South Africa’s finance minister is preparing to appoint a new board to the continent’s biggest asset manager, in an effort to salvage the reputation of an institution tarnished by allegations of political interference in its investments.
The board of the state-owned Public Investment Corporation, which manages $145bn of assets mostly on behalf of the government employee pension fund, resigned en masse this month following claims from a whistleblower that four of its nine members were involved in wrongdoing.
In their resignation letter the directors complained of a “concerted effort to discredit the board” of the PIC, saying the allegations against them were part of “an attempt to bring the institution into a state of paralysis”. Those who quit included Mondli Gungubele, finance minister Tito Mboweni’s deputy who served as PIC chairman. They remain as directors until a new board is appointed.
The resignations have compounded a governance scandal at the institution that controls more than a tenth of Johannesburg’s stock market through stakes in listed companies and manages the pensions of millions of civil servants, teachers and nurses. The PIC has significant shareholding in Naspers, the internet company, and mining group Anglo American.
Dan Matjila quit as PIC chief executive in November and denied leaked claims that the institution invested in deals involving politically connected figures in the ruling African National Congress. “I have never been partisan nor leaned towards any faction of a political party,” he said in his resignation letter.
An inquiry into the PIC ordered by President Cyril Ramaphosa has begun.
The PIC, which has over the past decade delivered double-digit annual returns for its biggest client, has been well respected in South Africa.
While many state institutions crumbled or were corrupted during the presidency of Mr Ramaphosa’s predecessor, Jacob Zuma, the PIC was not part of the biggest scandal, which involved the influence of the Gupta business family.
However, the PIC is nursing losses including Steinhoff, the retailer that collapsed in an accounting scandal. The inquiry set up by Mr Ramaphosa has also examined the backing the PIC gave to Iqbal Survé, a media mogul with ties to allies of Mr Zuma, through transactions such as buying up an alleged grossly overvalued share issue. Mr Survé denies wrongdoing.
Analysts say such involvements show the PIC’s inability to properly scrutinise deals at board level, particularly given its chairman is a government official.
“The voice of the politicians is far more prominent than it ought to be” at the PIC, said Khaya Sithole, an independent financial analyst and chartered accountant. “It is inevitable that politically influenced deals come to the table. If you administer two trillion rand, you will get a lot of requests, including from the politically affiliated.”
Politics is, however, bound up in the PIC’s mandate, which includes an objective to support the state’s development goals, such as rebalancing one of the world’s most unequal societies from the legacy of apartheid.
Some deals initiated by the PIC were geared to backing black entrepreneurs in the mostly white-owned economy. Underwriting Mr Survé’s media empire, which Mr Matjila once said was aimed at building a black-owned Naspers, was seen by some in the business community as blurring the lines of the mandate.
The PIC also in effect became lender of last resort to ailing state-owned companies. It is a large lender to Eskom, the power monopoly whose heavy debts threaten to overwhelm state finances. It raised its exposure even as Eskom’s credit rating tanked in recent years, the inquiry into the PIC heard recently.
Mr Mboweni is expected to submit recommendations for the new PIC board to South Africa’s cabinet next week.
Mr Sithole said the new intake must be “corporate in nature, rather than political. If you decide you want to pursue a dual mandate, you also need to accept the consequences of that.”