The poor economy coupled with the Covid-19 outbreak and the associated lockdown had a devastating effect on the pension fund that looks after the savings of government workers, with the value of assets falling by more than R200 billion.
A spokesman for the Government Employees’ Pension Fund (GEPF), which is responsible for ensuring the financial wellbeing of all national and provincial government employees in retirement, said its portfolio declined by nearly 12% for the year ending March 2020. Despite the lockdown only being announced towards the end of that month, it cited market turmoil due to Covid-19 among the main drivers of the decline, according to a report on BusinessLive.
The value of the pension fund for the country’s more than 1.2-million public servants fell by R243 billion to R1.64-trillion.
In March, the FTSE/JSE all-share index fell by 14% as markets around the world confronted the consequences of the economic impact of lockdowns. South Africa’s lockdown was said to be one of the hardest.
The reason that this affected the GEPF so badly is because more than half its portfolio is invested in local equities, according to the report.
The deterioration in the economy led to South Africa’s losing its last remaining investment-grade credit rating at the end of March. The move was expected by international bondholders who subsequently reduced their holdings of South African assets. South African bond yields, which move inversely to prices, were already among the highest even for emerging markets and spiked further due to Covid-19, the report said.
The downgrade caused the GEPF to take write-downs on the value of its large fixed-income portfolio. At the end of the last financial year, the GEPF held more than R500 billion in South African government and parastatal bonds.