/ 12 March 2019

State asset manager losing skilled investment professionals, PIC commission hears

The PIC commission
The PIC commission, headed by retired Judge Lex Mpati, is investigating issues of impropriety at the state asset manager.

The Public Investment Corporation (PIC) — which manages over R2-trillion in government pensions — is struggling to retain skilled investment professionals due to non-competitive salaries and management meddling in investments.

During his testimony before the PIC Commission, Lebogang Molebatsi, a general manager of listed equities, said he found it “heartbreaking” when highly skilled investment professionals — recruited from the private sector — left the institution.

Coming from the private sector Molebatsi said he, along with other officials, wanted to make the PIC competitive with private asset management firms. Instead, they had to contend with not being “incentivised as they should be and are subjected to things that their peer groups in the private sector are not subjected to”.

“If you had to ask me as a general manager what is the biggest risk that I am facing now, it is largely the large loss of key skills in the team,” Molebatsi said.

The PIC commission, headed by retired Judge Lex Mpati, is investigating issues of impropriety at the state asset manager.

On Tuesday, Molebatsi detailed how the investment team was put under pressure to work on a R3-billion Sagamartha Technologies transaction, not even a month after the PIC had made a controversial investment in Ayo Technology Solutions. According to documents before the commission, both companies fall under Sekunjalo Investment Holdings is ultimately controlled — through a family trust — by media owner Dr Iqbal Survé.

READ MORE: Sagarmatha, Survé’s perilous peak

Molebatsi testified he had raised concerns about several aspects of Sagarmatha’s investment case, including the company overvaluation of its stock. The PIC’s team had valued it at R7.06 which was significantly lower than Sagarmatha’s asking price of R39.62. The e-commerce company also wanted to use some of the money it would raise in the public offering to buy Independent Media which has a R1-billion loan with the PIC.

“This would in effect mean that the exit of the PIC [from Independent Media] would be funded by the PIC,” Molebatsi explained.

Molebatsi said while these issues were raised with Matjila as well as Fidelis Madavo, the executive head of listed investments, it was clear from the engagements that Matjila wanted this transaction to go through.

READ MORE: PIC liquidated stocks to finance R4.3bn Ayo investment

He said there needs to be a segregation of duties at the PIC — as is stands the chief executive role currently assumes the responsibilities of the chief investment officer (CIO) after Matjila restructured the organisation when he was appointed chief executive.

“[The investment professionals] must be given the right to apply their minds using best practice and investment principles within the risk framework and certain parameters and then be held accountable on the returns and lack thereof of their decisions,” Molebatsi said.

He explained that the chief executive role is normally focused on operations, while the chief financial officer is a finance role. The CIO role meanwhile, would be concerned with investment returns and holding investment professionals to account.