UIF and Compensation Fund Investments: PIC briefing (with Deputy Minister)

Meeting report

The Chairperson welcomed everyone to the meeting. He noted that the Committee had been reviewing the audit outcomes of various public agencies across South Africa. A key issue raised by the Auditor-General (AG) related to funds invested on behalf of these agencies by the Public Investment Corporation (PIC), particularly in unlisted companies. The Committee had asked whether the affected entities had any input into the PIC's investment decisions. In response, the entities indicated that they trusted the PIC to make sound investment decisions and deliver the required returns per the law.

As a result, the Committee resolved to directly engage the PIC to clarify its relationship with these entities, the processes behind investment decisions, and the protocol followed when investments do not yield the expected outcomes. This would allow the Committee to better understand how the funds are managed.

The Deputy Minister of Finance, who also serves as the Chairperson of the PIC, was present at the meeting. The Chairperson handed over to him to deliver his opening remarks.

Dr David Masondo (Deputy Minister of Finance and PIC) stated that the PIC would be accounting for the performance of its investments—specifically the unlisted portion—and explaining the difficulties faced by the Unemployment Insurance Fund (UIF) in producing financial statements that reflect the performance of the companies in which the PIC has invested on its behalf.

He noted that the performance of unlisted investments had previously been the subject of the Mpati Commission, which made several findings. Since then, the PIC has worked to address past irregularities and improve its internal governance. One of the ongoing challenges is the misalignment between the auditing cycles of the investee companies and the reporting timelines of the UIF and the Compensation Fund.

He stressed that the PIC is committed to ensuring strong investment returns and has implemented significant governance reforms to prevent future lapses. For instance, the Commission recommended separating the chief executive officer (CEO) and chief investment officer (CIO) roles. In addition, the PIC Act has been amended to strengthen governance, and the National Treasury, as the shareholder, is implementing these recommendations through the Minister of Finance.

He informed the Committee that he must leave the meeting at 11:00 AM to attend a Cabinet Committee meeting.

The Chairperson acknowledged this and informed Members that they would have an opportunity to pose questions to the Deputy Minister at 10:00 a.m., prior to his departure.

Public Investment Corporation Socially Responsible Investing Overview: Unemployment Insurance Fund and Compensation Fund

Mr Abel Sithole (PIC Chief Executive Officer), Mr Kabelo Rikhotso (PIC Chief Investment Officer), and Ms Batandwa Damoyi (PIC Chief Financial Officer) led the Committee through the presentation.

The PIC presented an overview of its investment performance on behalf of the UIF and the CF. As of the reporting period, the PIC had committed R23.6 billion for the UIF and R3.1 billion for the CF, with total portfolios valued at R169 billion and R70 billion, respectively. The current market value of the UIF portfolio stands at R11 billion, and the CF at R1.7 billion.

The UIF portfolio has invested R21.8 billion, received R7.6 billion in repayments, and holds an unrealised value of R11 billion, resulting in a total portfolio value of R18.8 billion. Since 2014, 38 socially responsible investments (SRI) have been made, with 36 still active and 14 currently undergoing turnaround efforts. Although there have been some recoveries, investments in liquidation such as Musa Capital and World Marine continue to weigh on overall performance. Two exits have occurred with near break-even returns, while 22 investments remain in the performing portfolio at a modest 1.2x return.

The CF portfolio has invested R3 billion, received R1.2 billion in repayments, and holds an unrealised value of R1.7 billion, amounting to a total value of R2.9 billion. The CF has concluded 23 SRI investments, with 17 still active and 8 in turnaround. Six investments have been successfully exited, five profitably, achieving a 1.4x return. However, overall performance remains subdued, with a -1% internal rate of return (IRR) and 0.4x distribution multiple due to underperforming assets and liquidations.

Despite these challenges, both portfolios have consistently outperformed their CPI benchmarks over time, attributed to diversified asset allocations and disciplined investment strategies. However, the lack of new investments since 2019 and persistent impairments remain key areas of concern.

