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You can also listen to this podcast on iono.fm here.<\/p>\n
JIMMY MOYAHA: If you\u2019ve been keeping up with the events unfolding at the Public Investment Corporation, the PIC, you\u2019ll know that we\u2019ve seen even more resignations from the board or board members of the Public Investment Corporation, and these resignations have sparked concern, so much so that the [Finance] Minister, Enoch Godongwana, [has called a special general meeting] next week on Monday, 27 July, to address the concerns around the Public Investment Corporation.<\/p>\n
We\u2019re going to see if we can make sense of that, as well as some of the other factors that have been unfolding in more detail.<\/p>\n
Read (all published within the past 10 days):
PIC CEO Patrick Dlamini suspended amid whistleblower allegations
Two directors resign after FSCA launches PIC investigation
Batandwa Damoyi appointed as acting PIC CEO
Masondo reassures PIC staff amid governance turmoil
Masondo faces potential PIC ouster
Masondo out \u2013 deputy finance minister quits as PIC chair<\/p>\n
We are joined on the line by the director at the centre for Public Policy and African Studies at the University of Johannesburg,\u00a0Busani Ngcaweni,\u00a0to look at this and see what we make of it.<\/p>\n
Prof, lovely having you on the show. Thanks so much for taking the time. Definitely not an ideal situation that the Public Investment Corporation finds itself in, with a board that has all but collapsed at this point, and with a chief executive officer that has been suspended.<\/p>\n
We\u2019ve been keeping an eye on this for quite some time. From your perspective, what are your insights around how it is that we got to this particular point in the case of the PIC?<\/p>\n
BUSANI NGCAWENI: Thank you, Jimmy. Good evening to you and good evening to the listeners.<\/p>\n
This is a very unfortunate situation, Jimmy, for several reasons.<\/p>\n
One is that the size of the asset that the PIC holds in the form of the pension funds of public servants which it invests, is so big that you don\u2019t expect that we could have such fights within the board and with the executive that put at risk the ability of the organisation to safeguard these investments.<\/p>\n
It is too big in the South African economy, given the type of investments that the PIC can make.<\/p>\n
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This is a problem for the whole economy, not just for those who have pensions that have been invested there.<\/p>\n
I say this because when you have so many leaks and stories in the public domain and in social media about squabbles between directors and the board executives and executive directors it means that there is indeed a problem.<\/p>\n
The PIC is not a small SOE [state-owned enterprise] or some municipality somewhere in an obscure region of the republic. It is a very important one. We have firms who are doing asset management that depend on the PIC for their survival.<\/p>\n
We have pensioners who hope that this money being invested will accrue real interest in order to grow and safeguard their pensions.<\/p>\n
So this is just too big to fail.<\/p>\n
JIMMY MOYAHA: It definitely is too big to fail.\u00a0Prof, I want to look ahead to next week\u2019s [general] meeting. What needs to be done?<\/p>\n
What conversations need to be had around the Public Investment Corporation, because aside from the obvious fact around it being too big to fail, as you mentioned, R3.6\u00a0trillion in assets \u2013 something else that you\u2019ve touched on \u2013 certainly is something about which we need to be very careful [to ensure] that those funds are administered on behalf of organisations like the Government Employees Pension Fund.<\/p>\n
So going into next week\u2019s meeting, what important conversations need to be had here?<\/p>\n
BUSANI NGCAWENI: That meeting must be guided by a few pieces of legislation.<\/p>\n
For example, Section 76 of the Companies Act requires that every director must act in good faith and for a proper purpose.<\/p>\n
Therefore the question is: In all decisions made by the board so far, were they made in good faith and for proper purpose?<\/p>\n
It appears from some of the news that we have been reading and hearing that there is a possibility of doubt.<\/p>\n
And if that doubt does exist, it means that [risks related to] Section\u00a076(3) of the Companies Act might have increased.<\/p>\n
It [this section] further says that directors must act in the best interests of the company, and they must have the degree of care, skill and diligence that may reasonably be expected of a person serving as an executive director.<\/p>\n
So the question is, of all decisions made within the provision of government \u2013 a document which is very crucial, Jimmy, is the Memorandum of Incorporation or MoI of the PIC, because it says the management and control of the company vest with the board as a whole, not just an individual.<\/p>\n
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And so when the minister calls the meeting that he called, a special [general meeting], he will be putting to the test this particular section of the two [Companies Act and MoI]\u00a0to the extent that he will further be asking.<\/p>\n
