The 2022/23 PIC Integrated Annual Report: Growing assets by R52 billion
3 October 2023
The 2022/23 Integrated Annual Report of the Public Investment Corporation (PIC) presents the PIC’s financial and investment performance in the context of global inflation rising to the highest levels seen in a generation, according to the South African Reserve Bank, and higher interest rates as a result.
Global financial markets had to contend with tighter financial conditions, heightened geopolitical tensions, risk aversion, and slower economic growth. Local investors also faced the additional effects of persistent electricity disruptions that weighed on company earnings through higher input costs, production losses and supply chain disruptions.
Considering weaker economic conditions and higher levels of risk aversion among major investors, the PIC’s investment performance for 2022/23 delivered admirable returns to the portfolios of all clients.
Total assets under management (AuM) by the PIC grew by R52.1 billion or 2%, to R2.599 trillion as of 31 March 2023, compared to R2.548 trillion by the close of the 2021/22 financial year.
Among the client investment portfolios:
The Government Employees Pension Fund (GEPF), representing 88.61% of total AuM, grew by 1.1% to R2.3 trillion.
The Unemployment Insurance Fund (UIF), comprising 5.14% of total AuM, grew by 13% to R135 billion.
The Compensation Commission Fund, accounting for 2.09% of total AuM, increased by 4.3% to R54.4 billion.
There are 15 smaller client funds that make up the balance of the PIC’s total portfolio and their assets grew by 7% to R61 billion.
Apart from growing the assets of clients, Dr David Masondo, Chairperson of the PIC Board, confirmed that the Board had declared a dividend of R141 million to government, the PIC’s sole shareholder, for the year under review.
The Board also welcomed sufficient internal controls and compliance in the operating environment that resulted in the Auditor-General of South Africa (AGSA), the PIC’s external auditor, issuing an unqualified opinion on the PIC’s financial statements for the fifth consecutive year.
No significant instances of fruitless and wasteful expenditure were incurred and no material findings or misrepresentations in the financial statements were raised by the AGSA.
Fruitless and wasteful expenditure of R1.6 million that was identified in 2022 was corrected during 2023, resulting in zero fruitless and wasteful expenditure for FY 2022/23 on the financial statements. The PIC reported irregular expenditure of R89 000 in its operations to the AGSA, relating to an employee contract extension. The AGSA reported a finding on AuM, regarding the PIC’s policy to monitor politically exposed persons in one investment.
“The Board believes that the company is in a sound financial position. The audit outcome is an improvement from the previous financial year and illustrates disciplined internal corporate governance, strengthening control environment and prudent financial management that met the essential requirements of the PFMA.
“The public, clients, pensioners and their beneficiaries can have confidence that the PIC is well governed and managed and that their savings, pensions and investments continue to grow in a sustainable manner because of the PIC’s investment performance,” Dr Masondo explained.
The Integrated Annual Report shows that the GEPF has a growing, sustainable portfolio of assets. Over three years, positive excess returns were delivered for all GEPF-listed investments. The GEPF exceeds its liquidity ratio requirements. It can comfortably meet all immediate debt obligations and future liabilities, including the payments of pensions for the life and duration of beneficiary benefits.
The UIF portfolio also recorded impressive, double-digit growth, recovering from the large emergency selloff in nominal bonds since 2020 that provided R64 billion in much-needed COVID-19 relief to thousands of vulnerable firms and employees under the Temporary Employer-Employee Relief Scheme.
Commenting on the growth in AuM, PIC Chief Executive Officer, Mr Abel Sithole, said the year under review “presented formidable challenges to our operating environment. The PIC’s performance is grounded in a disciplined investment approach that has proven resilient”.
“Its focus is on delivering positive, risk-adjusted returns and sustainable growth to client mandates. Listed equities, our major asset class, again delivered positive returns for clients, growing by 7.9% over the 12 months and outperforming benchmark returns by 1%.”
As of 31 March 2023, the PIC’s portfolio consisted of the following asset classes:
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INVESTMENT PERFORMANCE
Listed equities grew by 7.9% over 12 months to R937 billion and delivered positive returns to clients.
Continued investments in companies listed on the Johannesburg Stock Exchange (JSE) support the South African economy.
In South Africa, the PIC allocated R17.8 billion to 22 domestic equity managers. Sixty percent of this allocation went to black-owned -and managed asset management firms.
Externalised assets (domestic and global) grew from R422 billion in March 2022 to R463 billion in March 2023, with significant growth in Africa fixed-income and global equity asset classes.
The PIC concluded new Unlisted investment mandates with its clients in April 2022. Unlisted investments, through the Isibaya Fund, invested capital of more than R11 billion into the domestic economy in key strategic sectors: renewable energy, financial services, agriculture, housing and manufacturing.
The PIC was named, for a second time, one of the most responsible asset allocators in the world by the Responsible Asset Allocator Initiative, a global organisation promoting responsible investment. Asset allocators are evaluated on their investment strategy, governance structure and commitment to sustainability.
To access the 2022/23 PIC Integrated Annual Report, including the audited financial statements, please visit https://www.pic.gov.za/pic/
Issued by PIC Corporate Affairs, 3 October 2023