Discussion

The Chairperson noted that the PIC referenced concerns the AG raised during a SCOPA presentation, specifically regarding funds that had failed to yield returns. He asked which years those investments had been made.

Mr Rikhotso responded that most of the investments in question were made between 2016 and 2019, and that there had been limited investment activity from 2019 to the present.

The Chairperson emphasised that these investments remain relevant because the PIC is still invested in those companies.

Mr Rikhotso confirmed this was the case.

The Chairperson explained that one method to assess whether an investment is performing is to compare its current value to the original capital invested.

Mr Rikhotso confirmed this was the standard approach.

The Chairperson then asked what the acronym “MOIC” stood for.

Mr. Rikhotso explained that it referred to the Multiple of Invested Capital.

The Chairperson asked about the current value of the investment in Razorite Ransa, noting that R800 million had originally been invested.

Mr Rikhotso replied that the investment was currently valued at R778 million.

The Chairperson pointed out that this was R221 million short of the original investment.

Mr Rikhotso confirmed this.

The Chairperson then asked about the meaning of the acronym "TOVA."

Mr Rikhotso explained that TOVA stands for Turnaround and Value Add, a division within the PIC responsible for identifying financially distressed investments and developing strategies to restore their value.

The Chairperson clarified that this meant the PIC identifies when an investment is underperforming and intervenes to work with the entity to restore performance.

Mr Rikhotso confirmed this understanding.

The Chairperson asked at what point the PIC decides to intervene in an underperforming investment, and what types of interventions are usually applied.

Mr Rikhotso explained that the PIC’s Portfolio Management team is responsible for monitoring the performance of investee companies. This involves assessing whether the company meets revenue and profit expectations, evaluating the broader macroeconomic environment, industry conditions, and the competitive landscape. A watchlist is maintained in collaboration with the TOVA team, which uses approximately 20 to 25 indicators to identify potential red flags.

Some key warning signs include missed revenue or profit targets, significant regulatory changes, or increased competition leading to a loss in market share. When multiple risks are identified, the Portfolio Management team must transfer the investment to the TOVA team for further intervention.

The TOVA team partners with a panel of turnaround specialists. The first step is to comprehensively analyse the business in question and produce a report detailing possible recovery strategies. This report is then submitted to the PIC’s Investment Committee. In some cases, the business may require additional capital; in others, different forms of support may suffice.

The Chairperson then inquired about the factors the PIC considers when exiting an investment.

Mr Rikhotso explained that supporting transformation is a key secondary objective of the PIC. Once a business has grown and generated acceptable returns in line with client expectations, the PIC may decide to exit, reinvest the capital, and support new businesses that require funding. The goal is to realise client profits and recycle capital into new opportunities.

Mr Sithole added that one of the major challenges faced by the UIF and CF during audits stems from the financial statements of some of the investee companies.

The Chairperson asked the PIC to address the specific entities mentioned in the AG's report and explain the acronym "GRAP."

Ms Damoyi responded that GRAP refers to the Generally Recognised Accounting Practice standards, which govern how financial statements must be prepared for government entities such as the UIF and CF.

The Chairperson asked if GRAP applies because these are government entities.

Ms Damoyi confirmed this.

The Chairperson then asked about the challenges auditors face when auditing government entities governed by GRAP and private companies governed by other accounting standards.

Ms Damoyi explained that conflicts often arise when financial information prepared under International Financial Reporting Standards (IFRS) differs from what GRAP requires. If the UIF or CF holds more than a 25% stake in a company, GRAP requires equity accounting. Auditors cannot rely solely on monthly management accounts because these are not independently verified.

Mr Sithole added that the PIC is working on several solutions to address these challenges. While many of the issues are historical and difficult to resolve retroactively, the focus is on creating structures that will improve alignment between the accounting standards of government entities and those of investee companies going forward.