\u2018Has the board failed to perform its duties to the company as contemplated in the MoI and in the Companies Act?\u2019<\/p>\n
Of course, there is also the PFMA [Public Finance Management Act] and several others that make it very explicit in terms of what is expected of people serving as governors \u2013 including Section 50 of the PFMA, which is very explicit in terms of what is expected of them as the governors of the institution.<\/p>\n
So what we should expect is that those who remain \u2013 the board has about five or four, give or take, who remain, out of the full complement \u2013 will then have to justify that [they] will remain competent to exercise fiduciary duty to this organisation, [regardless] of all the reports that have been made.<\/p>\n
And you must remember the CEO is also a director who was suspended, together with the previous CIO [chief investment officer].<\/p>\n
So there is a crisis, however you look at it.<\/p>\n
And if you were to put this to the test, using the provisions of the law that I have quoted, including the whistleblower framework of this very same organisation, you will see that the board will have some questions to answer.<\/p>\n
JIMMY MOYAHA: Prof, it goes beyond the board at this stage because, as you rightly mentioned, the CEO has a different set of questions to answer. The chief investment officer was the first to part ways with the PIC earlier.<\/p>\n
All of these events have unfolded in less than 150 days and that, I suppose, is a concerning factor on its own in terms of the ongoing operations of the business.<\/p>\n
We know that last week, almost this time last week, around Friday, the chair of the board, who is also the deputy minister of finance, Dr Masondo, held a townhall with PIC employees to reassure them that everything was being handled and being taken care of.<\/p>\n
If we are to go from that conversation to perhaps where we find ourselves here, and the other questions that exist beyond the board\u2019s governance capabilities, how do we deal with the internal conversations, because they affect the daily operations of the business?<\/p>\n
BUSANI NGCAWENI: Well, most certainly the boardroom politics has a major impact in the organisation from the top-most official to the remainder \u2013 all the way down to the receptionist.<\/p>\n
Because every time there are people coming in and out of the organisation, the receptionist would be worrying and thinking, what is going on now? Are these investigators? Is it the police?<\/p>\n
So it has a major impact.<\/p>\n
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There is a major impact because there are also pending decisions, remember.<\/p>\n
Some of them ought to have been certified by the board, and some of these are very critical investment decisions where people have either borrowed money \u2013 or whatever the case might be \u2013 it means those transactions will now be in abeyance.<\/p>\n
And even if you were to appoint a new board, interim or not, it will take time before these things come back to the table.<\/p>\n
So this doesn\u2019t just affect employees both senior and junior.<\/p>\n
It also affects several stakeholders outside who expect decisions that must be made by the board itself.<\/p>\n
But this tells us something which we need to look at \u2013 I\u2019m making this on a lighter note, of course \u2013 that there would be an SOE in a small municipality somewhere that would experience the same.<\/p>\n
We should expect, [as] members of the public, from a governance point of view, that an organisation as big as the PIC must have sufficient anticipatory and risk management capacity to be able to see very far \u2013 where a small village in the municipality cannot see \u2013 because their capability to anticipate, to manage the risk, will safeguard or shield the organisation under conditions like this one, where you know that if there were payments to be made, those payments will still be made, as they were supposed to be made, because they were approved to include the due process.<\/p>\n
What then happens to the investments that are supposed to be approved by a majority of board members under these conditions?<\/p>\n
Because it is untenable that the board can meet in its current form and make investment decisions currently.<\/p>\n
So into the future, what the [PIC] would be challenged to do is to build anticipatory and risk-management capabilities to be able to build those shock absorbers that will sustain [the] organisation in times like these, because it is not viable.<\/p>\n
Listen\/read: Should the PIC be placed under administration?<\/p>\n
JIMMY MOYAHA: We definitely need to have a resolution towards the Public Investment Corporation\u2019s governance concerns, and this is what we hope is achieved by the [special general meeting] that\u2019s been called by the minister.<\/p>\n
For now we\u2019ll leave this conversation on that note.<\/p>\n
Professor Busani Ngcaweni \u2013 the director at the Centre for Public Policy and African Studies at the University of Johannesburg \u2013 joined us to share his thoughts around the governance concerns at the Public Investment Corporation.<\/p>\n
#PIC #intervention #expect #Godongwanas #urgent #general #meeting #Monday<\/p>\n","protected":false},"excerpt":{"rendered":"
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