🔒 PIC, GEPF a political piggy bank amid R7.4bn write-offs – expert

JOHANNESBURG — The Public Investment Corporation together with the Government Employees Pension Fund (GEPF) have been under the spotlight this week amid revelations that they have effectively written off loans of R7.4bn to a Steinhoff connected entity and Sekunjalo, which is headed by controversial media owner Iqbal Survé. This is effectively a huge jump in impairments from the previous year when GEPF impairments were a cool R995m. The latest developments have sparked the ire of those keeping a close eye on the PIC and GEPF, and now the Association for Monitoring and Advocacy of Government Pensions (AMAGP) wants accountability. In this interview, AMAGP spokesperson, Adamus Stemmet, explains what’s going on. – Gareth van Zyl

It’s a pleasure to welcome onto the podcast Adamus Stemmet who is the spokesperson for the Association for Monitoring and Advocacy of Government Pensions also known as AMAGP.
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Now Adamus, your organisation is unhappy about R7.4bn in write-offs by the Government Employees Pension Fund (GEPF). The revelation also only came after the annual report from the pension fund had been delayed for months. Can you tell us more about what is going on here?

The annual report was supposed to be released by the end of September. It did not happen and we only received it on Monday. So, what our organisation is doing now is that we have one of our financial experts analysing the report. All I can do now is speak in general about the report. The finer details we’ll have to work out and then eventually we’ll issue a statement about it. What is amazing about the report — and we get this year after year — is that the introduction is usually about very beautiful visions and how well they are doing as far as transparency and accountability is concerned and so on. But if you go to the practice, you’ll find that they are lagging behind very far. It’s good and well to have very well thought out plans and so on, but if the implementation lacks, the pension fund suffers.

You’re saying that the implementation is lacking? What exactly in your view is lacking then?

They are lacking because they are not really looking after the sustainability of the fund. For the past two years, there’s been an increase in their developments, the R200bn per year, but the income from interest and dividends remained stable at R71bn. If you take inflation into account, you can see that we are moving downhill. We are quite shocked by their statement about the impairment. Some newspapers interpret it as written off. We’re not very sure what they mean by “impairment”, but what we do know is that quite a number of investments are taking heavy knocks. However, what amazed us is the casual way in which all these problems are presented, as if we pensioners are a lot of imbeciles. They made the public believe that everything is in order. Now everything is not in order.

Let’s say for instance, that they are writing off or there’s an impairment of R4.3bn on Steinhoff. Now that is only the Lancaster part and that is a very small part of Steinhoff with a R4.3m loss that we’ve encountered. The real investment in Steinhoff was R28bn. According to our calculations, we are standing to lose about R24bn, but they make as if it’s only 0.6% of our assets, Steinhoff is only 1% of our investments and so on. In the same vein, they referred to Independent Media. Now Independent Media, Dr Iqbal Survé, that is a story on its own. They bought Independent Media from O’Reilly in 2013 for R2bn. According to their balance sheet at that time, the true value was R1bn, but PIC invested R500m and they gave them a loan for R830m. That is more than the value. In 2013 again and especially from 2015 onwards we kept on warning that the printed media is going down, you should not invest in that.

Iqbal Survé, head of Independent Media Group.

In July, the Minister of Finance said that they are looking at ways and means to get out of this Independent Media deal. In August, Dr Dan Matjila, the CEO of the PIC, said that he is working on an exit strategy. Independent Media, or Iqbal Survé, was supposed to repay the loan on the 18 August 2018. He could not and that is what they are now referring to. They say that we’re going to lose R1bn there, but to make things worse they knew in August – they lied to us by telling us that there’s an extra strategy because 4 months later in December, the PIC invested R4.3bn in Ayo Technologies, which is also an Iqbal Survé company and according to the market value at that stage it was grossly overvalued. So how on earth could they have done proper studies before the time? I can go on and on.

On the 17 October 2017, in the Free State, Dr Matjila said that the BBBEE investments, that is, the unlisted investments are underperforming at a rate of 30%. We have R70bn in that and we are losing. In the same media interview, he said that Daybreak Farms, now called AFGRI Poultry, is losing heavily. We had a share of 54% in that firm. They increased it to 100%. Now the GEPF is telling us that we’re going to lose billions. And with VBS, they say we are going to lose there. What feasibility studies did they do before the time?

