Government is considering breaking up PIC, probe told
Autonomous business units can deliver better outcomes, says investment expert
The government is considering breaking up the Public Investment Corporation (PIC) into autonomous business units to help improve efficiency, investment expert Muitheri Wahome.
“The PIC is in the process of reviewing its operating structure and internal discussions are underway to determine what operating model to adopt. Currently under consideration is a business unit structure,” Wahome told the PIC commission of inquiry on Wednesday.
Wahome had been asked to brief the commission on discussions and presentations made at a PIC inquiry workshop which took place over three days in May.
Finance minister Tito Mboweni attended the conference at which he and PIC executives discussed how to reform the outdated organisational structure of the state-owned asset manager.
Part of the inquiry’s wide-ranging terms of reference as set out by President Cyril Ramaphosa includes determining whether the current governance and operating model of the PIC and its board is the most effective and efficient.
According to Wahome, attendees considered established best practices applied elsewhere in the industry, locally and offshore, for an investment manager of the PIC’s size.
The PIC currently provides a full array of investment services to its 23 institutional public sector clients that have entrusted it with over R2-trillion.
Wahome says any major restructuring could be done according to asset class.
“Industry practice shared at the workshop demonstrated a far more flexible and decentralised approach to investment decision-making at large asset management firms compared to the PIC,” she said.
The PIC was more than big enough to justify the scale required to operate up to five autonomous business units, which would each have an executive management team and chief investment officer, she said.
This would see the PIC split into separate businesses according to its primary investment activities in listed equities, fixed income, private equity/impact investing, listed and unlisted property, and as a multimanager (appointing other investment managers to manage funds on its behalf).
The unlisted investments made by the PIC have been a contentious issue, and a number of deals have come under scrutiny at the commission due to the irregular manner in which the investments were made.
Wahome said the organisation had acknowledged it is short on capacity and skills in the unlisted arena and this limited “the corporation’s ability to compete for prime assets”.
It was also noted that “a clear alignment of interests” is necessary to succeed in private equity, implying that investment professionals would be encouraged or compelled to invest their own funds next to that of their clients.
The commission is expected to hear testimony next week from the PIC’s suspended chief financial officer, Matshepo Moré.