26/09/2017 09:54 SAST | Updated 26/09/2017 14:26 SAST

If Gigaba Really Wants PIC Funds To Bail Out SOEs, We All Should Be Worried

All government employees will bear the brunt of the decision because their pensions are under threat.

Should media reports that Finance Minister Malusi Gigaba wants to use R100-billion of Public Investment Corporation (PIC) funds to bail out state-owned enterprises (SOEs) be correct, many South Africans could have a lot to worry about.

All government employees could bear the brunt of such a decision, because the PIC manages their pensions.

The PIC acts an asset manager, handling mostly the Government Employees' Pension Fund (GEPF).

The GEPF is Africa's largest pension fund: it has more than 1.2 million active members, in excess of 400,000 pensioners and beneficiaries, and assets worth more than R1.6-trillion.

Its core mandate is to manage and administer pensions and other benefits for government employees. It makes sure that all funds are responsibly invested and accounted for, and that benefits are paid out efficiently. All its pensions are guaranteed.

The PIC invests funds on the GEPF's behalf. It is wholly owned by government and is the only asset manager that serves South Africa's public sector, taking care of the investment needs of about 35 public sector pension, provident, social security, development and guardian funds.

The GEPF, which accounts for 88.2% of assets under the PIC's management, is followed by the Unemployment Insurance Fund (UIF), the Compensation Commissioner Fund, the Compensation Commissioner Pension Fund and the Associated Institutions Pension Fund. The Guardian Fund and a range of smaller clients account for the remainder of PIC's clientele.

Last week, media outlets reported that Treasury was pressuring the PIC to provide as much as R100-billion to fund struggling SOEs.

This came after Gigaba told the National Assembly that it was considering various options to recapitalise SAA, which would include using funds from the PIC.

But Treasury spokesperson Mayihlome Tshwete reportedly said such allegations were malicious and unconstructive.

PIC boss Dan Matjila was last week hauled before a special board meeting after allegations of financial impropriety emerged in the media. Matjila denied the allegations, saying he was being targeted by people who wanted to have him removed in a bid to take control of the PIC's extensive funds.

In a statement, the GEPF assured its members that the fund had not received or been approached with a proposal and no discussions had been held with it on this matter.

"We urge all our members and pensioners not to panic or read too much into this speculation," it said.

"The GEPF through the PIC receives many requests all the time and rigorously considers the merits of all investment opportunities and invests prudently in the best interests of its members, pensioners and beneficiaries."

Gigaba will hold a media briefing at 2pm on Tuesday at Treasury's offices in Pretoria following a meeting with the PIC board.