SOEs a major exposure for the PIC
The asset manager is often called on by cash-strapped, overindebted and struggling SOEs to provide funding
The Public Investment Corporation (PIC) has a R183bn exposure to state-owned enterprises (SOEs), acting CEO Matshepo More revealed in a presentation to parliament’s standing committee on public accounts on Thursday night.
The asset manager — the largest in Africa with total assets under management of more than R2-trillion — is often called on by cash-strapped, overindebted and struggling SOEs to provide funding. An example was the R5bn one-month loan granted to crisis-hit Eskom in February on the basis of a government guarantee.
Of the R183bn invested in SOEs, R94bn is invested in Eskom. This is largely underpinned by government guarantees. The PIC’s executive head of listed investments, Fidelis Madavo, said that this investment had not been increased in recent times because of worries about governance.
More highlighted the PIC’s development role, which had to be taken into account as well as risk-return considerations.
The PIC appeared before the committee to discuss the documents that it had submitted on the demand of the committee. The documents dealt with its listed and unlisted investments, and transaction advisers and costs.
It emerged that the PIC rejected an investment in struggling state-owned airline SAA in August 2017 because of its low credit rating and governance concerns. SAA was considered to be below the PIC’s investment grade.
SAA approached the PIC in April 2017 to discuss a R6bn funding for five to seven years to repay short-term debt.
Other major PIC investments in SOEs include R27bn in Transnet, R23bn in South African National Road Agency Ltd (Sanral), R15,4bn in the Development Bank of Southern Africa and R16bn in the Trans Caledon Tunnel Authority.
Under questioning, PIC chair and deputy finance minister Mondli Gungubele said he could not divulge the issues between resigned CEO Dan Matjila and the board, but insisted that they were not investment or corruption related.
PIC executives told MPs that the total assets made available to private asset managers was R4.6-trillion, of which R416bn was managed by black asset managers.
A total of 86.5% of assets with black-owned firms were managed by 10 asset management companies — Taquanta, Aluwani Capital, Mazi, Kagiso, Argon, Mergence, Vunani, Meago, Sentio and Perpetua.
According to the documents provided by the PIC, total transaction costs paid for its listed investments in the four years between 2014 and 2018 amounted to R960m, with the largest amount of R193m being paid to Symphony Capital Advisory Services, R110m to Mergence Africa Capital, R86m to Deutsche Securities and R46m to DM5, Sao Capital, White & Case, Templars.
Total trading costs for the listed investments in the four years from 2014-2018 amounted to R540m.
Of the R379m in advisory fees paid to transaction advisers for listed investments, R203m was paid to Mergence Africa Capital and Symphony Capital Advisory Services for the sale of the government’s stake in Vodacom in 2015. Symphony was paid R77m in fees in 2016 for the PIC investment in the R9.4bn Steinhoff/Lancaster deal.
DA finance spokesperson David Maynier said these fees seemed to be exorbitant and very worrying.
Total dealing costs of R182m were paid by the PIC between 2014 and 2018 for its unlisted investments, while total trading costs over this period amounted to R540m.