South Africa: State Worker Pension Fund Could Take a R12 Billion Hit From Steinhoff Share Collapse

Photo: Steinhoff
(file photo)
analysis

The bruising loss could have been minimised if the Public Investment Corporation (PIC) hadn't sold its derivative insurance structure that protected it against a collapse in the value of Steinhoff shares. The structure was linked to a R9.35bn loan extended by the PIC to Lancaster Group, a BEE investment vehicle, to buy Steinhoff shares.

By the end of its 2019 financial year, the Government Employees Pension Fund (GEPF), which is the biggest source of funds for the Public Investment Corporation (PIC), would have been hit with impairments of nearly R12-billion for its exposure to troubled retailer Steinhoff.

The GEPF, which is South Africa's biggest pension fund, managing R1.8-trillion of funds belonging to 1.7 million current and retired state workers, has already written-off R4.27-billion for its 2018 financial year due to the collapse in Steinhoff's share price.

With the Steinhoff shares collapsing by more than 80% since the furniture retailer admitted to accounting fraud in December 2017, which has left it scrambling for working capital, the GEPF might take another hit of about R7.3-billion during its 2019 financial year. This brings the cumulative losses since 2018 for the GEPF, which places most of the pension savings of state workers with the...

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