Suspended PIC executives rake in millions
‘CEASED’: HAS IMPLEMENTED SOME RECOMMENDATIONS; NOW IT’S DONE
Suspended executives still earning millions.
The Public Investment Corporation’s (PIC) annual report demonstrates the impact of the Covid-19 pandemic, which sparked a global recession. This had a dampening impact on investments.
However, the pandemic should not be used to explain away the devastating impact of state capture and its direct financial cost to the PIC – and, ultimately, the Government Employees Pension Fund (GEPF) as its major client.
PIC chief executive Abel Sithole is of the view that “although the PIC has been found wanting in several areas of corporate governance and ethics, it continued to deliver on key aspects of its core client mandates”.
Strengthening governance and accountability
On 4 October, 2018 President Cyril Ramaphosa established a judicial Commission of Inquiry into Allegations of Impropriety at the PIC under Judge Lex Mpati.
The Mpati report was released in March.
The commission made many recommendations, including that full forensic investigations into allegations of wrongdoing, as well as the role played by employees be conducted and for steps to be taken to recover all monies, including interest due to the PIC.
An advisory panel led by retired judge Yvonne Mokgoro has been established to assist the board in carrying out the recommendations.
The board has, post balance sheet, introduced measures to strengthen corporate governance processes and accountability.
The revised organisational structure comprises the chief executive, chief investment officer, chief financial officer, chief operating officer, chief technology officer and chief risk officer.
The investment committee, a subcommittee of the board, is the final approval authority for investments that are beyond management’s delegated authority.
The three fund investment panels have been terminated.
The audit and risk committee has been split, and each committee is now chaired by a different board member. A risk committee has been established, and a new position, head of ethics, created.
Suspended executives still earning millions
Matshepo More, the CFO earning
R10.5 million per annum, was suspended on full pay in March 2019. Roy Rajdhar, an executive earning R7.6 million per annum, was suspended on full pay. Fidelis Madavo, the executive head of listed investments, who earned R4.9 million in 2020, was dismissed.
The PIC’s dividend policy
The Mpati report outlined recommendations for the PIC’s dividend policy: “The mandate of the PIC is to act in the best interests of its clients; it is not to maximise profits. Essentially, by paying dividends from management fees charged to the GEPF and other clients an indirect tax is imposed on PIC’s clients.”
The commission questioned how the PIC could pay a dividend of R80 million in 2018, stating: “The payment of a dividend raises the question as to whether this is being done to convey to the shareholder that the PIC is in fact functioning extremely well and is thus able to afford to pay a dividend?”
Considering that, how can the PIC justify paying a dividend of R99 million in 2020?
The PIC replied: “No comment. The PIC is currently ceased [finished] with implementing the recommendations of the Mpati commission.”
Interim results as at 30 September
The PIC’s interim results for the six months ended 30 September show a slight improvement.
The assets under management for the six months increased to R2.1 trillion.
Listed equities continue to be volatile and negatively impacted by the Covid-19 pandemic.
However, unlisted investments continue to perform badly, with an internal rate of return (IRR) of 1.87% against the end-of-fund life target IRR of 8%.