The Chairperson noted that the issue ultimately manifests in the audit outcomes of the UIF and CF, even though the root of the problem lies with external investee companies managed by the PIC. As a result, the PIC cannot fully account for the discrepancies. He asked the PIC to elaborate on the governance structures it is putting in place and how these will lead to improved audit outcomes for the UIF and CF.

Mr Sithole acknowledged that many historical problems cannot be fixed retrospectively. He explained that the challenges stem from the PIC managing investments for multiple entities with different financial year-ends. For example, the UIF has 23 investee companies, not all of which align with its reporting timeline. Consequently, audited financials for investee companies are not always available in time for the UIF’s audit. This misalignment affects how the AG assesses the reliability of the financial data.

The PIC has established a dedicated fund to house all UIF investments to address this. This would allow the AG to audit the fund itself rather than each company, while still having oversight over the underlying investments from an assurance standpoint.

The Chairperson acknowledged the response and then invited Members to pose their questions or make comments to the DM before his departure.

Mr F Essack (DA) remarked that the presentation was not easily understandable to the average person, given the complexity of the information presented. He asked to what extent due diligence is conducted, particularly regarding companies' creditworthiness, and for clarity on the term "defensive assets."

Poor board governance is a key contributor to financial distress in companies, often resulting in weak internal controls. He asked what advice the PIC could offer the Committee on urgently addressing governance failures. He inquired about the Special Credit Risk Committee and its members and whether they take a proactive approach. He also requested information on how many legal actions are currently underway and the associated costs to the PIC.

Mr T Khubeka (MKP) questioned why, given that the PIC manages over R2.6 trillion in assets, it has not been called upon to assist with the current budget crisis. Instead, the Minister opted for a 0.5% value-added tax (VAT) increase. He asked whether it would not be preferable for the government to borrow from the PIC rather than institutions like the International Monetary Fund or World Bank.

Mr C Matiwane (EFF) asked whether the current challenges faced by the UIF and CF are a result of the PIC’s need to fulfil its social mandate while operating in a competitive market. He questioned whether this social mandate undermines the PIC's competitiveness.

He also asked whether the Ministry of Finance influences the PIC’s investment decisions and why the PIC would intervene in the governance of a failing entity. He sought clarity on what support the PIC provides when a business underperforms.

Mr G Skosana (ANC) asked the Deputy Minister whether the PIC Board has successfully addressed all the issues raised in the Mpati Commission report, and if not, what obstacles remain.

Ms H Neale-May (ANC) referred to the President’s launch of the CEO Circle’s SA SME Fund. According to the PIC’s 2020 Integrated Annual Report, the PIC committed R500 million to the fund, alongside over 50 listed companies that contributed about R1.4 billion, of which R1.2 billion has already been deployed. She commended the PIC for its R500 million contribution. She requested an update from the Deputy Minister on the impact of this investment on the small, medium, and micro-enterprises sector (SMME), any notable successes, and lessons learned.

Deputy Minister Masondo, addressing why the PIC is not assisting more directly with the government’s current fiscal challenges, explained that the PIC contributes to economic growth through its investments. These investments help create an environment conducive to further investment and expand the tax base. The PIC also supports government financing by purchasing government bonds, effectively lending to state-owned entities and funding infrastructure and social services.

He mentioned that the idea of granting the government a pension fund contribution holiday has been raised. However, in his view, any funding solution must be sustainable. If a new expenditure item becomes permanent, it must be matched by a permanent revenue stream. A once-off contribution holiday could be considered, but long-term unfunded expenditure could lead to a fiscal crisis.

On the impact of the social mandate on the PIC’s competitiveness, he explained that the PIC aims to generate strong returns for its clients while also making a positive social impact. This includes driving transformation, such as diversifying economic ownership, revitalising sectors like manufacturing, and addressing rural-urban economic disparities.

