Election outcome may lead to PIC board overhaul

The Public Investment Corporation (PIC), Africa’s largest state-run asset manager, could see an overhaul in its leadership should the ANC be ousted from power after this week’s election.

The board of the asset manager reports to the minister of finance as the sole shareholder representative on behalf of the government. The minister, currently Enoch Godongwana, in consultation with cabinet appoints the board of the PIC. 

The PIC board is chaired by Godongwana’s deputy David Masondo. Historically, the deputy minister of finance has chaired the PIC board, but this is not a view shared by all parties, with some believing it gives politicians too much power at the PIC.

Both Godongwana and Masondo are senior ANC members and deployed by the party to the positions they hold. Should the ANC lose power, the PIC, the biggest investor on the JSE, could see the appointment of a new chair and a new minister of finance to whom it accounts.

The PIC board provides leadership to the PIC on all issues of strategy, performance, resources, and standards of conduct, either directly or through its committees. The election also comes just months before the term of the current board is set to expire. The term of the current board comes to an end in October, opening the door to whoever will be the minister of finance and government of SA to choose who sits on the company’s board.

The PIC, with R2.6-trillion assets under management is the largest investor on the JSE, owning strategic stakes in most of SA’s blue-chip entities.

According to the company’s corporate plan for 2024—2027 the fund manager increased assets under management to R2.6-trillion at the end of March last year from R1.9-trillion in March 2020. The biggest growth was recorded from March 2020 to March 2021, when assets grew more than R400bn.

Since 2006 the PIC has grown the value of assets under management by R2-trillion. Its investments are spread across various asset classes, though about 87% of the portfolio is invested in listed bonds and stocks.

The current PIC board was appointed to fix governance lapses that emerged at the asset manager which led to President Cyril Ramaphosa in 2018 establishing a commission of inquiry to probe allegations of maleficence at the company. The inquiry was chaired by retired judge Lex Mpati.

One of the steps the board took was to separate the roles of CEO and chief investment officer — roles that were combined under former boss Dan Matjila to the detriment of investment decision making processes. Matjila testified at the Mpati Inquiry that he and his staff had come under pressure from politically connected individuals to bankroll deals without the required due diligence.

One of Mpati’s observations was that the frequent changes to the finance minister as the shareholder representative and the role of the deputy minister as chair, regardless of skills and experience, contributed to ineffective governance at the PIC.

However, this concern was not addressed as Ramaphosa signed the PIC Amendment Act, which still required that the chair of the fund manager’s board be a deputy minister appointed by the finance minister or any other deputy minister in the economic cluster.

One of the changes that followed the Mpati inquiry saw the inclusion of workers representatives on the PIC board. The PIC invests funds on behalf of the Government Employees Pension Fund (GEPF).

khumalok@businesslive.co.za