PIC CEO has too much power, inquiry hears

The merger of the chief executive and the chief investment officer roles at the Public Investment Corporation (PIC) was a centralisation of power that exposes the PIC to huge risk, the Mpati commission into the state owned asset manager heard on Monday.

Giving testimony before the commission, former board member Vuyo Jack, who was integral in attempting to improve the governance and oversight structures of the PIC, said there were no principles on which consolidation of the two roles could be justified.

He said this meant there were no “checks and balances” in place which are necessary for every investment process.

“You need to have a segregation of duties because not all of us have the wisdom of Solomon, so we do need to have others with different points of views [in order to] have stronger decisions coming out,” said Jack.

The two executive roles were combined when Dan Matjila was appointed PIC chief executive in 2014. This after he had served as the chief investment officer since 2005.

The structure is in contrast with practice by private sector fund managers where the chief executive role is mainly administrative and has limited influence on investments. Previous testimony at the commission highlighted how the controversial R4.3-billion Ayo deal had come from Matjila’s office.

Despite concerns raised by employees regarding Ayo being overvalued Matjila “exercised [his] authority as CEO” and signed off the subscription agreement to buy shares in Ayo before due process was completed and the requisite committee could approve the deal, according to testimony from an official who worked closely on the transaction

One of the terms of reference of the commission headed by retired Judge Lex Mpati involves looking at the current governance and operating model of the PIC to determine if it is the most effective and efficient model.

Evidence Leader Jannie Lubbe highlighted how the merger had practically and effectively left two people at the apex of the executive, namely the chief executive and chief financial officer. The role of the chief operating officer was also scrapped.

Jack said due to the conflict of power between the chief executive and investment officer that the PIC had experienced in the past, merging the two roles and concentrating the power in one individual’s hands was probably seen as a pragmatic solution.

But, Jack said it was not the best design to have accountability and longevity within the PIC which “exposes the organisation to huge amounts of risk”.

“One of the key lessons we have learnt in this country is don’t design structures based on people, design structures based on what is in the best interests of the organisation.

“It can be anyone who can occupy that position, you need to go beyond the issue of personalities,” he added.

The PIC’s structure as it stands — with the dominant roles of the CEO and CFO – also hampers proper succession planning because if the two people leave the organisation there will be a loss of institutional memory.

Jack also questioned the tradition of appointing the deputy finance minister as the chairperson of the board saying the continued practice did not mean that it was correct and it only served of further open the PIC to political influence.

“I do not see any reason from sound economic and governance principles that this position would enhance the governance and returns of the PIC,” Jack said.

The commission continues on Tuesday.

Subscribe to the M&G for R2 a month

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

And for this weekend only, you can become a subscriber by paying just R2 a month for your first three months.

Tebogo Tshwane
Tebogo Tshwane

Tebogo Tshwane is an Adamela Trust financial journalism trainee at the Mail & Guardian. She was previously a general news intern at Eyewitness News and a current affairs show presenter at the Voice of Wits FM. Tshwane is passionate about socioeconomic issues and understanding how macroeconomic activities affect ordinary people. She holds a journalism honours degree from Wits University. 

Related stories

Covid-19 causes Acsa to dust off its begging bowl

The SOE has asked the government for R3.5-billion in extra support over the next three years to offset losses incurred because of the pandemic

More arrests expected in the R2.3bn VBS heist

Prosecutors tell the court that more people will be charged and additional charges will be added to the seven accused in a new charge sheet

Justice department hit by a costly cyberattack

The theft of R10-million from the Guardian’s Fund account prompts the justice department to freeze all accounts until an audit can determine the extent of the damage

Ace pulls diplomatic strings for Steinhoff-linked pal

If the ANC general secretary has his way, Ithala chair Roshan Morar could soon be an ambassador

All agree: Use pension funds

The state wants to increase spending on infrastructure to drive economic recovery, and South Africans’ savings could help foot the bill

ANC wants pension funds to finance infrastructure build

The party released its plan for the reconstruction of the country’s post-coronavirus economy on Friday. This would involve changes to Regulation 28 of the Pension Funds Act

Subscribers only

ANC: ‘We’re operating under conditions of anarchy’

In its latest policy documents, the ANC is self-critical and wants ‘consequence management’, yet it’s letting its members off the hook again

Q&A Sessions: ‘I think I was born way before my...

The chief executive of the Estate Agency Affairs Board and the deputy chair of the SABC board, shares her take on retrenchments at the public broadcaster and reveals why she hates horror movies

More top stories

DRC: Tshisekedi and Kabila fall out

The country’s governing coalition is under strain, which could lead to even more acrimony ahead

Editorial: Crocodile tears from the coalface

Pumping limited resources into a project that is predominantly meant to extend dirty coal energy in South Africa is not what local communities and the climate needs.

Klipgat residents left high and dry

Flushing toilets were installed in backyards in the North West, but they can’t be used because the sewage has nowhere to go

Nehawu leaders are ‘betraying us’

The accusation by a branch of the union comes after it withdrew from a parliamentary process

press releases

Loading latest Press Releases…