He emphasised that the PIC’s mandate comes from its clients, such as the Government Employees Pension Fund, UIF, and CF. The PIC Board does not make specific investment decisions but sets strategic direction per this mandate and legislative requirements. He noted that the Financial Advisory and Intermediary Services Act requires designated individuals to be accountable for investment decisions. The Mpati Commission’s recommendation to separate the roles of CEO and CIO has been implemented. The transitional board also introduced a Group Investment Committee and sub-committees to improve governance and investment efficiency.

The PIC does have the right to appoint board members to investee companies. However, other investors can also appoint directors to represent the PIC. The appointment process is rigorous to ensure quality oversight.

Regarding implementing the Mpati Commission recommendations, he said the Commission identified three key areas for reform, the first being PIC governance. Through legislation, the shareholder (including Parliament) is responsible for this. The PIC Board has implemented the recommendations and submitted a report to the shareholders. Once the Minister is satisfied, the report will be forwarded to the President.

On SMME investments, he noted that the PIC typically does not invest directly into small businesses. Instead, it funds investment vehicles or companies with expertise in the SMME sector that can deliver returns while supporting smaller enterprises. This strategy avoids high-volume, low-return direct investments.

He reiterated that the PIC Board is available and accountable to the Committee.

The Chairperson noted that the Minister has agreed to appear before the Committee to discuss a range of issues, including past expenditure reviews by National Treasury and broader policy matters. He requested that the Deputy Minister join the delegation to provide further clarity to Members.

He then adjourned the meeting for a short 15-minute break.

The Chairperson handed over to the PIC to respond to the questions asked by Members earlier.

Mr Sithole said the PIC could not provide details on MOSA as it is an entity with which it is currently in litigation. Some of the directors are US-based, and the PIC is trying to take action against them in their personal capacities.

Regarding the litigation in which the PIC is currently involved, he indicated that the PIC would have to provide a written response to this question.

On how the PIC assesses a company's creditworthiness before investing, he told the Committee that historically the PIC invested in listed entities or public markets, which entails investing in the same markets as others. While the PIC does have due diligence, it relies on how the market assists to assess the investments. When the mandate to invest in the unlisted environment (private markets), previously, the PIC did not have the expertise. In some instances, the initial investments made in the private unlisted markets and some of the disciplines required did not actually reside within the PIC, which may have led to some of the challenges the entity experienced with those investments. The benefit derived from the findings and recommendations of the Mpati Commission was how to strengthen the environment so that the PIC can do its work. One of the areas is that it invests either through equity investments or lending into those entities. Historically, it invested in them and bought equity in those entities. When it started lending, the PIC did not have all the structures to do so, one of which was a credit committee to assist with assessing the creditworthiness of a particular entity and to make sure the appropriate risk mitigants are in place.

Since then, a credit committee has been created, with the chief risk officer as chair. In accordance with the Mpati Commission, an ethics office has also been established, and it participates in the credit committee.

Regarding whether the PIC’s social mandate limited its competitiveness in the market, he mentioned the PIC has a dual mandate in the law, to invest on behalf of its clients to make sure it gets financial returns, and at the same time to contribute to transformation, the structure of the economy. The PIC did not believe that its social mandate limited its competitiveness. The challenges in the SRI do not emanate from the dual mandate, but rather other operational decisions, as well as the impact the hard lockdowns during the height of Covid-19 had on businesses.

Regarding the type of support the PIC provides to distressed companies, he explained that two types of support are provided: financial injection to resuscitate a company, which is only done after a proper assessment. The other support is business support, which does not always emanate from the PIC, because in most instances it is an investor, not an operator. Then, through its TOVA, it will look for expertise to assist distressed companies. Other factors considered to give support are the security provided.

Regarding defensive assets, he indicated that in cases where new entities are in the growth phase of establishing themselves, the PIC attaches more risk to them; that is not defensive. There are established companies, and it is easier to predict how their income is going to be generated; this is what a defensive asset is.

