Editorial: PIC's first duty is to the public
Investments and bail-outs by the increasingly activist Public Investment Corporation are incongruous with its role as protector of retirement funds.
The lead story in this week's Mail & Guardian can only strengthen concern that the increasingly activist Public Investment Corporation (PIC) is more interested in serving South Africa's political elite and its pals than in protecting the retirement funds of government employees. No less a voice than the Financial Times expressed this view this week, commenting that "the PIC at times struggles to shed the perception that political considerations as much as financial ones guide its investment decisions".
In recent months, the PIC has ignited controversy by, in effect, scuppering a Chilean corporation's bid for Adcock Ingram, apparently on noncommercial grounds; throwing its weight behind Iqbal Survé's bid for the Independent Media Group, a high-risk investment; and may help the politically connected Daphne Mashile-Nkosi to buy out ArcelorMittal's share of her mining company for close to R4-billion, seen by industry players as overvalued.
This week, we report that the PIC plans to put R3-billion into Camac, a company owned by controversy-dogged Nigerian-American Kase Lawal. There are good reasons for questioning this deal. Camac appears to be in deep trouble, as indicated by a recent company report warning of "doubt about [its] ability to continue as a going concern", as well as a report by its independent directors noting a lack of interest on the part of other companies and Camac's limited prospects. From Lawal's viewpoint, the PIC's bailout is heaven-sent. His track record should have set off alarm bells.
In 1999, his private company, registered in the secrecy haven of the Cayman Islands, made off with the government-to-government oil allocations Nigeria had awarded to South Africa. The supposed beneficiaries – the South African people – got nothing. In a separate matter in Nigeria, he faced charges of illegally pumping oil and depriving the government of royalties, though this does not seem to have come to trial.
There must be suspicion that the PIC is pandering to ruling-party politicians. The 1999 oil scam seems to have been pulled off with the help of former president Thabo Mbeki, whom Lawal is known to have schmoozed. He has also made it his business to cosy up to President Jacob Zuma, contributing to his education fund and apparently helping him to land an honorary doctorate from a United States university.
The PIC justified torpedoing the Adcock Ingram sale by saying that the bidder was a family business and this posed corporate-governance concerns. How does it then explain its support for Camac, a Lawal family undertaking that poses obvious governance risks?
There are both ideological and practical arguments for the progressive shift in the pattern of PIC's investments since 1994, from government bonds to equities. The M&G has no objection in principle to the PIC spreading its wings offshore and specifically in Africa, where accelerating economic growth offers many opportunities. But propping up foundering businesses and serving as a piggy bank for ANC comrades cannot be its primary goals. Ninety percent of the PIC's assets come from the retirement savings of government employees. Its overriding responsibility is to look after them.