EDITORIAL: PIC’s powers under scrutiny

June 1, 2018



With control of R1.9-trillion in pension and other government social funds, the Public Investment Corporation (PIC) is the largest single investor in the JSE, with investments equal to 12.5% of its market capitalisation. It is also the biggest investor in government debt and holds more than 40% of Eskom’s listed bonds. What it does, how well it does it and whether it does it with integrity is of prime importance to the health of our market and economy.


Close to 80% of the R1.9-trillion comes from the Government Employees Pension Fund (GEPF), which entrusts the PIC with a mandate to make investments of up to R2bn in unlisted firms and R10bn in the listed space, without seeking approval. The mandate from the GEPF requires the PIC to make a market-related return, which it has consistently done. For members and pensioners, and even for taxpayers who stand behind the fund to guarantee benefits, this is obviously the most important factor.


Finance Minister Nhlanhla Nene. Picture: TREVOR SAMSON 



The mandate also requires the PIC to contribute to the country’s social and economic development through infrastructure investment and to economic transformation through investing in black-owned companies.


It is this last dimension of its mandate that has made the PIC a highly significant funder of black economic empowerment. In this regard, the management of the PIC enjoy a large amount of discretion in deciding who to support.


Their delegated authority allows them to undertake investments that fulfil the GEPF mandate before needing to seek approval from its board’s investment committee.


As a result, dozens of entrepreneurs beat a path to the PIC door every month. Many of them come with political backing — not of the governing party alone but also of other parties such as the EFF, as well as some trade unions and their investment companies. Deciding who to back can be a highly political exercise. As not every project can be supported, the opportunity to dispense favours to certain individuals or political parties and to call in those favours later is enormous.


This is precisely what is alleged to have occurred in the incident in September 2017 in which CE Dan Matjila was accused by a whistle-blower of dispensing favours to a friend and calling in favours from those he had recently funded.


It was disturbing to learn that in an organisation with such enormous economic power the board chose not to investigate these claims properly. It is hard to draw any conclusion other than that in doing so it neglected its duties. As a result, the allegations are now back, dredged up quite possibly by people with their own motives, but dredged up nonetheless.


Meanwhile, an important process is taking place at Parliament. Two draft bills that will compel the PIC to disclose its unlisted investments are on the table.


Public hearings start on Thursday. The PIC has declared publicly that it is committed to transparency.


But the GEPF is standing in the way, arguing that as the assets belong to it, it should be the institution to make the disclosure.


As it stands now, the GEPF discloses only the top 10 investments in each asset category, so the vast majority of unlisted investments are not disclosed at all. Disturbingly, Finance Minister Nhlanhla Nene and the Treasury, which in 2016 supported full disclosure and made possible the first disclosure on the unlisted portfolio, have endorsed the GEPF position and argue that disclosure should be at its discretion. This is a profound reversal for which there has been no explanation.


The DA, which initiated the first bill, and the ANC, which initiated the second, are both in favour of full disclosure.


This means that on the issues of disclosure and the integrity of the PIC CE and its board, it is all eyes on Nene.


What he says and does next on both of these matters will be decisive for the future health of the PIC.




LINK : https://www.businesslive.co.za/bd/opinion/editorials/2018-05-31-editorial-pics-powers-under-scrutiny/


Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER

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