The Chairperson asked whether government bonds fall into the category of defensive assets.

Mr Sithole confirmed that they do. The golden standard of investment is a government instrument, especially if it provides a guarantee, so when the PIC invests, government bonds, domestic and international, are the first line of investment. This is because the government generally can get the required income and provides good returns. The latter is significant because for most of the PIC’s clients, especially the GEPF, and to some extent the UIF, there are certain benefits you know you are liable to pay, such as pension benefits. Government bonds almost provide a guarantee of the ability to pay the liabilities and also the increases. The PIC also prefers state-owned entities’ bonds.

The Chairperson asked what the PIC’s aggregate public sector fixed income holding exposure is currently for government bonds or state-owned enterprises.

Mr Sithole said it is almost at R900 billion of R2.6 trillion PIC investments, about 33%.

The Chairperson indicated this meant that 33% of the funds invested by the PIC have been used to lend to the government.

Mr Sithole confirmed this was the case.

The Chairperson asked how much interest the government pays on that debt at current levels.

Mr Rikhotso highlighted that the current yield to maturity on the long-term bonds is just over 10%. However, if you look at the entire curve, the expected income range is between 9.5% and 10.5%.

The Chairperson asked what guides the PIC’s decisions on how much to lend to the government, and if it had a ceiling. It was important for the public to note that the funds invested by the PIC do not belong to the government; they are usually pension funds.

Mr Sithole said putting the question into the broader context was important. The assets the PIC manages on behalf of clients support obligations or promises to pay benefits that differ from any jurisdiction other than its own. What would be the best way to invest if you manage a pension fund anywhere in the world? The PIC has a diversified portfolio. It invests in three asset classes: shares (95% in the listed environment and 5% in unlisted), fixed income investments, which comprise bonds or borrowing of entities, and real estate. The PIC is a large landlord, as it is a significant owner of the airport company, jointly with the government, and half of the V&A waterfront and other large malls in the country.

The PIC’s clients look at their promises to pay benefits, and then, based on their needs to meet the benefits, they give the PIC a mandate on their investments. Usually, the clients request that 60% be invested in company shares and 40% in fixed-income investments.

Mr D Skosana (MKP) asked how much pension savings the PIC currently manages and what percentage of those funds have been invested in black-owned businesses. While diversification is important, he raised concerns about investments in malls, especially those in township areas, which tend to offer employment without real equity ownership for black communities.

Mr K Madlala (MKP) emphasised the need for the PIC to address its historical challenges to prevent recurrence and establish effective risk mitigation strategies. He then inquired about the return on investment to the CF and UIF over the last financial year, specifically, whether the investments yielded profits. He also asked if the PIC had systems in place to detect early signs of financial distress in investee companies and requested clarity on the areas of concern highlighted by the Mpati Commission.

Mr Khubeka noted that during the UIF’s previous appearance before the Committee, concerns were raised about the lack of proper verification of unlisted investments. He asked whether the UIF had since verified these investments and requested a detailed breakdown of the estimated R9 billion in write-offs, including the names of the distressed companies and their owners. He also questioned whether the PIC had mechanisms to ensure that investee companies submit adequate financial statements. He noted that the PIC had made poor investment decisions — evidenced by a 30% credit loss ratio in unlisted investments, compared to less than 5% by private asset managers — and asked why the PIC tolerates such a high loss ratio. Additionally, he asked who was responsible for valuing the PIC’s financial assets.

Mr Skosana referred to the presentation, which noted a decline in impairments following the Mpati Commission’s recommendations, with only two investments impaired in the past three years. He asked which investments these were and why they were impaired. He also raised concerns over the discrepancy between committed capital and the UIF and CF market value. For the UIF, R23.6 billion was committed but valued at only R11 billion; for the CF, R3.1 billion was committed with a market value of R1.7 billion. He asked what factors contributed to this difference. Lastly, he questioned whether the PIC had engaged with the AG regarding accounting standard differences between GRAP and IFRS, similar to previous issues with the Road Accident Fund.

