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The GEPF, an abused client 

The PIC did not put the interests of members and pensioners first.
The GEPF’s pot of gold represents 87% of the assets managed by the PIC, a tempting goal for any erstwhile criminal. Image: Moneyweb

The recently released Report of the Judicial Commission of Inquiry into the Public Investment Corporation (PIC) has brought to the surface the destructive relationship between the PIC and its largest client, the Government Employees Pension Fund (GEPF). The GEPF’s pot of gold represents 87% of the assets managed by the PIC, a tempting goal for any criminal.

The PIC has not covered itself in glory. It has ignored the fundamental requirement to act within the regulatory framework prescribed by the Financial Advisory and Intermediary Services (Fais) Act, the General Code of Conduct for Authorised Financial Service Providers (FSPs), the Companies Act, and the Public Finance Management Act (PFMA).

The commission has questioned the payment of dividends by the PIC to the shareholder in light of the drop in the long-term funding level of the GEPF from 79.3% (2016) to 75.5% (2018). Was this done to convey to the government that ‘the PIC is in fact functioning extremely well and is thus able to afford to pay a dividend’?

 The PIC clearly did not place the interests of members and pensioners first.

Instead of acting as the agent for the GEPF, the PIC acted as the abusive controller, squandering the GEPF’s wealth to peddle influence and enrich the corrupt.

Possible corrupt activities to be investigated

The various PIC shenanigans included making deals via politically exposed persons (PEPs), and paying “arranging fees” to the favoured few. This means soliciting a bribe to obtain a contract, and falls foul of the Prevention and Combating of Corrupt Activities Act.

Following allegations contained in the Noku/Nogu emails, the commission engaged PwC Advisory Services to conduct lifestyle audits and background checks on the following PIC directors: Mondli Gungubele, Sibusisiwe Zulu, Dudu Hlatshwayo, Dan Matjila, and Matshepo More. No evidence of criminality was found based on these lifestyle audits. However, there were discrepancies in Zulu’s lifestyle audit and these will be further investigated.

It should be noted that the commission is of the view that “the content and tone of the Noku/Nogu emails indicate that the intention of the originator was not to blow the whistle on corruption but to cause maximum reputational damage to the PIC and its directors/top management”.

The commission recommended that the PIC investigate all allegations of impropriety – such as the allegations and findings contained in the Control Risk Report.

It is unlikely that the PIC has the skills to unpack sophisticated corruption structures: “The layering of legal entities (state-owned corporations, pension funds, banks, companies and trusts and partnerships etc), when applied by financiers and corporate structure experts, can make finding the substance, and not form, of a transaction or series of transactions complex and quite perplexing.”

Dan Matjila 

Matjila, the CEO of the PIC during this period, is accused of pushing through deals and circumventing governance processes.

According to the commission, Matjila’s testimony “illustrates a complete disregard for transparency, formal process and proper governance”.

“It also illustrates the implicit understanding of Matjila that his influence, status and power enable him to direct activity without having to detail specifics.”

Matjila was also oblivious of reputational risk to himself and the PIC.

The commission remarked that Matjila could not evaluate materiality and prudence, and gave as an example Matjila dismissing the focus on “only 2%” of the fund. However, that 2% exceeds National Treasury’s annual contribution to the fund. “Any 2% capital loss, when the fund is potentially not fully solvent [in terms of the actuarial valuation reflecting the funding level of long-term liabilities], is a significant loss to what should be capital reserves or a buffer.”

The commission found a number of irregularities, including that Matjila, throughout his testimony, had been evasive, and had a selective view of accountability. He had “a tendency to ride roughshod over the established approval and decision making processes, using a combination of process, influence, fear and dictatorial fiat”.

The PIC did have in place a policy to ensure that investments do not unduly favour or discriminate against a politically exposed person (PEP), or a prominent influential person, however, the actions of Matjila showed “total disregard for the policy on PEPS”.

The commission also pondered whether the PIC had deliberately structured the internal risk management function and process to be ineffective.

It has recommended that the GEPF, PIC and government as the shareholder launch an investigation into whether Matjila violated the Fais Act requirements of honesty and integrity, breached the Protected Disclosures Act (in trying to find the whistleblower), and violated any other act.

Whether Matjila was that powerful/pushy a leader, or whether he was surrounded by gormless gnomes, the impact on the GEPF’s assets is devastating.

Read: The sitting duck in the corruption fallout

Destruction of value

Apart from the disastrous investment in Ayo, the PIC made many other senseless investments with the GEPF money, with nary a thought to the risk nor the prudence concept.

