PIC inquiry: Corruption or sheer incompetence?

An inquiry into accusations of impropriety at the Public Investment Corporation (PIC) kicked off this week in Pretoria as Africa’s largest asset manager seeks to clear its name. Chaired by the retired president of the Supreme Court of Appeal, Justice Lex Mpati with assistance from Emmanuel Lediga and the former SA Reserve Bank governor Gill Marcus, the inquiry will look closely at how investment decisions are made and whether allegations of corruption that date as far back as 2015 have any substance.

In what might be considered ambitious, the inquiry not only has to probe whether the PIC’s policy between January 1, 2015 and August 31, 2018 yielded undue benefit for any PIC director but also must establish if the asset manager’s investment decisions were simply a manifestation of an incompetent board.

The inquiry, which was announced by President Cyril Ramaphosa in August 2018 kicked off to a relatively slow start (by South African inquiry standards) with the acting secretary, Wilna Louw first to take the stand. Her testimony took listeners on a walk through the PIC act, vision and its history. However, her testimony was marred by an admission that she did not know the Charles River asset management system (which is the system the PIC uses) despite having been at the PIC since September 1996.

Questions have been asked about the PIC’s processes following questionable investments into Sekunjalo, Erin Energy and Ayo Technology Solutions. This prompted a question on the hiring process at the PIC. Gill Marcus wanted to know how the board was composed. Were there instances where the cabinet had proposed names or rejected names that had been proposed? “The [finance] minister can exclude some of the PIC’s nominations and include some of his own nominations,” confirmed Louw. “We can propose but at the end of the day, the board does not have any say in who is appointed.”

The next testimony changed tune with Roy Rajdhar, the  executive head of impact investment at the PIC unpacking the investment process that leads to the final investment decisions.

As the testimony went on, gaps in the PIC’s operational model became apparent. Rajdhar explained that the PIC receives applications for finance through various channels, which could be unsolicited applications or referrals. He confirmed that the majority of applications were unsolicited. The admission coupled with Louw’s earlier confirmation that the board does not have a hand in board appointments, would imply that the minister could easily appoint someone to the PIC board to specifically oversee the approval of an unsolicited application.

In the coming days, the PIC will also have to address queries around limits to how much a company can request from the asset manager in the form of repeated fund capitalisation. It has been suggested that the PIC repeated preferential treatment for certain companies.

Meanwhile, President Ramaphosa insisted the commission must submit an interim report to him no later than February 15, 2019 with a final report due no later than April 15, 2019.

Listen: Inquiry into governance at the PIC kicks off