Government guarantees of investments in state-owned enterprises can be made meaningless by bad governance, Dr Renosi Mokate, chair of the board of trustees of the Government Employees Pension Fund said on Tuesday.
Mokate was taking parting in a panel discussion on financing sustainable infrastructure at the 4th annual meeting of the New Development Bank, commonly known at the Brics Bank, in Cape Town.
The GEPF manages pensions and other benefits for state employees in South Africa. The Public Investment Corporation is the state-run asset manager which invests on behalf of the GEPF and other public sector funds.
"Governance is very important for us. We do not want to put money into something and then because of a lack of governance, we do not have the results pensioners were expecting," said Mokate.
When working with government to invest in state-owned enterprises, government guarantees make it "easier" for the GEPF to make such investments.
"Our members always want to know if their pension savings are growing and if they will be secure. So, government has an important role to play to provide guarantees. Projects we invest in have to be bankable," said Mokate.
"Government pension funds have always been involved in infrastructure development. We recognised early on that, as a pension fund, it is critical to take a long-term, sustainable approach to investment."
Mokate said the GEPF has a responsible investment policy that guides its asset managers to integrate sustainable environmental issues into the decisions they make. It has, for instance, made substantial investments in renewable energy in SA and also in Kenya.
"We do support SOEs in SA. We own a significant number of bonds in Eskom, in the SA National Roads Agency (Sanral) and in water infrastructure. We think the GEPF has a very important role to play. As a long-term investor in a project we can draw other investors to it too," she said.
"So, we have a significant role to play in the investment value chain where we can make a quality impact on infrastructure investment."
She added that the GEPF places a great deal of importance on being provided with reports on the investments it makes in order to monitor risk.
"We have a development investment policy - including SME development. We track the social impact indicators of our investments - for instance in hospitals, health care and housing. This includes the employment created by the projects," she explained.
"We know we must measure results to make sure we are making the right kind of impact and not just the right kind of noise."
Fin24 reported in March last year that Eskom undertook to repay a short-term loan of R5bn it received from the Public Investment Corporation. When the loan was extended by the PIC in February 2018, the Public Servants Association, a trade union, said this could risk government employee pensions being caught up in failing state-owned enterprises.