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Trade union Solidarity today expressed concern over the concentrated investment policy the Public Investment Corporation (PIC) is following when it comes to managing the funds in the Government Employees Pension Fund (GEPF).

Morné Malan, a researcher at the Solidarity Research Institute, explains that the PIC’s increasing focus on development at the expense of capital growth could have dangerous consequences for members in the future. “It is outrageous that the PIC considers it appropriate to keep Eskom as its second largest investment, and that other ailing state-owned enterprises constitute 30% of its portfolio, while there are so many other potential investments that can offer a higher return with a much lower risk,” Malan said.

Unlike other pension funds, the GEPF is not subject to Regulation 28 of the Pension Funds Act , and the PIC therefore has the freedom to diversify much more offshore than other pension funds can. It nevertheless appears as if only 5% of the PIC’s funds are invested abroad, while a further 5% is invested in the rest of Africa. “Given that South Africa is currently growing at a much slower rate than most other countries in the world, especially in comparison with other emerging economies, one can hardly justify such an allocation purely on investment criteria.

So far, the PIC has opted to stay well below the allowed limits set for its international allocation. Yet, they are exceeding the limits when it comes to issuing debentures to ailing state enterprises,” Malan pointed out.

Solidarity urges the PIC to regard their members’ retirement, rather than funding government’s development projects, as its primary objective. “Sound investment in solid companies per se offer the best vehicle for development. These matters need not be treated as being in opposition to each other. Yet, it would appear as if the PIC, be it because of pressure, ideology or other obscure motivations, believe they must invest in accordance with an explicit development mandate instead of investing only according to what would yield the most sustainable returns,” Malan said.

The trade union encourages the PIC to respond to market pressures rather than to political pressures in future.

Issued by Solidarity