PIC defends investments

Fund ‘lean and mean’ despite some big losses, officials tell parliament

Dan Matjila
Dan Matjila
Image: SUNDAY TIMES

Public Investment Corporation (PIC) chief executive Dan Matjila and his investment portfolio managers have justified the investment decisions made by the corporation, which have come under media scrutiny recently.

Controversial investments include those in Ayo Technology Solutions, Erin Energy, VBS Mutual Bank, Steinhoff, Independent News and Media SA and Mobilised Specialised Technologies (MST).

Matjila was at pains to point out in a briefing to parliament’s finance committee that the performance of the PIC portfolio of more than R2-trillion – of which 70% was in listed shares, 20% in unlisted investments and 10% in nondomestic – had exceeded the expectations of PIC’s clients.

These clients include the Government Employees Pension Fund, the Unemployment Insurance Fund and the Compensation Fund.

The PIC had more than 300 securities in its portfolio that were generating good returns, Matjila said.

In the year to end March, the PIC’s assets under management grew 8.6% (R165-billion), mainly due to the good performance in listed equities.

The PIC would pay a dividend to the government, its financial rations were healthy and it was a lean and mean organisation, Matjila said.

He acknowledged that some work needed to be done on risk management but said that this was being addressed aggressively.

The PIC has unrealised losses of R16-billion in its investment in scandal-hit Steinhoff.
PIC listed investments executive head Fidelis Madavo justified the corporation’s 30% investment in Ayo Technology Solutions, which at the time of the listing was worth R4.29-billion. On May 31, this investment was valued at R3.49-billion.

Ayo is in the group of companies owned by Iqbal Surve. Madavo said the PIC was comfortable with its current position even though the share was moving up and down. He said the reason for the investment was that the PIC understood that the IT service industry was extremely fragmented and that consolidation would be a big driver.

The market was valued at R230-billion with the largest player, EOH, only having a 6.6% market share.

Madavo said there was the potential for Ayo to gain market share.

The company also had the highest black economic empowerment credentials in the sector.

Another poor investment was the 30% stake acquired in West African resources company Erin Energy, which was planning a significant increase in the production of oil.

The company has filed for bankruptcy. The PIC’s unrealised loss amounts to R167-million.

The PIC invested a net R888-million in Sekunjalo Investment Holdings’ Independent News and Media in 2013.

As at the end March it had an exposure of R1.3-billion to the company.

“Various discussions are currently being held with Independent News management and Sekunjalo with regard to the upcoming payments due and the PIC’s exit,” PIC portfolio manager Reabetswe Nosi told MPs. – BusinessLIVE

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