The Public Investment Corporation (PIC) has reported a 27% plunge in profit for the year ended March 31 on the back of poor performing assets on the JSE due to weaker economic conditions and higher levels of risk aversion among major investors.
This was in spite of the largest asset manager in South Africa growing total assets under management (AUM) by R52.1 billion or 2%, to R2.599 trillion, compared to R2.548trn a year ago.
The PIC yesterday reported a net profit of R221 million and a balance sheet growth by R200m for the 2022/23 financial year, which was characterised by high levels of global inflation and higher interest rates.
PIC acting chief financial officer Brian Mavuka said global financial markets had to contend with tighter financial conditions, heightened geopolitical tensions, risk aversion, and slower economic growth.
Mavuka said 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.
“Our profit decreased 27% when compared to 31st March 2022, and the big driver was unrealised losses on our investment account, which has a link to the performance of the JSE and if the JSE hasn't performed well, it has a direct impact on us, so that resulted in unrealised losses for the period,” Mavuka said.
“But by and large, we still continue to remain stable, we grew the balance sheet and the only liabilities we have as an entity are provisions relating to incentives, both current and long term incentives.”
Mavuka said the PIC was financially stable, buoyed by the new unlisted investment mandate that provided the framework for new unlisted investments targeting transformation, economic growth, job creation, environmental sustainability and good social returns.
Unlisted investments, through the Isibaya Fund, invested capital of more than R11 billion into the domestic economy in key strategic sectors, such as renewable energy, financial services, agriculture, housing and manufacturing.
“The contributors of the growth are made up of three. The first one was the revenue, which grew by 15% when compared to the 31st of March 2022, and the two drivers there are the new mandate on the unlisted side that began at the beginning of the financial year,” Mavuka said.
“The other increase in revenue was driven by the increase in AUM. How we generate our fees is based on performance of the assets that we manage, and a growth in that will also result in the growth in revenue.”
PIC chief investment officer Kabelo Rikhotso said they approved nearly R15bn worth of transactions in the financial year after nearly two years of not investing on the unlisted side.
Rikhotso said R4.5bn of those transactions were in unlisted properties, and about R10.5bn was purely in the listed environment.
“We want to deliver superior risk-adjusted performance with good societal outcomes. So the two go hand in hand,” Rikhotso said.
“So in some cases we may forgo a potentially very high return prospect if it doesn't do good for society.”
The PIC-managed Government Employees Pension Fund (GEPF), which makes up 88.61% of total AUM, grew by 1.1% to R2.3trn.
The Unemployment Insurance Fund (UIF) grew by 13% to R135bn while the Compensation Commission Fund rose by 4.3% to R54.4bn.
The PIC was also able to decrease its total expenses by 6% during the period, mainly driven by the cost management initiatives.
Apart from growing the assets of clients, the board declared a dividend of R141m to the 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 saw the Auditor-General of South Africa (AGSA), the PIC’s external auditor, issuing an unqualified opinion on the financial statements for the fifth consecutive year.
PIC CEO Abel Sithole said the year had “presented formidable challenges” to the business’ operating environment.
However, he said the PIC’s performance was grounded in a disciplined investment approach that had proven resilient.
“Its focus is on delivering positive, risk-adjusted returns and sustainable growth to client mandates,” Sithole said.
“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%.”
BUSINESS REPORT