Ms Damoyi confirmed that the PIC had engaged with the Accounting Standards Board, the Office of the Accountant-General, and the AG to clarify expectations for verified financial reporting. She explained that the divergence between IFRS and GRAP often arises when information is unaudited. In such cases, external valuers may not apply GRAP standards. On asset valuation, she noted that the PIC appoints valuers through a tender process, selecting from a panel that includes a required number of black-owned companies.

Mr Sithole added that while the PIC appoints independent valuers on behalf of its clients, these valuers operate independently and do not represent the PIC.

Addressing the capital versus market value issue, Mr Rikhotso explained that the full commitment is not released upfront when a project sponsor approaches the PIC for funding. Capital is disbursed over time, based on agreed-upon conditions. The market value reflects the invested amount plus dividends and business performance. This comparison helps assess whether value has been gained. He confirmed that no new impairments were recorded between 2020 and 2024.

The PIC has made no new UIF investments recently but has done so for the GEPF. Accrued interest is a major driver of current impairments. Unlike banks, which write off unrecoverable investments, the PIC lacks a write-off policy; such decisions must come from the client. When normalised, the PIC’s reported 33% impairment ratio drops to 22%. A benchmarking study showed the PIC performs slightly better than comparable development finance institutions.

Mr Sithole emphasised that impairment comparisons should be made with similar entities, not private asset managers who often avoid or write off unlisted investments. As the PIC holds all unlisted assets, its credit loss ratio appears higher. He highlighted the need to bridge the gap between the small returns Members see and the large funds the PIC manages, ensuring that investment decisions always reflect this responsibility. Although the proportion of bad investments may be small, the absolute value is significant. He reiterated that higher risk often leads to better returns, but investments in government bonds are safer, whereas private equity involves more risk.

Mr Rikhotso reported that the CF and UIF delivered total returns of just over 15% over the past year, far exceeding the CPI+ target of around 6%. The UIF’s listed portfolios' returns were 32 basis points ahead of benchmarks, while other portfolios slightly lagged. Over 24 and 36 months, both funds outperformed their benchmarks. Sustaining this outperformance over five years is critical for long-term fund stability.

Mr Sithole acknowledged that some poor investments had been made in the past, but he pointed out that the PIC’s portfolio remains strong overall.

Mr Rikhotso confirmed that the PIC manages close to R3 trillion in assets — R2.6 trillion of which belongs to the GEPF, with the remainder from the CF, UIF, and other clients. Of this, 95% is invested in listed markets, and 5% in unlisted investments.

Regarding black economic empowerment, he outlined that over the past three years, the PIC has allocated more than R18 billion to black-women-led businesses since 2022. On the public side, 20 of the 2023 asset managers are black-owned; on the private side, 12 out of 20 are black-owned. There’s been a strategic push to support black ownership, particularly black women, with requirements such as 30% women's ownership for investees. To further transformation, the PIC requested information for a Women Empowerment Fund, allocating R15 billion to black women-owned and managed businesses.

Given the economic challenges and job scarcity, the PIC aims to support entrepreneurship and venture capital. Its previous project development fund has transitioned into an early-stage fund focused on empowering SMMEs. Over the past year, R1.6 billion has been allocated – R900 million of which targets women-owned enterprises. The PIC’s strategy is to drive transformation on both the listed and unlisted sides by enabling the creation and growth of new companies. The Department of Science has supported this approach.

Mr Sithole explained that investment decisions must balance risk and return. Government guarantees are unreliable, and high returns often require higher risks. The PIC’s overall portfolio performance justifies its risk exposure. To ensure investment outcomes align with objectives, he emphasised three key areas: stable and strategic governance at the board level, robust internal policies and processes, and capable executive leadership.