Adamus, do you think that the PIC and the GEPF have become a cash cow for certain politically connected individuals?

Definitely, yes. Do you remember that Mr David Maynier of the DA, he called it the government’s piggy bank. Whenever they need money from them the piggy bank, it’s reserved. If you take Eskom, which owes the PIC R90bn, Prasa, not all of them, but most of the SOEs are underperforming, corrupt, and badly managed, but if they need money, it’s easy to get it. The PIC is a political organisation; it’s a political corporation with a deputy minister as the chair. Now you must expect that the government will have this piggy bank available. In February, they couldn’t pay the salaries at Eskom and they quickly invested R5.5bn. Well, we made a hell of a noise about it and within a month it was repaid, but things like that make us very unhappy.

Now probably the PIC would come out and say that all of these billions of rands are really just a drop in the ocean when you consider that the fund is well north of R1trn, and they will typically argue that their overall performance is still solid and generating good returns. What do you make of that? Do you think that it’s a good enough explanation from their side?

No, we think that is a lot of nonsense. According to the actuaries last year, the fund is totally underfunded already. The government is contributing 16% from the armed forces. According the actuary, it should be 19.8%. They are contributing 13% for the ordinary civil servant, according to them, it should be 14.8%. Now the lower income is just a logical conclusion that it must affect the sustainability of the fund and that is exactly our problem. The fund is going down. They say it’s overfunded at a rate of 115%.

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That is on the short-term, but the pension fund must be sustainable on the long-term and on the long-term, they are only 79% funded. I just want to come back quickly to the SOEs. They say that the guarantees by the government are guaranteed, we can never lose, but if you look at the 24th of November, S&P stated very clearly that the government is not in a position to honour all their guarantees. Therefore, in the case of the piggy bank there can only be one loser.

The likes of the PIC are about to be put under the spotlight with the Commission of Inquiry. We’ve also seen the PIC head, Dan Matjila, resigning recently. Do you think that the issues there can still be sorted out or is it on a downward slide?

It is on a downward slide and something must be done about it. As an organisation, we are trying, but it’s like quicksilver to contain the loss. What we are doing now, we have made presentations to the Zondo Commission of Inquiry on State Capture. We are working on a presentation to this Commission of Inquiry into the PIC and we hope to include the GEPF because they are really the guilty ones, not the PIC. And then we are also in discussions with the Public Protector. Another thing that we are working on now, we are trying to get the authorities to make people accountable. You know, people are making investments for political reasons and when there are losses they pull up their shoulders and we read in the papers about debt being written off.

Dan Matjila, CEO, PIC
File Photo: Dan Matjila gestures as he speaks during an interview in Johannesburg. Photographer: Dean Hutton/Bloomberg

We think that it’s high time that the members of the PIC and the board of trustees of the pension fund should be held accountable in their personal capacity. Another thing is they give high hopes and they promise things about monitoring. They say that they didn’t know. I’m talking about the board of trustees now. They are actually the responsible body. The PIC is only an investment agent and we cannot understand why the politicians and everybody else is placing such a lot of emphasis on the PIC. The board of trustees are the persons who should supervise.

Now they say that they monitor the big investments. If they had monitored the VBS bank story, then they would have realised that things there were going wrong for two years. If they had monitored the investment as they promise us pensioners, why did they not pick it up. We think that they did. Now, if they did, the Prevention of Corruption and the Containing of Corruption Act of 2004, Section 34 should be applied because according to that section, if you know about corruption or other criminal activities, you must report it and if you don’t you are committing an offence. So I think that we should really look at the board of trustees and ask the new prosecuting authority to charge them because they had known.

Adamus, could there be legal action coming from your organisation’s side in light of what you’ve said?

Not actually legal action by us, but legal action by the prosecuting authority.

Adamus Stemmet, thank you so much for taking the time to chat with me today. It’s been interesting finding out more about your views on what’s going on at the Government Pension Fund and the PIC.