Auditor-General Kimi Makwetu. Picture: BATHINI MBATHA
Auditor-General Kimi Makwetu. Picture: BATHINI MBATHA

The political instability at the embattled Public Investment Corporation (PIC) has taken its toll on the asset manager, contributing to a decline in its internal controls, auditor-general Kimi Makwetu says.

The PIC, which manages R2.1-trillion, mostly for government employees and pensioners, has been under the spotlight for all the wrong reasons in recent times.

In 2018, President Cyril Ramaphosa established a commission of inquiry to look into allegations of impropriety at the state-owned asset manager. The inquiry, chaired by retired Judge Lex Mpati, has finished hearings and is drafting its report. The final report has to be submitted to Ramaphosa by October 31.

Over the years, the PIC’s unlisted portfolio has become a source of funding for black entrepreneurs, which has led to allegations that deal-making was being influenced by political connections and considerations.

In the PIC annual report for the 2018-2019 financial year, which was tabled in parliament on Tuesday, Makwetu gave the asset manager an unqualified audit opinion. This is a regression from the previous financial year’s clean audit opinion.

He pointed out the vacancies in leadership positions in the PIC, saying the anomaly had contributed to the overall decline in internal controls.

“The leadership did not adequately establish policies, guidelines and procedures to enable and support the understanding and execution of internal control objectives, processes and responsibilities.”

Makwetu said the management did not ensure that the supply chain management policy and Public Finance Management Act requirements were adhered to due to incorrect interpretation of procurement prescripts relating to deviations. Some of the goods, works or services were not procured through a fair process as required by the act, he said.

In the report, interim chair Reuel  Khoza said the PIC had not been immune to lapses in good corporate governance. Neither was it “sufficiently insulated from political or other undermining external influences”.

“During the year under review, the PIC came under sustained public scrutiny in the media, which damaged the organisation’s reputation. This resulted from allegations of misconduct and breaches of company governance regimes levelled against senior officials. These included flouting investment processes, making improper transactions and abusing positions of privilege in allocating funds,” said Khoza.

There is no doubt that the leadership will need to do much more to restore the PIC’s credibility and salvage what is left of its reputation, he said. Priorities for the interim board are to stabilise the organisation, appoint a CEO and fill other senior positions.

Acting CEO Vuyani Hako said the PIC was on track to implement its continental investment strategy.

During the period under review, the PIC approved continental  investments worth $873m. Of this amount, it made an equity investment of $100m to acquire class B shares in the African Export-Import Bank (Afreximbank), a pan-African multilateral financial institution devoted to financing and promoting intra and extra-African trade.  

The PIC declared a dividend of R80m, making it one of the few state-owned entities to contribute to the fiscus, said Hako.

phakathib@businesslive.co.za