National Treasury has confirmed that Finance Minister Enoch Godongwana has called for a general meeting of the Public Investment Corporation for 27 July.

According to local media reports, the meeting is set to vote on the removal of nine non-executive directors of the PIC Board, including his deputy, Finance Minister David Masondo.

But it is understood that four of the nine non-executive directors resigned on Tuesday.

This follows major ructions at the largest asset manager in the country, including the placing on precautionary suspension of its Chief Executive Patrick Dlamini earlier this month and the subsequent resignation of two non-executive Board directors.

This included Thabi Nkosi, former Chairperson of the Land Bank.

The PIC is the largest asset manager in South Africa, managing around R3.7 trillion worth of assets.

Around 87 percent of the funds it invests belong to the Government Employee Pension Fund, while the balance includes investment of public sector funds, like the Unemployment Insurance Fund and other social security funds.

For years now, there have 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 in investments lost.

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 Mpati Commission in 2020, a commission that looked into governance issues at the PIC.

COSATU’s Parliamentary Co-Ordinator Matthew Parks says, “The previous PIC Act, which COSATU forced its amendment by Parliament in 2019, that previous PIC Act gave the minister of finance a blank cheque. That no longer exists. The previous PIC Act allowed the minister to appoint whoever he wanted to the board. That no longer exists. They must meet certain skills. There’s also now worker representation on the PIC chosen by workers to ensure that workers’ monies are safe. There’s also a very clear investment mandate as well, so that if an investment is – beyond dodgy. There was no economic logic to it. There’s now a clear investment guideline – you must support local jobs, you must support economic growth, sustainable development, return on investments, etc.”

Owen Nkomo, 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 Mpati Commission.

He argues that the Mpati 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 being invested and, ultimately, for whose benefit.

Nkomo, says, “I think that the commissions of enquiries that have happened in the past were good because a lot of rules that were flouted 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 are legacy issue, there are legacy transactions that still need to be cleaned up and I believe that, in time, 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”.

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.

In line with the Mpati 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.

“Assets must be managed objectively, and that’s not the case, so I think these are the important issues. The corporate governance design of the PIC needs to change. We cannot have ministers, deputy ministers, any kind of minister or 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 needs to have a multi-key selection process, which means that the nomination, appointment, and removal process is entirely independent of the executive or government, and that would be typically what you have – if you go to a bank, the multi-key is that you’d have more than one person with a key as additional protection”.

The PIC’s funds under management have overall continued to grow, while government employees benefit from a defined benefit scheme – a guaranteed amount upon retirement.

But if lapses in PIC governance result in massive losses, it is 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.

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