Africa’s Top Pension Fund Backs Scandal-Ridden Money Manager

The new head of Africa’s biggest pension fund is retreating from his predecessor’s threat to withdraw money from the Public Investment Corp., as he backs a turnaround at the scandal-plagued asset manager.

That the former overseer of South Africa’s Government Employees Pension Fund is now at the helm of the state-owned PIC is also giving Musa Mabesa the confidence to entrust the bulk of its 1.9 trillion-rand ($125 billion) portfolio to the money manager.

Mabesa, 37, took over from Abel Sithole last month as principal executive officer of the GEPF after Sithole moved to the PIC, which counts on the pension fund for the bulk of its assets. While Sithole had said shifting funds from the PIC to other managers was an option, Mabesa is opting to bolster scrutiny of the firm and give it time to rebuild trust.

“Diversifying who we give mandates to is a future discussion we can have,” Mabesa said in an interview Thursday. “We have increased confidence in the PIC’s interim board -- and we know Abel.”

A judicial inquiry last year exposed lapses in the PIC’s governance and political interference in its investment decisions, with a third of the recommendations aimed at the company’s management. The inquiry also highlighted the PIC’s reliance on the GEPF, which accounts for 86% of its funds under management, and oversees the retirement savings of more than 1.2 million civil servants.

The filling of several high-ranking vacant posts at the PIC also “improves functioning and provides comfort to us,” Mabesa said. Before taking the top role at the fund, Mabesa was head of corporate services at the GEPF.

Here are other highlights from the interview:

  • The GEPF hasn’t been approached about a debt-to-equity swap in debt-stricken state power company Eskom Holdings SOC Ltd.
  • It is not actively considering changing its holding in Naspers Ltd.
    • As Naspers’ biggest shareholder, there has been concern that the GEPF is overexposed to the company, making the fund vulnerable to share moves of its underlying investment in Chinese games developer Tencent Holdings Ltd.
  • While the GEPF is still looking to increase its investments in the rest of Africa, finding suitable targets is going slowly.
    • The GEPF has 2% of its portfolio on the continent outside of South Africa, lower than its 5% threshold. The GEPF is also considering whether to increase the amount it invests outside of Africa.
  • South Africa needs help to improve domestic investment. President Cyril Ramaphosa wants the government to invest 100 billion rand in new infrastructure, with a view to spur 10 times as much spending from private investors.
    • “There is a lot of scope for infrastructure, it does provide security for our investments and has potential for good returns.”
  • While the GEPF’s listed equity portfolio fell 21% in the financial year through March, its about 540 billion rand in domestic bills and bonds only dropped 2.1%.
    • “The security of returns earned from the fixed-income portfolio, which includes government bonds, has in the past provided stability for the funds. We can never discount that.”

©2020 Bloomberg L.P.

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