At any other time in SA’s politics, efforts to hold the Public Investment Corporation (PIC) to account and to force it to make full disclosure of its unlisted investment portfolio could only be a good thing.
The power the PIC wields over SA’s markets and its economic fortunes can hardly be overestimated. It is the single largest investor on the JSE, owning more than 11% of the market value of the JSE’s top 25 listed companies, a recent Treasury study found. It is a major client for the private sector asset management industry, to which it outsources the management of some funds.
Most crucially, in its role as the asset manager for the Government Employees Pension Fund (GEPF), the PIC manages the retirement savings of well over a million public sector employees and pensioners. It also manages the unemployment insurance money held for the benefit of millions of people who lose their jobs and the Compensation Fund. And that means taxpayers ultimately are liable if the PIC fails to do its job properly.
The unions and federations last week put proposals to Parliament for legislative changes that would give them representation on the PIC board, which is an excellent idea
In the government, defined benefit pensions are still the norm — in other words, employees are guaranteed pensions based on their final salaries, not just on contributions to their pension fund, so the fund has to make sure it can make the returns needed to fund those pensions over the long-term, as calculated by the actuaries.
In the event that the GEPF ended up without enough assets to cover its liabilities to pensioners, or the Unemployment Insurance Fund ended up with a deficit, the government would have to stand good for the money. It is SA’s taxpayers, therefore, who are at risk if the PIC is plundered or if it invests the money entrusted to it in underperforming ventures.
The prospect of plunder has been centre stage in recent weeks and months, after Finance Minister Malusi Gigaba disclosed to Cosatu that he might look to the PIC to fund the shortfalls at bankrupt state-owned enterprises such as South African Airways, with rumours that he might be looking to tap the PIC for as much as R100bn in bail-out money.
PIC CEO Dan Matjila, rightly, declined to invest in such risky assets. He was, in turn, subjected to a swirl of allegations of impropriety, prompting the PIC board to investigate but affirm its full confidence in him. Though Matjila talked of people who wanted to oust him so that they could loot the "big safe" of the PIC, Gigaba has since firmly denied any looting allegations and a truce has seemingly been declared.
The instability and allegations have at last drawn into the fray the trade unions whose members’ savings are at risk. This is a welcome, if belated, development: trade unionists should always have been active in monitoring the PIC and ensuring it delivered the required returns. That’s especially so given its expansion in recent years into unlisted "impact" investments, which are meant to be developmental and transformational — but can easily provide cover for corruption and cronyism.
Last week’s release to Parliament of a full schedule of those unlisted PIC investments provides essential checks and balances. The list bears further scrutiny, and pressure must be put on the PIC to disclose the criteria on which it makes these decisions: while some of the investments, especially in infrastructure projects such as renewable energy and toll roads, have done well, others have been spectacularly unsuccessful.
The unions and federations last week put proposals to Parliament for legislative changes that would give them representation on the PIC board, which is an excellent idea. The proposal that the GEPF should be forced to keep its funds at the PIC is less so. There is nothing in the law that requires the GEPF to use the PIC to manage its funds.
The unions should be bold enough to demand that the PIC justify why it can do the job better and look after their members’ savings more safely and with less corruption than private sector fund managers. They should be willing to switch asset managers if the PIC cannot guarantee that.
That would be the best way of hard-wiring independence and good governance at the PIC and minimising the risk to pensioners and taxpayers, and the markets.