The Public Investment Corporation’s (PIC’s) CEO, Abel Sithole, says though it is undesirable that the fund manager’s new board chair will be a government deployee, the appointment is unlikely to affect the PIC’s governance as the board will be robust.
The PIC Amendment Act, which was signed into law by President Cyril Ramaphosa in February, requires 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, sparking fears of political interference in the PIC’s investment decisions.
To ensure that governance is strengthened at the PIC and that investment decisions generate sound returns for pension fund holders, the PIC Amendment Act also requires that the board be diversified with union representation and a representative from the Government Employees Pension Fund (GEPF), which is the PIC’s biggest client. The diversification of the board will ensure the decisions it makes are robust, Sithole said on Thursday.
“You have all interested stakeholders being on the table and [are] able to hopefully ensure that no particular constituency drives its agenda ... because clients are not going to allow their members’ assets to be dealt with in an untoward manner,” he said during a media briefing.
“The way the board is structured could have been different in terms of the recommendations of the commission, but it is likely to be a very robust board in terms of the possibility of nominees to represent all interests of the public.”
The inclusion of the deputy minister of finance in the PIC’s board is contrary to the recommendations of the Mpati commission, which found 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 under the leadership of former CEO Dan Matjila.
The PIC interim board’s one-year term concludes at the end of October. Finance minister Enoch Godongwana has not yet given an indication that the board’s term will be renewed.
The interim board, led by businesses stalwart Reuel Khoza, has begun implementing the recommendations of the Mpati commission, including separating the roles of the CEO and the chief investment officer, which were previously held by Matjila. The board has ensured the appointment of a chief technology officer and introduced the position of head of ethics to inculcate ethical behaviour within the PIC.
“If a new board is not appointed, this board will continue to serve until such time that a new board is appointed. We just hope that board members have not made other plans because they were told that their term will end in October,” he said.
Other recommendations that have been implemented include referring instances of impropriety by PIC officials to the National Prosecuting Authority for further investigations and the suspension of former CFO Matshepo More, who has been suspended on full pay for more than two years.
The PIC is SA’s biggest asset manager and is wholly owned by the government. It announced earlier in September that its total assets under management (AUM) for the financial year ended March 31 grew by almost R440bn to R2.3-trillion after plunging to R1.9-trillion in 2020.
The growth in assets came on the back of a 51% jump in the JSE’s all share index in the year to March 2021. That was a recovery from a 24% slump in the first three months of 2020 as economies started to close across the world to prevent the spread of Covid-19.
The asset manager’s listed equities division grew its AUM by 51.4% over the 12 months to March to R838bn. The PIC’s listed investments portfolio outperformed the composite index over the three years to end-March by 0.21% cumulatively, the asset manager said.
Despite the improvement in returns the PIC’s investment outlook remains uncertain.
“New virus mutations and the accumulating human toll are concerning, even as growing vaccine coverage lifts sentiment. Economic recoveries are diverging across countries and sectors, reflecting variation in pandemic-induced disruptions and the extent of policy support.
“The outlook depends not only on the outcome of the battle between the virus and vaccines, but also how effectively economic policies, deployed under conditions of high uncertainty, can limit lasting damage,” it said.
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