South Africans are accustomed to government mismanagement and corruption. They've suffered for years from periodic blackouts at state-owned power utility Eskom Holdings SOC Ltd., seen money flow out of the national airline and are routinely asked to pay off cops who've pulled them over.

The latest scandal, though, has the potential to reach wider and deeper. It's about whether the company that manages $150 billion of retirement funds for more than 1.2 million government workers has invested its money properly — a question that could touch every taxpayer in Africa's most industrialized economy.

The unfolding crisis at the Public Investment Corp. shows just how deep South African President Cyril Ramaphosa will have to dig to eradicate endemic corruption and restore the reputation of the government. Even the country's powerful unions, which in the past have steadfastly supported the ruling African National Congress, are raising questions, and national elections lie ahead in May.

Public hearings have revealed that the PIC, which invests on behalf of the Government Employees Pension Fund, is highly exposed to Eskom, which is struggling with power-station outages, regular blackouts and 419 billion rand ($30 billion) in debt. Not only does the PIC own 20% of all outstanding bonds of Eskom, it holds a fifth of South African-listed bonds and inflation-linked debt and nearly 10% of the Johannesburg benchmark stock index.

The PIC's "investments in government-issued bonds and state-owned entities have been made in line with clients' mandates and that large portions of these are government-guaranteed," said Dean Botha, PIC's head of corporate affairs. "Both the government and state owned entities have been honoring their debt to the PIC."

Other PIC deals highlighted at hearings of the ongoing commission of inquiry include the purchase of shares in Ayo Technology Solutions Ltd. and a plan to invest in the initial public offering of Sagarmatha Technologies, a listing that was eventually blocked by regulators. Both companies are ultimately linked to businessman Iqbal Surve, who is said by former PIC fund manager Victor Seanie to be friends with PIC's ex-Chief Executive Officer Daniel Matjila.

Seanie, who was suspended as a result of an internal investigation into the Ayo deal, also testified that the prices paid for shares in alcoholic drinks-maker Distell Group Holdings Ltd. and Vodacom Group Ltd.'s Tanzania unit were too high.

"It looks like the PIC overpaid for assets and it seems this has been going on for a long time," said Asief Mohamed, chief investment officer at Cape Town-based Aeon Investment Management. "It's unclear if there were kickbacks, but this certainly raises the question."

Mr. Matjila declined to comment because he's yet to appear before the commission. A spokesman for Surve said in a statement that the businessman welcomes the inquiry and the opportunity to set the record straight, should the commission of inquiry into the PIC request his presence.