Regarding how the PIC identifies distressed companies, Mr Rikhotso explained that if the PIC concludes a business is no longer viable, it withholds further investment. However, in cases where a distressed business provides essential services and can recover with support, the PIC may assist with recapitalisation. He confirmed that the PIC’s assets under management are expected to exceed R3 trillion by March. He also mentioned that the PIC has partnered with a business in the property sector to support rural retail convenience centres.

Mr Matiwane inquired whether any grey areas hindered the PIC’s ability to exercise the flexibility typically required of a portfolio manager. He referred to the case of the Road Accident Fund, which uses different accounting standards from the government. This resulted in a significant underestimation of liabilities, an issue flagged by the AG. He asked what challenges arose from using different accounting standards between the public and private sectors.

Mr Matiwane also questioned why no new investments had been made under the CF and UIF for the past five years.

Mr N Maduna (ANC) noted that IFRS is the international standard applied in accounting, while GRAP was specifically developed for South African public entities. While the differences between the two are minimal, he asked whether the PIC requires companies that use GRAP to align their reporting timelines when making investments. He agreed with the AG’s insistence on strict adherence to accounting standards.

He expressed concern that South Africa had too many shopping centres. He noted that the economy is predominantly service-based, which poses a challenge as it does not generate enough jobs. For meaningful employment growth, the economy needs reindustrialisation. He asked whether the PIC’s investment strategy considered these structural issues.

He further asked about the PIC's process to appoint its panel of experts and what safeguards are in place to prevent collusion between panelists and companies the PIC has invested in.

Mr Maduna raised concern about poor-performing investments. In December 2014, the PIC invested R97 million in Africa Oil, from which it only recovered R7 million before exiting. In 2017, it invested R300 million into the same company but only received R134 million in return. Similarly, in January 2016, the PIC invested R250 million in a company called Musa with no returns. Again, in April 2018, another R250 million was invested in Musa with no returns. He questioned why the PIC continued reinvesting in underperforming companies.

He cautioned against the PIC becoming like the Land Bank, which was intended to support emerging black farmers but largely funds white established farmers. He requested a breakdown of the demographic profiles of the companies the PIC invests in.

Ms T Bila (ANC) asked the PIC to elaborate on why the legacy Isibaya Socially Responsible Investment (SRI) mandate was suspended and how it has affected developmental investments under the CF and UIF portfolios. She raised concerns about the UIF Social Impact Summary, which revealed that 1 049 jobs were held by foreign nationals, despite South Africa’s high unemployment rate. She asked what criteria and considerations were used to justify these appointments. According to the CF Social Impact Summary, 8 361 job opportunities were created in 2024, of which foreign nationals held 194. She requested clarification on what justifies employing foreign nationals in such numbers and asked for details on their job designations.

Ms Neale-May noted that according to slide 13, the UIF’s total listed portfolio had a 12-month return of 15.16%, slightly outperforming the benchmark of 14.84%, which was commendable. However, performance in the 36-month and 60-month periods lagged behind. She asked for an explanation of this underperformance and what strategic changes were being considered to improve long-term returns.

She also asked whether the PIC knew how many civil servants were listed in the companies it invested in. She queried the location of Satrac Engineering Private Limited, noting that her research showed it was based in India. She highlighted that the CF owed R40 million to Busamed Hospital Group in Somerset West, which is currently in distress.

She raised concern about DayBreak Chicken Farm, where a former PIC investment banker had been appointed CEO to assist with the turnaround. She asked whether the PIC had taken over the farm. Regarding Nature Cell, which had burned down, she inquired whether the PIC had secured insurance and whether the company had been revived. She also asked about the ownership of Berlin Beef Group.

Mr A Beesley (ActionSA) asked for clarification on the acronym TOVA. He noted that under the UIF, R6.7 billion was once available, but only R867 million remains—a significant loss of R6 billion. He asked whether investigations had been conducted, as this appeared to involve corruption.

