PIC inquiry gets underway with nuts and bolts of investment decisions

The commission of inquiry into allegations of impropriety regarding the Public Investment Corporation (PIC) began on Monday as senior staffers took the inquiry through the structure and investment processes of the corporation.

The wholly state-owned asset manager controls about R2-trillion in funds, the majority of which is made up of government employee pension funds.

The commission is headed by former Supreme Court of Appeal president, Justice Lex Mpati, with assistance from the former Reserve Bank governor Gill Marcus and expert Investment and asset manager Emmanuel Lediga.

They were appointed by President Cyril Ramaphosa to investigate allegations of improper conduct in the investment of the state pension funds, as well as the potential flouting of governance rules.

First on the stand was Wilma Louw, the PIC’s acting secretary who explained to Justice Mpati the different structures and reporting lines within the PIC, the legislation under which it falls and the rules regarding governance at the corporation.

Key aspects of her testimony which chief evidence leader advocate Jannie Lubbe said would be returned to at a later stage, include policies concerning conflicts of interest of key representatives; stalled changes to the PIC’s memorandum of incorporation by former finance minister Malusi Gigaba and questions regarding the production of the minutes of board meetings.

Louw said the PIC had stringent measures for dealing with actual, potential and perceived conflicts of interests. These required members to provide frequent and comprehensive disclosures of potential conflicts.

Where a conflict of interest had been identified relating to directors, full disclosure must be made timeously through the company secretary to the board, she said.

At the beginning of every financial year, directors are also required to provide a duly completed conflict of interest form.

“In addition to the annual declarations where there is a chance within their position in the PIC or their personal circumstances directors are required to disclose in writing any relevant, new or additional information about those interests as soon as possible,” said Louw.

The disclosure of declarations of interests also took place at every board meeting. Where a conflict came up the relevant board director or attendee would have to recuse himself.

Last year, United Democratic Movement leader Bantu Holomisa wrote a letter to Ramaphosa calling him to address what he described as mounting corruption at the state asset manager.

Chief among the allegations in Holomisa’s letter was the accusation that companies with connections to those inside the PIC were using their positions to secure funding for companies which would otherwise not qualify to do so.

The executive head of impact investment Roy Rajdhar outlined the different levels of due commercial, technical, financial and legal due diligence that the PIC underwent before investing in projects. Impact investments are investments that are not measured solely on profits, but have social or environmental benefits or goals. 

Rajdhar said the process would take from three months to one year, depending on the nature of the project.

Typically in a year, Radjhar said only 10% of the applications that were made for funding were approved while 90% would be declined.

“In terms of the number of transactions we would do in a year I think between the private equity and impact investments there would be between 10 and 20 transactions concluded” he explained.

Rajdhar said that although he did not have the figures, he estimated the impairment rate on the investments to be about 10%.

The asset manager has come under fire for its questionable investment decisions. Last year, the PIC wrote off R5.3-billion of government employees’ money for two of its investments, the biggest being a R4.3-billion write-off in Steinhoff’s empowerment shareholder, Lancaster and a R1-billion loss in Sekunjalo Holdings, which is owned by Dr Iqbal Survé.

Asked by Lubbe if he was aware of any impropriety by directors or employees of the PIC who had leveraged their positions in the asset manager for their own benefit, Rajdhar said: “No, I am not aware of any such impropriety”.

The commission is set to continue tomorrow with more testimony expected from other PIC employees. 



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