EDITORIAL: Political hand casts a shadow over PIC Act
The reform job is 90% done but there is a glaring flaw: now it is law that a deputy minister is chair of the board
The Public Investment Corporation (PIC) Amendment Act was signed into operation by President Cyril Ramaphosa last week. It had sat on his desk for so long — ever since it was passed in early 2019 — that he had run out of time to delay it any further. The president cannot send a bill back to parliament or fail to sign it once passed unless he has a constitutional reason, and he did not.
And so it was signed, bringing into force transparency and accountability that had been strongly resisted by the PIC and also to some extent by the Treasury. The asset manager, which manages about R2.1-trillion in government pension and social funds, will now have to publish on its website all transactions in the unlisted space, which previously it did not have to disclose.
It was here much of the malfeasance that was to derail the PIC took place and where shady deals to the politically connected were done, often at a loss to the corporation. Under the new act it will need to report annually on “significant transactions” to the finance minister that require approval in terms of the Public Finance Management Act and consider “certain guidelines when investing deposits” on behalf of its members.
The PIC will need to get mandates from its clients before investing, the biggest of which are the Government Employees Pension Fund and the Unemployment Insurance Fund.
The composition of the board will also change with three trade union representatives, selected jointly by public sector unions, on the board for the first time.
But the amended act has one large flaw and it might be this that gave Ramaphosa pause: it introduces a provision that the board of directors be chaired by a deputy minister appointed by the finance minister. Even though, by convention, the PIC board has been chaired by the deputy minister of finance ever since it was separated from the Treasury and corporatised, this was not embedded in the law. Now it is.
Having watched the integrity of the PIC unravel before our eyes, first due to some very good investigative reporting by the independent outfit amaBhungane and then before the Mpati commission from 2019 to 2020, the perils of political meddling in the PIC have been plain to see. With that much money — now more than R2-trillion — all in one place, the last person you want to put in charge is a politician.
As the point of overhauling the legislation was to clean up governance at the PIC and take power out of the hands of politicians, how did this perverse development occur?
As revelations about the PIC grew both the DA and Cosatu sought to change the law. The DA brought a private member’s bill proposing many of the changes above, with the exception of the politically appointed chair. The ANC dropped the DA bill and drew up its own, very similar, which had the support of Cosatu.
The bill was processed in record time in early 2019 to meet the deadline of the end of the parliamentary term. Legislation that is not passed by one parliament must be reintroduced from scratch by the next one. But at the very last minute the ANC parliamentary caucus realised just what it was relinquishing. An 11th-hour intervention inserted the politically appointed chair provision into the bill just as it passed through the National Council of Provinces.
Finance minister Tito Mboweni, who had just come into the role, was furious and tried to stop it, but to no avail.
What we have now is a job that is 90% done, but the door to political interference still stands open. Advocates of transparency and opponents of corruption will need to remove this last problem by introducing a new amendment bill. But should they do so, the entire act will again be on the table for amendment. They might not want to take that chance soon.
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