Brian Molefe personifies the activist new leadership of the Public Investment Commission that has forced the PIC to centre stage in the past 12 months.
For years the PIC was the dozing giant of asset management, socking away billions of rands in government pension money and keeping a low profile. But that has changed dramatically.
The PIC’s official mandate looks straightforward enough: the Government Employees Pension Fund (GEPF) gives the commissioners a mandate to invest in bonds, equities, unlisted companies and infrastructure projects. But the scale of the operation, and its potential to influence the economy, make the reality a good deal more complex.
Seconded from the National Treasury to take control of an understaffed and rudderless organisation, PIC CEO Molefe has set about making it more professional and efficient. But he has also turned it into a confident — some say over-confident — player in the ongoing restructuring of corporate South Africa.
With R400-billion under management, and roughly R150-billion invested in the JSE Securities Exchange — almost 10% of its total capitalisation — the PIC has serious muscle in South Africa’s biggest companies. Molefe is making it increasingly plain that he is not afraid to use it.
The most recent display of force came over Sasol’s refusal to appoint the PIC’s nominee, Imogen Mkhize, to its board. That tiff, which saw Sasol climbing down quickly as the political cost of intransigence became clear, encapsulates Molefe’s two primary battles with listed companies: over empowerment and corporate governance.
Sasol is still overwhelmingly white, and the PIC felt its 13% share entitled it not just to suggest that more attention be paid to equity, but to fill a board seat with a candidate of its own.
“Transformation is the challenge of the moment,” Molefe says. “But we also focus on other corporate governance principles — separating the chairmanship from the CEO’s position, limiting the discretion of the board over share issues, leave for directors — we’ve consistently voted on these issues.”
He says Bidvest’s Brian Joffe, long opposed to separating the roles of chairperson and chief executive, changed his mind after persistent pressure from the PIC. Joffe handed the chairmanship to Cyril Ramaphosa in July, retaining the CEO role for himself.
Perhaps the most dramatic move yet by the commissioners came last month, when Molefe swooped in to snap up the 15% stake in Telkom that Elephant, an empowerment consortium led by former director general of communications, Andile Ngcaba, was about to buy. The announcement that the PIC would “warehouse” the shares for Elephant while funding arrangements were worked out led to an outcry from unions — notably the Congress of South African Trade Unions (Cosatu) — which accused the PIC of “greasing the wheels” of elite empowerment.
Molefe is unmoved by the criticism.
“For me, as a money manager, I think we’ve done very well. We bought at an average price of R78. I don’t think any pensioner should complain.”
Telkom shares are now at about R95, and the comment suggests that “warehousing” is too passive a description of the PIC’s intervention. If the shares are sold back to Elephant, the PIC will take profit on the deal.
“Obviously we should be compensated for taking the risk, but we’ll negotiate with these guys,” Molefe says.
The intensity of Cosatu’s criticism, however, reflects a relationship that has become increasingly fraught since the move to corporatise the PIC and hive it off from the National Treasury gained momentum.
Molefe says that on March 31 next year the commissioners will be no more. On April 1 the Public Investment Corporation will come into being, freed of government pay scales, to build a bigger, more sophisticated asset management operation.
The primary issue for now, however, is the mandate the commissioners get from the GEPF, and the blurring of lines between the two bodies.
Minister of Finance Trevor Manuel is currently the sole trustee of the GEPF, and both Cosatu and the predominantly white Federation of Unions of South African (Fedusa) complain that this means workers have no say in how their retirement funds are invested.
Cosatu also objects to the fact that that the National Treasury insists on fully funding pensions, suggesting that a “pay as you go” or partial funding model be adopted. This would cost less in the short term, freeing up funds for social delivery, the federation told Parliament’s finance committee this year.
Molefe professes to be bemused by both claims. “Unions have been entitled to appoint trustees since 1997. They complain that their trustees are not appointed, but they have not exercised their responsibilities. If they had a real problem, why didn’t they take it to court?”
In any event, he says, the new board of trustees will soon be in place, featuring substantial union representation.
As for pay-as-you-go, Molefe is outright dismissive. “That’s the European approach, and it’s a disaster. The system is on the verge of collapse.” He points to the fiscal crisis in Germany, where an ageing population is making it increasingly difficult for the government to meet its pension commitments.
The irony of the battle with Cosatu — where Molefe is disliked — is that the union body strongly believes government pension funds should be used to advance national development goals, particularly through investment in infrastructure projects.
Union officials have told the Mail & Guardian they would not have objected to the Telkom deal if the PIC had committed itself to hanging on to the stake in order to exercise more leverage over the monopoly.
Officials at the commission privately say they are frustrated with what they see as labour’s failure to see shared strategic objectives.
A more subtle response could create space for the PIC to act in ways that would suit Cosatu better, one official said. “They are spending too much energy fighting the [African National Congress] instead of capital, and confronting the challenges about the role of capital that confront all of us.”
Molefe would not go that far, but did say “the PIC is not the enemy of the workers”.
Many in the government do see an expanded Public Investment Corporation as a crucial lever to bring policy choices to bear on big business. But Molefe insists that any convergence of positions is coinci- dental. “The Public Investment Commission does not vote on government positions,” he says.
Why, then, does his approach to empowerment — that it is essential but needs to be conceived more broadly — chime so well with Manuel’s?
“Coincidentally, it is a position we both feel is correct,” he says. “The PIC has a board of seven members, six of whom are independent accountants and lawyers.”