PIC was warned against state capture, inquiry told

The board of South Africa’s Public Investment Corp. was put on red alert two years ago by then-finance minister Pravin Gordhan who warned that Africa’s biggest money manager may be targeted by government–linked corruption that was sweeping the country, a board member told an inquiry.

The firing of Gordhan and his deputy Mcebisi Jonas by then-President Jacob Zuma at the end of March 2017 “was cause of great concern for me because the perceived risk of potential state capture of the PIC increased significantly,” Sandra Beswick said Wednesday in the capital, Pretoria, at hearings of an ongoing commission of inquiry into allegations of mismanagement and corruption at the PIC.

At an annual general meeting, before Gordhan left, he warned the board against state capture, a local term for the use of political connections to secure appointment of allies to key state posts and win contracts, and asked them to be vigilant and diligent in protecting the company, Beswick said.

Having joined the board in late 2015, she is among the nine directors who offered to resign en masse earlier this month from the PIC, which invests on behalf of the Government Employees Pension Fund and manges more than R2 trillion ($144 billion) in assets. The board offered to stay on until a new one is found.

Exacerbated fears

The appointment of Malusi Gigaba and Sifiso Buthelezi to replace Gordhan and Jonas respectively, “exacerbated my fears of state capture of the organization and the importance of maintaining my fiduciary duties,” Beswick said.

All board and committee meetings were suspended until Gigaba had familiarised himself with the PIC and Beswick “considered this as highly irregular from a governance perspective because a company can’t operate optimally without a functioning board.” Meetings only resumed three months after Gigaba’s appointment, she said.

President Cyril Ramaphosa set up the commission in October after a whistle-blower made allegations of wrongdoing, most notably against then-CEO Daniel Matjila. Chaired by former Supreme Court of Appeal President Judge Lex Mpati, its job is to investigate and make recommendations on the validity of the accusations. It will also rule on whether any legislation, PIC policy or contractual obligations have been broken and resulted in undue benefit for any director, employee or their family members.

The board only offered to step down on February 1 after the PIC chairman told them that finance minister Tito Mboweni had instructed it to do so, she said.