The Public Investment Corporation (PIC) is now required to receive a mandate from its depositors regarding how its funds are managed.
The fund manager is the largest asset manager in Africa, managing more than R1.9 trillion in assets, the majority of which are government pensions.
According to the PIC Amendment Act, which was signed into law by President Cyril Ramaphosa on Monday, the fund manager is also required to publish and submit a report on all investments to the minister of finance for tabling.
The Act also stipulates that the finance minister must table a report annually to Parliament on all investments of deposits and request approval of any significant transactions in line with the Public Finance Management Act (PFMA)
The PIC Amendment Act aims to strengthen accountability and transparency at the fund manager, following revelations at the Mpati Commission that it had been involved in a number of suspect investments, including its billion-rand investment in Iqbal Survé-linked Ayo Technology.
While the Mpati Commission’s terms of reference did not not include the Government Employees Pension Fund (GEPF) and the Unemployment Insurance Fund (UIF), the inquiry found that the PIC’s former management did not inform the two organisations on some crucial investment decisions.
With regards to the PIC’s disastrous R4.3-billion in Ayo, PIC CEO Abel Sithole (who was the GEPF’s principal officer) told the commission that the PIC did not involve or inform the GEPF when it considered and made the investment in Ayo, nor did it highlight the investment in its subsequent reporting to the GEPF, but only responded when the GEPF began asking questions.
This was in contravention of the R2 billion cap on the amounts the PIC could invest in a single asset without approval by the GEPF.
The newly-signed law also requires the PIC to have three board members selected by organised labour in the Public Service Collective Bargaining Council. Labour federation Cosatu has welcomed this move as it will be the first time in the fund manager’s history that workers are represented on the board.
“Whilst there is no silver bullet in the fight against corruption, the PIC Amendment Act will be a critical tool in the hands of workers, Parliament, and the public,” said Cosatu.
“It will help ensure that workers’ monies are invested to protect workers’ hard-earned pensions. It will also support job creation and economic development and not simply be used to fund the pockets of crooks through get-rich-quick schemes.”
The government representative on the PIC’s board will still be decided by the minister of finance, however the amendments to the Act stipulate that the minister, in consultation with the cabinet “may designate the deputy minister of finance or any deputy minister in the economic cluster” to be appointed as chairperson of the board.
The PIC has since implemented some of the Mpati Commission’s recommendations, including revising its organisational structure which comprises the chief executive officer, chief investment officer, chief financial officer, chief operating officer, chief technology officer and chief risk officer. The Investment Committee (IC), a subcommittee of the board, is now the final approval authority for investments that are beyond management’s delegated authority.
In a statement on Wednesday, Sithole said: “Ultimately, the PIC is accountable to its clients and their beneficiaries and to the government as shareholder and guarantor of its clients. The new legislation provides for greater oversight by all stakeholders.”