PIC crisis | Mess deepens as 6 directors quit board in a week

[00:00:00]The Public Investment Corporation is the largest asset manager in South Africa, managing around 3.7 trillion rands worth of assets. Around 87% of the funds it invests belong to the Government Employees Pension Fund, while the balance includes the investment of public sector funds like the Unemployment Insurance Fund and other social security funds. For years now, there've been rumblings about poor governance at the PIC. Concerns of certain stakeholders viewing the funds it manages as their personal slush fund, and hard evidence showing poor investments made by the asset manager with billions of rand in investment lost.

[00:00:38]Trade Union Federation Cosatu says key officials at the PIC should undergo lifestyle audits, but assesses the asset manager to have improved following the recommendations of the Imbali Commission in 2020, a commission that looked into governance issues at the PIC.

[00:00:55]>> Uh the previous PIC Act, which we as Cosatu has forced its amendment by Parliament in 20 2019, um that previous PIC Act gave a Minister of Finance a blank check. That no longer exists.

[00:01:07]Um the previous PIC Act allowed the Minister to decide whomever he wanted to appoint to the board. That no longer exists. They must meet certain skills.

[00:01:16]Um there's also now worker representation on the PIC chosen by workers to ensure that workers' monies are safe.

[00:01:23]There's also a very clear investment mandate as well.

[00:01:26]So that if if an investment we saw we saw some of the lessons previously, were just beyond dodgy, because it had no economic logic to it.

[00:01:33]It was just naked looting. There's now clear investment guideline. It must support local jobs. It must support economic growth, sustainable development, return on investments, et cetera.

[00:01:44]>> Ominigomo, founder of the Inkunzi Wealth Group, agrees that the PIC seems to have tightened up its approval processes for investing, especially in unlisted businesses, a terrain where corruption can be more rife, given that it's not a transparent space like the listed environment of investment in shares, bonds, and other publicly listed instruments as was found in the Impati Commission. He argues that the Impati Commission was effective to a degree, but the problem remains that some decision-makers continue to be negatively influenced by tenderpreneurs and political influences, not appreciating for whom these funds are actually being invested and ultimately for whose benefit.

[00:02:25]>> think that the the the the the the commissions of inquiries that have happened in the past were good because a lot of rules, you know, that were flaunted in the past have been brought to the fore and things are looking a little bit more like the PIC is moving in the right direction. But as I've said, there's legacy issues, there's legacy transactions that uh still need to be cleaned up and I believe that in time >> [clears throat] >> as we continue to observe and put pressure on the PIC to do the right things, I do believe that they might ultimately end up getting things right.

[00:03:02]>> Wits University's governance expert, Professor Alex van der Heever, says the PIC, which is tasked with looking after trillions of rand of people's money, is not transparent in its dealings, that the public only has the benefit of learning of the bad developments around its operations much later down the line when immense damage has already been done with zero accountability.

[00:03:24]In line with the Impati Commission's recommendation that a Deputy Finance Minister should not chair the PIC, which was not taken on board, the professor says there shouldn't be even a whiff of any politician at the asset manager, adding that the corporate governance design there needs to be overhauled.

[00:03:43]>> Assets must be managed in an objective manner, and that's not the case. So, I think there's these are the issues that are important. The corporate governance design of the PIC needs to change. We cannot have ministers, deputy ministers, any kind of minister, any kind of politician of any political party ever as a chair of that fund. The selection process for people who go on the board need to have a multi-key selection process, which means that the nomination, appointment, removal process is entirely independent of the executive of government. And uh and that would be typically what you would have. If you have a safe to a bank, the multi-key is you'd have more than one person with a key um as a as an additional protection.

[00:04:26]>> And so, the saga rages on. The PIC's funds under management have overall continued to grow, while government employees benefit from a defined benefit scheme, that is a guaranteed amount upon retirement. But, if lapses in PIC governance result in massive losses, it's ultimately the taxpayer that could potentially have to fill in any financial gaps. So, the governance health of the PIC is critical for South Africa as a whole.

[00:04:54]Nompumelelo Siziba, SABC News, Johannesburg.