"The ACDP, like others including various political parties, trade unions and state pensioners, has been extremely concerned by the revelations over the past year of suspect investments in which the Public Investment Corporation (PIC) was involved, particularly in Ayo Technology. These revelations are being investigated by a commission of inquiry chaired by retired judge Lex Mpati.
There can be no doubt that there is an urgent need to strengthen corporate governance, accountability and transparency at the PIC. The PIC is the largest asset manager in Africa and the single largest investor on the JSE. It is tasked with investing pensioners’ funds held in the Government Employees Pension Fund.
It is important to note that as public sector employees have a “defined benefit” pension fund, if the PIC makes losses that reduce the pension benefits of employees, it is the national fiscus that will have to make up the loss. At present, the PIC has no board following the resignation of the board last week. This adds to problems experienced by the PIC at present. Hence this amendment Bill.
The DA’s private members Bill covered many of the issues covered in this Bill, but went further to protect investors’ rights. This the ACDP supports. We are concerned about the role of the deputy minister as chair of the PIC’s board, given evidence even heard earlier today, as to how the deputy ministers were “very belittling” and “accusatory” - how board members felt “ambushed and attacked”. We agree that the PIC chairperson should be appointed through a public nomination process to insulate it from political interference.
The present Committee Bill is said to strike a balance between those wanting specific investment criteria and those arguing that the interests of depositors should be overriding. There are no longer prescriptions on PIC investments, only guidelines. Surely the interests of depositors should be overriding, given that the GEPF is a “defined benefit” pension fund.
We all know that the national fiscus is operating under severed financial constraints. There can be no risks in investments which, if a loss is incurred, would have to be reimbursed by the fiscus.
The latest version of the Bill states that the PIC “must seek” to invest in projects which further the developmental objectives of the country - while also saying that the PIC must invest in projects that will benefit investors and must act in accordance with their instructions. It is uncertain how this balance will be achieved, and whether investors’ interests will be sufficiently protected - given the startling revelations of wrongdoing already in the public domain.
A further issue much debated was whether the PIC should provide housing loans to the members of the GEPF who are in the “missing middle” - with an income too high to qualify for state housing and too low to qualify for a loan from a financial institution. This matter will be dealt with by the GEPF in terms of the Pensions Funds Act.
While this Bill goes some way to protect investors’ interests, the ACDP believes that greater safeguards can and should be included. We do, however, appreciate that this Bill is the first phase of improving governance, accountability and transparency at the PIC, and that there will be a further review of the legislation depending on the recommendations of the Mpati Inquiry.
I thank you.”
ISSUED BY: STEVE SWART MP
26 February 2019