Govt pensions body shocked over PIC’s ‘gamble’ with Denel

The reported R2.8 billion of Denel bonds now owned by the Public Investment Corporation (PIC) was not a solution for a long-term problem, a defence analyst said.

“While it benefits Denel in terms of saving it from big cash payments or defaulting, it doesn’t bring any new cash injections, which the company desperately needs to complete orders and earn income,” said Darren Oliver of African Defence Review on Twitter yesterday.

“The PIC is rescuing both Denel and bondholders. If Denel had defaulted on the R290 million the City of Joburg would’ve lost nearly all of that investment as it was unsecured,” Oliver said.

“The PIC is indefinitely rolling over Denel’s bond debt. Moreover, given that these purchases happened outside the public eye, what are the odds against it being done for other SOEs?”

A senior government source said the GEPF rules prohibited any investments in the arms or defence industry.

The Association for Monitoring and Advocacy of Government Pensions’ Adamus Stemmet said he and other members were in “complete shock”.

“Denel is bankrupt and the auditor-general recently could not give them a clean bill of health due to ‘shoddy and incomplete accounting’,” Stemmet said. “The PIC’s action is irresponsible and reckless, gambling with the money of workers and pensioners.”

Finance Minister Tito Mboweni was asked on Twitter about the legality of the move by the PIC. He has yet to respond.

According to the PIC website, it is the only investment manager in SA focused exclusively on the public sector.

“Our clients consist of 23 public bodies that operate pension, provident, social security and guardian funds. They include SA’s largest pension fund, the Government Employees Pension Fund (GEPF), as well as public funds critical to the country, such as the Unemployment Insurance Fund,” the statement read.

As of March, the PIC held R2.083 trillion in assets.

Meanwhile, Cabinet has approved the appointment of Daniel du Toit as Denel’s new group CEO. “Mr du Toit brings a wealth of experience in the defence and manufacturing sectors that will be of value to the Denel group,” a joint Denel and Public Enterprises statement said.

It said nothing about Denel’s debt held by the PIC.

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