RETURN ON INVESTMENT: Public servants’ pension money — the R88bn question behind the PIC’s Isibaya portfolio

The Public Investment Corporation’s Isibaya portfolio was meant to do more than make money. It was supposed to help build the country by funding infrastructure, supporting empowerment deals, creating jobs and backing investments that could deliver both social impact and financial returns. But after nearly two decades, the portfolio’s disclosed return raises a blunt question: was the risk worth it?

The Public Investment Corporation’s Isibaya portfolio, which invests money on behalf of the Government Employees’ Pension Fund (GEPF), has delivered an internal rate of return of 4.25% from March 2006, according to a written parliamentary reply by Finance Minister Enoch Godongwana.

The figure was disclosed in response to a question from DA MP Andrew Bateman, who asked for the rate of return on the Isibaya investments listed in a previous annexure. The minister said the 4.25% internal rate of return, or IRR, covers the entire Isibaya portfolio for investments conducted on behalf of the GEPF since 1 March 2006, and includes transactions that have already been fully realised.

A separate reply, also to Bateman, provided an updated schedule of Isibaya’s unlisted investments. The annexure shows a wide spread of investments across infrastructure, empowerment vehicles, financial services, media, property, agriculture, housing, energy and private equity funds.

The numbers show a portfolio with some big winners, but also some heavy bruises.

Committed capital is the amount promised or allocated to investments; invested capital is the portion actually paid into them. According to the annexure, the Isibaya investments listed had committed capital of about R94-billion, with about R88-billion invested. The total value reflected in the schedule, comprising proceeds already received and current market value, amounts to about R98.8-billion. That implies a money multiple of about 1.12 times the amount invested, before getting into the more complicated questions of timing, risk and opportunity cost.

In plain English, the portfolio appears to have turned R88-billion invested into about R98.8-billion in value over a long period. That is not a disaster in absolute rand terms, but, over almost 20 years, it is not exactly a champagne cork moment either.

For pension fund members, a 4.25% annualised return over nearly 20 years raises uncomfortable questions about whether enough value has been created for public servants whose retirement savings are ultimately exposed to these decisions.

The Isibaya portfolio has never been a plain vanilla investment bucket. It is meant to support