Africa’s Biggest Pension Fund Has $800 Million Tied Up In Failing Bank

African continent

Public Investment Corp (PIC), the entity that handles money for Africa’s largest pension fund, has $800 million tied up in the failing African Bank Investments Ltd (ABIL), which collapsed in August.

PIC injected $440 million into the bank this month as part of a bailout project. The fund already had a $300 million ownership stake in the bank. Reported by Bloomberg:

The collapse of African Bank Investments Ltd. has forced the custodian of most of the South African government’s pension money to agree to invest 5 billion rand ($440 million) to rescue the lender.

Public Investment Corp., the continent’s biggest fund manager, owned 12 percent of African Bank when it failed last month. Abil, as it’s known, collapsed after it forecast record losses and said it needed at least 8.5 billion rand to survive. The central bank devised a rescue plan that involves buying the bad loans and recapitalizing the “good bank.”

“PIC has committed to provide up to 50 percent of the total amount required to recapitalize the ‘good bank,’ which cannot exceed 5 billion rand,” Finance Minister Nhlanhla Nene said in a written response to questions in Parliament from the opposition Democratic Alliance party.

As part of the South African Reserve Bank’s Aug. 10 plan to save Abil, six banks and the PIC were asked to underwrite 10 billion rand so that the lender could hold an initial public offering in Johannesburg early next year.

“The net exposure of the Government Employees Pension Fund to Abil currently stands at just over 4 billion rand,” which is 0.5 percent of the PIC’s investments,Nene said in a written response to questions from the opposition Freedom Front Plus party. “The PIC hopes to recover some of this through its participation in recapitalizing the ‘good bank.’”

ABIL was Africa’s largest provider of loans to low-income workers. It had over $1.5 billion worth of bad loans on its books when it failed.

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