The March 1 rescue came a week after a senior official of the Congress of South African Trade Unions emailed the deputy finance minister, who was also chairman of the PIC, and said a failure to fund Edcon could lead to a loss of votes for the ruling African National Congress in May elections and would damage the federation’s alliance with the party. Bloomberg reported about the previously undisclosed email on June 28. The PSA is not a member of Cosatu.
There is “an obligation on the PIC to make sound business decisions and to adhere to the strict rules that are applicable when such decisions are taken,” the PSA said in a statement. “The PSA is increasingly concerned about the PIC’s capability to manage a fund such as the Government Employees Pension Fund in an accountable and ethical manner in line with the principals of good governance.”
The PIC, which didn’t respond to Bloomberg’s questions before the publication of the June 28 story, said in a statement that it “didn’t succumb to any external political or union pressure” when making the decision.
The 1.2 billion rand contributed by the PIC came from the Unemployment Insurance Fund, one of its smaller clients, and was in line with that organization’s mandate, it said. If the intervention had not been made 140,000 jobs would have been lost and the UIF would have had to pay out unemployment benefits. The rest of the money came from Edcon landlords and banks that already lent funds to the company.
The investment by the PIC ran counter to the recommendations of its investment professionals, two people with direct knowledge of the situation said.
The PIC is currently the subject of a judicial inquiry into its governance and the PSA said it may take legal action against it when the findings of that commission are made.