gives to the PIC to the committee.
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