Citing reports that DayBreak is nearing liquidation, he asked whether the PIC had reviewed its valuations in light of corruption concerns. He also asked whether asset management fees were reported net or gross and requested a breakdown of the fees involved.

Mr Sithole responded to the question on GRAP, explaining that the PIC often does not have sole investor status in companies and therefore cannot dictate terms such as accounting standards or year-end schedules. He added that a growing service-based industry was a global trend and not unique to South Africa. Nonetheless, the PIC Act requires it to support industrialisation and manufacturing sectors.

Regarding the appointment of the PIC’s panel of experts, he explained that the process complies with the Public Finance Management Act and focuses on selecting black-owned businesses.

He further explained that the PIC’s unlisted portfolio largely comprises black-owned businesses, in line with Broad-Based Black Economic Empowerment (BBBEE) goals, and includes women- and youth-owned enterprises.

In terms of investment strategy, he said the PIC conducts assessments to ensure all its clients benefit from investments. However, when investments fail, all clients are similarly exposed.

He said the suspension of the SRI mandate resulted from poor performance and, in some cases, the absence of audited financial statements. Clients have since instructed the PIC not to make further unlisted investments until the AG’s qualifications are resolved.

Regarding the employment of foreign nationals, Mr Sithole said the PIC does not dictate employment practices to investee companies but encourages them to hire South African nationals first.

Responding to performance-related questions, Mr Rikhotso said the slight underperformance over the medium and long term was largely due to constraints on financial sector holdings. The South African Reserve Bank limits the PIC to how much it can hold in financial institutions. For example, if the benchmark allows for 18% in banks but the PIC is limited to 15%, the 3% difference is counted as underperformance. The PIC is working with its largest client to adjust the benchmark for more active positions.

In response to the question of civil servants in invested companies, Mr Sithole stated that the PIC has a Politically Exposed Persons (PEP) policy and conducts assessments. Still, he could not confirm if civil servants are part of the companies the PIC has invested in.

Mr Bothwell Hlahla (Portfolio Manager: PIC) clarified that Satrac is part of the infrastructure investment portfolio. It is a toll road concession covering the route from Tshwane through Mpumalanga to Mozambique.

The Chairperson asked what went wrong with the PIC’s investment in Enable Capital.

Mr Sithole explained that the PIC had committed R200 million to Enable Capital for fibre infrastructure. Of this, R100 million was disbursed—R50 million from the GEPF and R50 million from the CF. Subsequently, the board of Enable placed the company into business rescue, suspecting the executive had deviated from the original mandate. The matter was reported to SAPS due to possible fraud. The rescue process will determine the business's viability and the R100 million investment status.

Mr Bothwell said the Busamed and the Clinics Group investments supported black industrialists and hospital expansions. The PIC underestimated COVID-19’s impact on these institutions, though recent improvements have been seen due to board and management efforts. Combined, the two groups have over 1,500 hospital beds. Despite current low valuations, the PIC is optimistic about its recovery.

On Berlin Beef, he said the company focuses on beef and pig production but has significantly underperformed, is in a critical financial state, and is currently within the TOVA unit.

Nature Cell is a startup that produces roofing materials. It underperformed due to a fire during plant installation. The insurance claim is still pending, and TOVA is also evaluating the business.

Mr Sithole clarified that TOVA stands for Turnaround and Value Add.

On the UIF’s R6.7 billion investments, he said that where wrongdoing is found, it is reported to law enforcement, and internal action is taken where processes were breached.

Regarding the PIC’s fees, he emphasised that the PIC is a low-cost provider, with fees far below those of other asset managers.

Mr Rikhotso added that fees are under 100 basis points for SRI investments and below three basis points for listed investments. The PIC now complies with Global Investment Performance Standards (GIPS).

The Chairperson suggested that the Committee schedule another meeting in the next parliamentary term to focus exclusively on the unlisted portfolio, including auditing issues flagged by the AG and potential solutions.

The meeting was adjourned.