| The PIC’s Integrated Annual Report provides an assessment of how the organisation executed its mandate as an asset manager during 2023/24. This includes its performance against the requirements of client investment mandates and how it complied with the regulatory environment in which it operates. |
| The PIC’s investment performance is presented in the context of a global economy showing signs of stabilisation despite persistently high inflation in major economies and continued geopolitical tensions. Higher inflation challenges asset managers to deliver better returns to sustain client investment portfolios. |
| Considering weaker economic conditions, the PIC’s investment performance for 2023/24 delivered admirable returns to the portfolios of all clients. Total assets under management (AuM) by the PIC grew by R95 billion or 3.6%, to almost R2.7 trillion (R2.69 trillion as of 31 March 2024), compared to R2.599 trillion by the close of the 2022/23 financial year. |
| Among the client investment portfolios: |
| • The Government Employees Pension Fund (GEPF’s) highly diversified portfolio, constituting 87.97% of total AuM, grew by close to R70 billion, reaching R2.369 trillion by 31 March 2024 despite withdrawals of R117 billion for benefit payments. |
| • The Unemployment Insurance Fund (UIF) portfolio, the second largest client with 5.55% of total AuM, grew by R16 billion to R149.55 billion, reversing R64 billion in outflows for the COVID-19 Temporary Employee/Employer Relief Scheme that supported businesses in distress during the pandemic. |
| • The Compensation Commissioner Fund (CC), representing 2.2% of total AuM, grew by R4.62 billion to R59.02 billion. |
| • The Compensation Commissioner’s Pension Fund (CP) grew by 9.8% to R51 billion. CP assets account for 1.9% of total AuM. |
| The combined portfolios of smaller client funds (representing 2.4% of total AuM) increased to R64.3 billion and grew by 6.11% year-on-year. |
| Apart from growing the investment portfolios of all clients, Dr. David Masondo, Chairperson of the PIC, explained that the PIC Board declared and paid a dividend of R141 million to the Shareholders for 2023/24. A dividend of R99 million, declared in 2020, was also paid during FY2023/24. |
| “This was the third, continual dividend paid to the government since the start of the COVID-19 pandemic (R141 million: 2022/23, R99 million: 2019/20), and sets the PIC apart from several major state-owned companies that require fiscal support to remain operational, solvent or financially sustainable,” Dr Masondo said. |
| Revenue increased by 3% from R1.220 billion the previous year to R1.262 billion for 2023/24 due to growth in the AuM, attributed largely to investment performance. Net profit increased by 22% from R222 million in 2022/23 to R271 million due to the outperformance of the foreign listed, unlisted and fixed income portfolios, explained Mr Abel Sithole, PIC Chief Executive Officer. |
| Total assets increased by 2% due to the reinvestment of the available funds into the PIC operating fund and total liabilities decreased by 8% (from 635 million: 2in 022/23 to R582 million: in 2023/24) due to lower lease liabilities and the dividend settlements, said Mr Sithole. |
| Audited Financial Statements |
| Sufficient internal controls and compliance in the operating environment resulted in the Auditor-General of South Africa (AGSA), the PIC’s external auditor, issuing an unqualified opinion with findings, on the PIC’s annual financial statements, for the sixth consecutive year. |
| No significant material findings or misrepresentations were raised by the AGSA. Instances of irregular expenditure and fruitless and wasteful were raised by the AGSA as a result of weaknesses in the PIC payroll functions and these are disclosed in the annual report. |
| Dr Masondo explained that the PIC Board responded immediately by implementing measures required to correct the identified weaknesses. |
| “This included enhancing segregation of duties, implementing additional approval layers, and strengthening system access controls. The Directors are pleased to report that the internal control environment relating to payroll has been significantly improved. Ongoing monitoring and periodic reviews will ensure the sustainability of these enhancements,” Dr Masondo said. |
| Transforming Asset Management |
| The PIC’s listed investment strategy provides for the allocation of funds to external asset management firms as required by client investment mandates. |
| Whilst the principle objective is to generate alpha – to enable managers to deliver sustainable, over-benchmark returns to client portfolios – the PIC’s External Manager Program is committed to increasing the participation of black asset managers in the savings, investments and asset management industries. |
| There is still notable underrepresentation of black women as shareholders, in governance and the roles of investment professionals. To address these gaps in the industry, during FY 2023/23, the PIC launched the Women Empowerment Fund and the Global Developmental Programme. Through an open tender process, the PIC has invited investment firms to submit technical proposals on their product offerings for consideration and possible appointment. |
| The empowerment fund seeks to increase the participation of women owners, governance leaders and investment professionals in investment firms. The minimum criteria were carefully structured with the requirement for selection set at 30% minimum black women ownership for the fund and a 50% black investment team for the developmental programme. |
| As an anchor investor in many black-owned firms, the PIC has enabled experienced black professionals to build credible track records. At the start of the Developmental Manager Programme, black-owned firms managed only 17% of the R65 billion in externalised assets. |
| By the end of the financial year 2023/24, R167 billion (66%) of the R253 billion in capital allocated to domestic firms was managed by black-owned entities with more than 51% black ownership and 30% black management control. |
| Financial statements of incumbent black managers show that the PIC contributes between 15% and 75% to the revenue streams of these firms, depending on the lifecycle stage and business size. Fees paid for portfolio management services on domestic assets from 1 April 2023 to 31 March 2024 increased to R837 million (base and performance fees combined), with R516 million (62%) going to B-BBEE asset managers. While these black managers earned R330 million in base fees for services rendered, most managers outperformed and earned an additional R186 million in performance fees. |
| For the full document click the link below: |
| Public Investment Corporation |
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