As SA suffers a new wave of power cuts, or to use its gentler euphemism "load shedding", one has to wonder how we are going to get ourselves out of the hole we are in.
As SA suffers a new wave of power cuts, or to use its gentler euphemism "load shedding", one has to wonder how we are going to get ourselves out of the hole we are in. There is government issued debt, government guaranteed debt issued by state owned enterprises SOEs such as Eskom and SAA, and the direct debt of the same entities. All need to be serviced in an environment of virtually no growth, increasing unemployment, declining tax revenues, poor education and deteriorating health care services. In fact, there is a long list of cash hungry initiatives, which, if not addressed soon, will quickly send us further into the economic abyss. Most significantly, we are not only running out of money, we are running out of time.
If we do not get the fiscal situation under control we will waltz into the arms of the IMF and an austerity loaded bailout. Unfortunately, we have very few options on the table. Consequently, one needs to be a lot more creative in how we allocate what resources the country has. There is one existing solution, which, if deployed properly, could make a material difference to SA's situation. It is the Isibaya Fund, managed by the Public Investment Corporation PIC on behalf of the Government Employees Pension Fund GEPF. On paper, the Isibaya Fund provides finance for projects that "generate financial returns while also supporting positive, long term economic, social and environmental outcomes for SA". In practice, it has been a slush fund for BEE entrepreneurs with questionable credentials. Instead of supporting growth, it has destroyed value while propping up companies that should not exist Someone really needs to look into the affairs of Ayo Technologies, where R4.3bn of the PIC's money is in the process of being looted while the share price is manipulated on a daily basis.
The very fact that the PIC refuses to disclose the transactions it has supported tells us a lot but the past is the past. Looking forward, the money could be deployed as initially envisaged to resolve some of the massive issues facing SA, boost growth and reduce unemployment. But this requires a completely different set of competencies than the rest of the PIC's responsibilities. If managed on a commercial basis in a completely transparent manner by the very best investment minds with impeccable credentials as opposed to political cadres the fund could invest in projects that support the provision of education and affordable health care, renewable energy initiatives and myriad other opportunities that could make a material difference to our country's trajectory. The money could also be deployed to aid SOEs, provided they can demonstrate adherence to good governance and the ruthless elimination of overspending and corruption a big ask at this stage . For this to work, the fund would need a mandate similar to that of a sovereign wealth fund. It would also need to be split from the PIC, which has too many issues to deal with to be effective in the execution of even its primary mandate.
While the PIC's largest client is the GEPF, its largest stakeholders are SA taxpayers. The GEPF is a defined benefit fund and any shortfall in its ability to pay pensions must be met by taxpayers. Taxpayers thus have a right to transparency, not only in the PIC's primary mandate but also in the investments made by the Isibaya Fund. If the fund's mandate requires short term financial returns to be risked in a trade off against long term growth, it should need to account for its investments to taxpayers. My appeal to the board of trustees of the GEPF is simple: take control of the money entrusted to you and use it for the benefit of both your members and the broader SA. The chances of this being successfully achieved will be much greater if the Isibaya Fund is constituted separately from the PIC.
Publication: Business Day (Late Final)
Date: Wednesday, December 05, 2018
Page: 7