The ANC’s last feeding trough

The Public Investment Corporation (PIC) is the ANC’s last feeding trough, with all other state institutions and state-owned enterprises being hollowed out. 

In particular, the PIC’s unlisted investment portfolio, the Isibaya Fund, is being exploited by politically connected individuals to secure loans and investments for their companies. 

Many of the asset manager’s investments in this space have been spectacular failures, with the portfolio failing to beat inflation and the majority of investments losing value over time. 

While the unlisted portfolio is a small portion of the PIC’s total R3.5 trillion in assets, it is the site of R18.2 billion worth of losses. 

This is significant when considering that the funds represent the retirement savings of thousands of government employees, capital from the Unemployment Insurance Fund, and the Compensation Fund. 

It also means that the PIC’s listed portfolio has to perform well to offset the losses from the unlisted portfolio, which is not a guarantee. 

Since its corporatisation in 2005, the PIC has had a mandate to generate a return for clients and drive the transformation of South Africa’s economy. 

This change enabled the asset manager to expand beyond investing in government bonds to include listed equities, property, and unlisted investments. 

The PIC has been historically well run, with it generating good returns for its main client, the Government Employees Pension Fund (GEPF). 

This has seen its assets under management grow to R3.5 trillion, making it the largest asset manager in Africa and the site of a large amount of cash. 

Today, the PIC owns significant stakes in all major companies listed on the JSE, with it often being the single largest shareholder in corporates on the exchange. 

This gives it significant influence as a shareholder and has seen it generate strong performance on behalf of its clients. 

However, its strong performance, the billions in contributions from GEPF members and its R3.5 trillion worth of assets have made it a target for corrupt individuals.

The last cash cow

The PIC is one of the few state-run institutions that emerged from the era of state capture in reasonable financial health. 

This is largely thanks to the legislative controls on the institution that force it to invest in predominantly listed companies, which is a highly regulated space. 

Apart from the Steinhoff collapse, the PIC’s listed portfolio has performed well, with it effectively tracking the performance of broad JSE indices. 

However, the Isibaya Fund’s lack of transparency and regulatory oversight, given its investments in the unlisted space, has made it a target of corrupt individuals. 

“It represents a large chunk of cash on the African continent and one of the last remaining feeding troughs for people to get their hands on,” DA federal finance chairperson Dr Mark Burke told BizNews. 

“The way they do this is through the unlisted section. This is a classic elephant and mouse problem, with its poor performance dismissed as insignificant compared to the overall R3.5 trillion in assets.” 

This is dangerous because it enables significant sums of money that could be better used elsewhere to flow into the hands of corrupt individuals, criminal enterprises, or to be lost. 

“In the unlisted space, the controls disappear, and the money does the same. This is finally coming under from regulators,” Burke said. 

Burke pointed to examples such as the PIC’s R100 million investment in Enable Capital, which was lost in a scam, as evidence of the poor governance of the Isibaya Fund. 

Other poor investment decisions include capital injections into VBS Mutual Bank, which later collapsed and questions surrounding the spin-off of private equity firm Harith General Partners.

The PIC lost R11 billion structuring a Black Economic Empowerment through the fund for AfriSam and a further R1.4 billion investing in VIA Bounty. 

In total, it has reported R18.2 billion in complete losses, with billions more of value being written down or lost to scams and fraud. 

The lack of oversight on the Isibaya Fund has made it the perfect vehicle for corrupt individuals and businesses to siphon money out of the PIC.