The National Treasury is strengthening its oversight role over the Public Investment Corporation (PIC), Africa’s largest asset manager, which more than R3-trillion in assets under management.
The PIC manages the funds of the Government Employees Pension Fund (GEPF), the Unemployment Insurance Fund and the Compensation Fund among other funds.
In a written reply to a parliamentary question by ActionSA MP Alan Beesley, finance minister Enoch Godongwana said the Treasury’s oversight role over the PIC would be strengthened through the shareholder compact that is signed annually between the minister and the PIC board.
“These will include the power to conduct independent audits, ensuring that comprehensive investment policies and guidelines are established, among others. In the interim, to uphold the PIC’s accountability, the National Treasury will continue to enforce existing regulatory frameworks, which include the Public Finance Management Act (PFMA), Treasury regulations and National Treasury instruction notes designed to regulate financial management,” the minister said.
Earlier this month during a question-and-answer session in parliament, Godongwana said he had ordered an inquiry into the PIC’s unlisted investments, which amount to about R170bn.
He also said in a written reply to a question by DA MP Andrew Bateman that the Treasury had begun a process to amend the PIC Act to give effect to the recommendations of the Mpati commission of inquiry. One of these recommendations was the appointment of an independent non-executive chairperson, who is not the deputy minister of finance (as is the case) but someone with experience and expertise in pension funds, finance markets and governance.
Godongwana said the appointment of this independent non-executive chairperson could not be implemented at this stage due to the legislative requirements of the PIC Act.
“The act must first be amended to give effect to the recommendations of the commission,” he said. “The bill will outline the final proposals regarding the process of selecting directors on the board with due consideration of the recommendations of the commission.”
The decision to draft new legislation was taken as part of the process of implementing the recommendations of the commission.
Recommendations of the commission that had already been implemented concerned the term of office of board members that had been increased to three years; the separation of the risk and audit committees; and the oversight roles of the information communication and technology governance and investment committees.
The recommendation on the skills mix of directors had also been implemented.
“The current board comprises directors with skills and experience in areas such as leadership, governance, strategy, actuary, investments (including pension fund), accounting, economics, legal, public administration [and] human resources,” Godongwana said.
In reply to another question by Beesley regarding the PIC’s investment in Daybreak Foods, which is in business rescue, he said the board of the GEPF had informed the National Treasury that it had decided to institute a forensic investigation into Daybreak Foods as well as the PIC’s management of the investment.
Godongwana pointed out that it was the responsibility of the PIC’s clients to monitor the implementation and performance of its investment. The Treasury was not involved in the day-to-day operations or in the specific investment decisions undertaken by the PIC on behalf of its clients.
“With regards to the specific investment in question, since it falls within the scope of the investment mandate agreed upon between the PIC and the GEPF, the National Treasury expects the GEPF board to fulfil its fiduciary duties of oversight over the PIC. This includes taking appropriate corrective action, where necessary, to address any governance violations.”
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