The African Pension Behemoth will Reduce its $4.4B Allocations to The PIC Unit

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Africa’s largest pension fund plans to reduce the amount of money it gives to a division of South Africa’s Public Investment Corporation that has aided the country in meeting some of its environmental, social, and governance goals.

The Government Employees Pension Fund of South Africa let a 70 billion Rand ($4.4 billion) allocation agreement with the PIC, Africa’s largest fund manager, the lapse in March and is now negotiating a new mandate. According to Sifiso Sibiya, the GEPF’s Head of Investments, this will include “more consequence management” for bad investment decisions.

The GEPF’s decision follows a judicial investigation into the 2.34 trillion-rand PIC, which focused on its Isibaya Fund, which invests in unlisted assets and focuses on Black economic empowerment transactions and social infrastructure projects. While the GEPF, which manages a 2.09 billion rand, will continue to profit from the money already spent, no new investments can be made without a new mandate.

 

The so-called Mpati Commission questioned the division’s leadership and the division’s disregard for investment procedures. As a result, a number of senior PIC officials have since left the company, including former Chief Executive Officer Dan Matjila.

 

“There would be a reduction,” Sibiya said in an interview on Nov. 22. “The extent of the reduction will be communicated once the agreement is in place.”

 

Mpati Commission is a non-profit organization

 

The size of the allocation, according to Sibiya, will be influenced by the impact of the Covid-19 pandemic on business as well as the pension fund’s strategic asset allocation. While it may take up to a year to agree on a new mandate, he said the goal is to do so within six months.

 

In terms of addressing South Africa’s social inequality and environmental challenges, Isibaya is critical to both the GEPF and the PIC’s strategies. According to the PIC’s website, the unit “provides finance for projects that generate financial returns while also supporting positive, long-term economic, social, and environmental outcomes.”

 

With the help of the PIC, a decision to make more unlisted-asset investments could be made, he said.

 

The Isibaya Fund has been criticized since the Mpati commission began its investigation in January 2019.

 

In May, its employees complained to the PIC’s senior management and investment committee about how the unit was being run, claiming that the mandate’s expiration had caused an “existential crisis.” The PIC announced in October that Isibaya had missed its annual investment target by 72%.

 

Increased scrutiny of the unit slowed decision-making and jeopardized some existing investments, according to people familiar with the situation who asked not to be identified because the discussions are private. This scrutiny includes a stipulation that a single person can make no investment decision.

 

“To specifically address long delays in the unlisted investment selection process and oversight, the investment committee now consists of two committees — for listed and unlisted investments,” the PIC said in response to questions.

 

ZAR X, a stock exchange that had its license suspended in August over liquidity and capital adequacy concerns, and Daybreak Farms, a chicken producer, are among the companies impacted by Isibaya’s decision-making slowdown, according to two people who asked not to be identified because the discussions are private.

 

In the case of ZAR X, the PIC, which owns about a quarter of the company, took until September to decide on a Hong Kong-based investor’s investment, by which time the deal had collapsed, according to one of the people. Daybreak, in which Isibaya has invested 1.2 billion rands, requires additional funds, according to another source, but no decision can be made until a new mandate is in place.

 

On ZAR X and Daybreak, the PIC did not respond to questions.

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