Call for PIC’s monopoly on government pension fund to be broken

The obligation of the Government Employees Pension Fund (GEPF) to invest money with the Public Investment Corporation (PIC) came under the spotlight at the Mpati inquiry on Monday, when a pensioner advocacy group called for the GEPF to spread its funds to a greater number of asset managers. 

The GEPF’s entire portfolio amounting to almost R1.8-trillion is invested through the PIC, making the state-owned asset manager the largest and most influential investor in the economy.

The commission has been charged by President Cyril Ramaphosa with investigating allegations of malfeasance and internal instability at the PIC. The commission has also been asked to examine whether the governance and operating model of the PIC is the most effective and efficient model.

Albert van Driel, head of advocacy group Association for Monitoring and Advocacy of Government Pensions (AmaGP), which represents thousands of government pensioners, argued before the commission on Monday that more competition for the business of the GEPF would lead to lower costs, more diversified investments and less political meddling.

When asked by judge Lex Mpati whether the pension fund was obligated to use the PIC as its investment manager, Van Driel replied: “There is no hard or fast rule or law that all the funds must be given to the PIC to do the investments of the GEPF. There should be a spread of funding to brokers and investors with good records that should handle the investments for the GEPF. We think the GEPF should contract directly with investment managers; we feel that would be in the best interests of the fund.”

The GEPF is by far the PIC’s largest client, accounting for about 88% of the more than R2-trillion it manages. While external fund managers, including emerging black asset managers, are contracted to run portions of the GEPF’s portfolio, they are managed and appointed by the PIC.

The GEPF’s principal executive officer, Abel Sithole, has previously stated that the use of the PIC as sole investment manager is not obligatory. He has also previously said the fund would like to diversify the portfolio from the focus on SA-listed equities to unlisted investments and greater exposure to foreign markets.

Van Driel also argued that the mandate of the inquiry should be extended to appraise the role of the GEPF’s board of trustees.

“The trustees are the first line of defence against the capturing of the PIC and GEPF,” he said.

The GEPF board is comprised of eight employer representatives nominated by the minister of finance and eight employee representatives from which the chair is elected. 

While the GEPF has generally been passive in overseeing the investment of its funds, last week it condemned the manner in which the PIC had represented the investment in Iqbal Surve’s Ayo Technologies.

thompsonw@businesslive.co.za