THE Public Investment Corporation (PIC), which is the guardian of 82 percent of the Government Employees Pension Fund’s (GEPF’s) R2.09 trillion portfolio, must get all dividends that are due to it as stated by former Finance Minister Tito Mboweni when addressing the Parliamentary Standing Committee on Finance (SCoF) in December 2020.
AYO Technology Solutions (AYO) in which the PIC invested GEPF funds in 2017, has done just that. The black-owned tech firm has paid a total of R310 million in dividends from 2018 to now. One of the very few investments that are paying dividends to Africa’s largest asset manager.
In the 2020/2021 financial year alone, AYO paid R64 858 726 in December 2020 and the exact same amount again in June 2021 in dividends through the PIC to the GEPF.
By any standards, this return is good. When seen against the backdrop of the Covid-19 interrupted economy and the subsequent dividend hiatus of many listed entities who preferred to hang onto to their cash, AYO’s performance and the PIC’s windfall should not be sneezed at.
This is further highlighted by the GEPF’s decline in investment income by R7 billion in the last year alone, from R85 billion received in 2020 to R78 billion in 2021, which is a clear illustration the PIC and GEPF need investments that can deliver.
The GEPF’s latest Actuarial Report shows that the number of contributors to GEPF is declining, which directly impacts total contributions. The GEPF’s dividend income is also on a negative trajectory, while the number of pensioners claiming is rising.
The GEPF states in its 2021 Annual Report: “The shortfall in the required contribution rate is estimated to amount to some R6.3 billion over the next year.” With that kind of deficit to be made up the pension fund would do well to nurture an investment that continually contributes more than R100 million a year in dividends.
Moneyweb recently reported that apart from the risk that the government may not be able to save the GEPF if the time had to come, there are other major risks facing the fund. “The GEPF has to look far into the future, as a defined benefit fund, it must grow its asset base to be able to fund retirement benefits in 50 to 70 years’ time. Any major restructuring that results in retrenchments will deplete the fund.
“The GEPF must be able to withstand any attempt by the government or corrupt government cadres to tap into its pool of assets. If the government continues on its journey of providing a comfortable haven for criminals and continues to appoint inept and dishonest or exceedingly gullible cadres into powerful positions, how good is its legal commitment that it must guarantee the GEPF pension benefits if the fund runs into trouble?”, reads the Moneyweb report.
With the number of contributing members declining, as too contributions, which during the height of the Covid-19 pandemic also remained flat, there is an incremental need for an increase in generating returns on investments of funds for the PIC, the GEPF and its pensioners who are the ultimate beneficiaries.
AYO, which also counts among its shareholders, unions, and black empowerment groups, have been constantly on the receiving end of negative media reports and litigation, yet despite this, the group has managed to grow its investment base, which it said was now worth several billion rand.
The company could well unlock even further value for stakeholders, as it is ideally positioned to take advantage of the growing dependency on technology. With interests in telecommunications infrastructure, e-commerce, cybersecurity, renewable energy/climate change technologies, logistics, digital communication, and publishing as well as remote working solutions and command and control technologies, it is well placed to not only support the GEPF but the overall economy.
The bottom line is that considering all the PIC’s investment in ICT companies, the high dividend yield it is receiving from AYO, far outperforms that of investments in other ICT companies it has a stake in.