The government is solidly committed to the protection of workers’ life savings, deputy finance minister David Masondo said in parliament on Tuesday.

Masondo made the introductory remarks ahead of a presentation by a PIC management team led by chair Reuel Khoza on the state-owned asset manager’s annual report for 2018/19. Board members were also present.

The PIC’s reputation has been damaged by testimony presented to the commission of inquiry chaired by former Supreme Court of Appeal justice Lex Mpati, which has raised questions about corporate governance and the process of decision-making for the corporation’s investments. 

The PIC, which has assets under management of about R2.1-trillion, acts as the asset manager for the Government Employees Pension Fund (GEPF), the Unemployment Insurance Fund (UIF), the Compensation Fund, and some other statutory funds. It is the biggest single investor on the JSE, controlling about 10% of its total market capitalisation. It is the largest asset manager in Africa with listed investments representing about 70% of its total portfolio, unlisted investment about 20%, and offshore investments about 10%.

“The government has confidence in long-term fund managers’ capability to direct funds towards investments with long-term and more durable returns,” Masondo said on Tuesday. 

“As government, we should not compel fund managers to invest in bad programmes. If we do so we would be squandering hard-earned workers’ deferred wages. We are committed, as government, to the life savings of workers and the PIC needs to be equally cognisant of its responsibility in this.”

Masondo’s comments come in the context of a debate over the possible use of PIC funds for development purposes and over the possible introduction of prescribed assets, which would require pension funds to dedicate a percentage of their funds for investment in government assets.

Assets under management by the PIC increased by R47bn in the year to end-March 2019 with the listed equity portfolio outperforming the JSE Swix all-share index, but the performance of its unlisted investment portfolio was well below targets, except for properties. The PIC has outperformed against target returns for its clients.

Executive vacancies

Khoza gave an account of what the interim PIC board — appointed in July — is doing to restore stability to the asset manager and to strengthen corporate governance.

“Since our appointment to the board, we have embarked [on] reviewing policies, procedures and delegations of authority to ensure that governance processes are strengthened and appropriately aligned. The PIC’s corporate strategy and plan will also be reviewed,” Khoza said.

Among the measures adopted have been the separation of the positions of CEO and chief investment officer; adding the positions of chief risk officer, chief technology officer and COO to the organisational structure; doing away with fund investment panels of the board to ensure that all investment decisions rest with the investment committee; and separating the audit and risk committees.

Khoza said whistle-blowing is encouraged and access to the PIC is under review to eliminate “middlemen” syndrome — where substantial fees are paid to “unscrupulous intermediaries and deal originators”.

“Our key priority over the next few months is to stabilise leadership and management by filling all the vacant positions at senior level. The board is concerned that there are too many executive vacancies in the top echelons of the organisation,” Khoza said.

The recruitment process for a permanent CEO had also begun.

Khoza said the report of the Mpati commission is  expected to be presented to President Cyril Ramaphosa by the end of October.

“We are aware that some of the findings could be damning and far-reaching, but we would like to give the assurance that the board is committed to restoring sound corporate governance and public trust in the institution.”