PIC has devised a strategy to support SOEs

The Public Investment Corporation (PIC), the government-owned asset manager that manages its social security funds and is the biggest investor in the JSE, has devised what it calls a ‘State-Owned Enterprise Strategy’ to support entities such as Eskom and Transnet.

PIC chief investment officer Kabelo Rikhotso said on Wednesday that the strategy covers when and under what conditions the PIC supports state-owned enterprises (SOEs).

“That strategy was shared with our clients and our board and we are quite happy,” he said at a briefing on the release of the PIC’s latest annual report.

Rikhotso added that the PIC will deal with initiatives to include the private sector but has a collective comprising the private sector, public sector and management, all of which are trying to ensure that the country works.

PIC CEO Abel Sithole said SOEs need to be supported but “not at all costs”, and there needs to be a strong case and proposition, and the SOEs need to be properly managed and governed.

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Municipal investments

Sithole said the PIC is a fund, which means it can only provide funding to entities that can assist municipalities.

But he confirmed that the PIC does lend to the big metros to the extent that they require funding, provided they meet its investment requirements.

Rikhotso admitted the PIC has had a huge struggle with some of its property developments, but its approach is to have a five- to 10-year plan to ensure that the precinct around an investment is cleaned up or improved.

“We are starting to invest in smart cities. We want Tshwane and Joburg to go back to how [they were when] we grew up,” said Rikhotso.

“So [we] need to go in and identify the issues, where we partner to create nodes where people live, work and play in a great space,” he said.

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SOE exposure

Rikhotso said the PIC is a significant investor in major state-owned companies through various instruments, chiefly bonds.

It had exposure of R4.7 billion in Transnet short-term paper, the outstanding amount on which the transport parastatal settled by 31 March 2024.

The PIC also remains one of Eskom’s biggest investors, contributing significantly to the utility’s financial sustainability.

“Exposure to Eskom bonds was approximately R83 billion by the close of 2023/24,” he said.

“The PIC also supported the proposal for Landbank’s Liability Solution 5, which sought to cure the bank’s default position, restructure the repayment of debts and allow the entity to resume normal business operations.”

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Dividend payouts

Sithole said the PIC board declared and paid a dividend of R141 million for the 2023/24 financial year, adding that a dividend of R99 million declared in 2020 was also paid during its 2023/24 financial year.

“This was the third, continual dividend paid to government since the start of the Covid-19 pandemic and sets the PIC apart from several major state-owned companies that require fiscal support to remain operational and/or solvent,” he said.

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Mpati recommendations 

Sithole said the PIC has implemented 242 of the 243 recommendations of the Mpati Commission of Inquiry that are within its control and is preparing a close-out report to be submitted to Minister of Finance Enoch Godongwana.

President Cyril Ramaphosa appointed the Mpati Commission in 2018 to, among other things, inquire into whether there was any impropriety in the investment decisions at the PIC and associated improper personal gain by parties.

The commission’s report, released in March 2020, made adverse findings on many transactions and on the actions of various individuals in investment decisions, including widespread disregard of PIC policies and processes regarding transactions by PIC management and certain board members.

The commission made 308 recommendations, but the other recommendations had to be implemented by other entities.

Sithole said the one caveat to having addressed 242 of the 243 recommendations over which the PIC has control is that there are recommendations that it has implemented but the matters have not ended, such as VBS Mutual Bank, where action has been taken but action still has to be taken by other agencies of government, such as the Hawks and the National Prosecuting Authority (NPA).

“But the best thing about the recommendations of the Mpati Commission was to set out a new PIC … a PIC that has learnt from some of the errors of its past and institutionalised some of the recommendations.”

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Financials

The PIC reported on Wednesday that total assets under management grew by R95 billion, or 3.6%, to R2.69 trillion at 31 March 2024 from R2.599 trillion by the close of the 2022/23 financial year.

However, Sithole said the value of assets under management by the PIC on 26 September got to R3 trillion, and has since been fluctuating.

He attributed “the current run” in the growth of assets under management to the government of national unity, some global dynamics, and the easing of interest rates.

He said the Government Employees Pension Fund’s highly diversified portfolio constituted 87.97% of the PIC’s total assets under management and grew by 2.89% or almost R70 billion to R2.369 trillion by 31 March 2024, despite withdrawals of R117 billion in benefit payments.

Sithole said the Unemployment Insurance Fund portfolio, the second largest client with 5.55% of assets under management, grew by R16 billion to R149.55 billion.

He said this reversed the R64 billion outflows for the Covid-19 Temporary Employee/Employer Relief Scheme, which supported distressed businesses during the pandemic.

The Compensation Commissioner Fund, constituting 2.19% of assets under management, grew by R4.62 billion to R59.02 billion, and the Compensation Commissioner’s Pension Fund, which accounts for 1.9% of assets under management, grew by 9.8% to R51 billion.

The combined portfolios of smaller client funds, representing 2.4% of total assets under management, increased by 6.11% year on year to R64.3 billion.

This article was republished from Moneyweb. Read the original here.