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South Africa’s Public Investment Corporation Changes Methods

The PIC or South Africa’s Pension Investment Corporation is rarely seen as an aggressive player. As the country’s biggest pension provider, it said it would use new methods that would see it as more of an aggressive player to help boost the country’s economy.

According to PIC Chief Executive Dan Matjila, the fund has about $117bn and is a key shareholder amongst South Africa’s top companies. Matjila plans to create a black consortium and to assert a major stakehold in Barclays Africa. The Johannesburg-based subsidiary of Barclays is selling off its company and the PIC wishes to use it to its advantage.

“The challenge is that we’re facing headwinds now — the economy is expected to grow below 1 per cent,” he says in an interview. “We’re now moving from the passive approach of saying, ‘Strategic asset allocation is going to work for us,’ to, ‘How do we then influence the economy this time? So that we can catalyse growth and therefore that will translate into asset growth’.”

Matjila estimates the new strategies can help drop the PIC’s returns from 14 per cent to 12.5 per cent a year. He said the PIC must be an instigator of growth by using investments to bolster employment.

It would also remove pressure in the Unemployment Insurance Fund given the new jobs the PIC and its other subsidiaries could offer for the country.

But the PIC has had to fend off worries that some of its decisions are politically driven and not necessarily in the best interests of the pension holders. It has also endured criticism from opposition MPs that it lacks transparency, particularly with its unlisted assets which account for 20 per cent of its portfolio.

Greater intervention in the economy is likely to increase scrutiny of the fund.

“We will be working hard to crack open the Public Investment Corporation and ensure that it is fire-walled from becoming a corporate battering ram and a piggy bank for the ruling (African National Congress) party in South Africa,” said David Maynier, an opposition Democratic Alliance MP, in a recent speech.