Some of these investments are briefly described below:

  1. Erin Energy: Hundreds of millions of US dollars were invested in oil exploration on the African continent where the success rate was likely to be 20%.
  2.  Ecobank: The GEPF owns 13% of the shares. This is a dollar investment and faces international equity risk. The returns on investment in US dollars were negative from 2012 to March 31, 2019, with an overall yield of -6.48%.
  3. The GEPF “was often used as a bailout fund for connected insiders and also a bailout fund for bad investments made by the PIC, for example, the investments in SacOil, Erin and possibly others”.
  4. Steinhoff International Holdings NV (SNH): The PIC didn’t invest directly in SNH, but gave money to the Lancaster Group for the acquisition of 2.75% of the shares, amounting to R9.35 billion (loan plus equity). The deal was structured by Symphony Capital, which was paid R76.95 million for this work. An amount of R22.85 million was paid to Lancaster Group and L101, a subsidiary. Matjila allegedly reduced the initial amount requested of R10.4 billion to R9.4 billion so that it would fall within his delegated authority limit, and would not have to be referred to the board for consideration.
  5. In the period December 2017 to December 2018, 41% of the total unlisted investments (worth approximately R123 billion) were either on watch, underperforming, or in distress and not servicing their loans – 29% of the 41% were not servicing the loans. Author’s comment: The impairment of investments as at March 31, 2019 amounted to only R8.8 billion (2018: R7.4 billion). Should we expect a much larger impairment as at March 31, 2020?
  6. Included in the distressed entities are Independent News & Media SA, Sakhumnotho, S&S Refineries (a palm oil refinery and saponification plant based in Nacala, Mozambique), both loan and equity, SSIH (transport and logistics company) and Ascendis.
  7. Repeat investments were made with particular individuals or companies, thereby repetitively favouring and enriching the same people via different investments – blissfully (or purposefully?) ignoring the imperative for ‘broad-based’ investments per the GEPF mandate.
  8. The PIC has invested 86% in SacOil, 100% in Daybreak, and gave Erin (already 30% invested) a guarantee so that it could obtain bank financing, even though it was technically insolvent. The direct capital investment did not impact the 30% limit, and the commission questioned the extent to which loan funding, guarantees and derivatives were used to deliberately circumvent the 30% requirement.

The commission has the impression that money lost or bad investments, or investments not used for the intended purpose, must be “identified, quantified and recovered”.

This is somewhat optimistic. The money is gone …

The commission also recommended that: “The GEPF should ensure it has the required skills, resources and expertise to check and challenge the PIC.” Why didn’t the commission ask the GEPF why it has been ignoring the many concerns raised by the AMAGP (Association for the Monitoring and Advocacy of Government Pensions)? 

The PIC has miserably failed its duties under the Fais Act, and has miserably failed its clients.

Has it not passed its sell-by date? It adds no value, it forms an additional layer of parasitic rent-seeking, and is an opaque structure vulnerable to criminality.

Should the GEPF not be restructured, and be given the capacity to manage its own affairs?



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It would seem that the avarice displayed by those responsible for theft at the PIC, Eskom, SAA, Eskom Pension Fund , Municipalities and other SOE’s knows no bounds.

All of this has happened post 1994.

A once proud nation is now among the poorest of the poor. It is Africa after all. And past conduct is a precursor of the future.

The pensions were abused by GEPF and their ANCfriends

The trustees of the gepf and the pic exec management are the one eyed men leading the blind. The average trustee is susceptible to “stomach politics”. Whatever money circulated between the trustees the consultants who advise them and the asset managers (who are predominately Bee managers) should be investigated. Look at the latest 27four Bee surveys to read the list of corrupt asset managers who are all “managing” gepf money.

The PIC serves the purpose it was intended for perfectly — the connected loot and plunder. And the taxpayer of the future will bear the cost.
This is its purpose.

On another note — the GEPF, and in fact all public pensions including politicians, should be forcibly moved to defined contributions.
Let them feel the pain their policies inflict on their own savings the way we do now.

Thank you for the succinct analysis of the shameful plundering of the GPEF. Right now, as Covid-19 is set to stretch health services to the limit, we should note that it is not shareholders who are the losers in the sordid PIC affair, but our hardworking (and long suffering) public servants.
How frustrating that the GPEF is allowed a “Monitoring Board” rather than be given the mandate to manage the fund themselves. They would surely do a better job than a bunch of power drunk oniomaniacs playing chuck-hole with the stolen coins?

End of comments.



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