EDITORIAL: PIC’s rebuke of CEO a welcome sign

It’s hard to overstate the importance of the Public Investment Corp (PIC) in the South African market. 

At 112 years old, the PIC remains the custodian of the pensions of all government employees, with an immense R2.54-trillion in assets. Part of this is invested on our local stock exchange, and the PIC holds about 11% of all the stock on the JSE. As a result, few weighty decisions are made in boardrooms without considering the PIC.

Given this vantage point, it ought to be a role model for other asset managers and companies in how it behaves. This is partly why the PIC was put under such an onerous microscope at the Mpati commission so that, having gone through that process, it could legitimately claim to have overhauled its governance. 

Which is why last week’s statement by the PIC’s own board, admonishing CEO Abel Sithole, was so disturbing.

At the centre of this issue was a lawsuit brought by the PIC against Iqbal Survé’s Ayo Technologies for R4.3bn, on the basis that Ayo had made “misrepresentations” to induce the PIC to invest that amount five years ago. 

Yet in late March, the PIC abruptly reached a “settlement” with Ayo, saying the terms would remain “confidential”. It took less than a day for those terms to emerge in the Daily Maverick, which revealed that the PIC would get R619m, retain 25% of Ayo, plus retain a right to sell another 5% back to Ayo for less than half what it paid.

As the FM argued, this was hardly a victory for the PIC’s pensioners. And for an organisation aiming to rebuild trust, trying to hide this detail from its clients was pretty much the worst way to go about it.

Last week the PIC board, chaired by deputy finance minister David Masondo, released a statement on the matter, revealing that Sithole’s management hadn’t bothered to tell them about the settlement either. 

“The board expressed its concern to the PIC management team for neglecting to timeously inform the board of its intention to settle,” the statement said.

“The PIC’s management has a duty of care to protect the company’s integrity and reduce the risk of reputational damage — this includes the responsibility of management to timeously inform the board of intended settlements.”

Though it was “deeply concerned” with how Sithole’s team handled this, the board nevertheless said the settlement was justifiable commercially as it sought to salvage value from a questionable investment.

In the end, the board issued a warning to Sithole about how this was handled. Masondo added that “good governance, appropriate transparency, accountability and integrity should be principles embedded in every decision the PIC makes”.

If that’s the barometer, it’s clear Sithole’s handling of the Ayo settlement doesn’t even come close to making it. But then, this is an organisation which, despite its vaunted position in the corporate landscape, remains painfully media shy and has ignored repeated requests from the FM for an interview. 

Masondo’s board, by contrast, has lit the way. 

Few other company boards are willing to be transparent about their disagreements with their executive. But by reiterating the principles the PIC should aspire to and admitting where it had fallen short, Masondo’s board has illustrated that it’s not going to cover up shoddy behaviour. 

It was necessary. Had the board not taken this hardline approach, it would have made it far more difficult for the PIC to insist on anything remotely resembling good governance at the companies in which it invests.