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The Interim Board of the Public Investment Corporation (PIC) today concluded its last meeting to mark the end of its tenure.

In terms of the PIC Amendment Act (14 of 2019), the Minister of Finance as shareholder representative, will appoint a new Board in due course.

The Interim Board was appointed in July 2019, at a time when the reputation and credibility of the PIC were beset by allegations of impropriety, negative public exposure and deteriorating relations with clients and stakeholders, some of which became the focus of the PIC Commission of Inquiry led by Judge Lex Mpati.

“The PIC was viewed with suspicion, with weak governance processes and open to serve only a few who were politically connected,” said Dr. Reuel Khoza, the PIC Chairman.

Over the past two years, the Interim Board had a formidable task to restore ethical conduct, review governance structures, delegations of authority, policies and investment processes, review questionable investments, institute legal recovery steps and disciplinary actions. The Board was guided in its work by the recommendations of the Mpati Commission of Inquiry and its interventions, which are discussed below, sought to directly address improprieties, lapses in governance and deficiencies in the PIC’s operational structure, as identified by the Commission.

The Board revised the PIC’s Memorandum of Incorporation (MoI) with the shareholder and introduced changes to the PIC Operating Model to remediate weaknesses caused by an overconcentration of executive power in the position of CEO. The positions of Chief Investment Officer (CIO), Chief Operating Officer (COO), Chief Risk Officer (CRO) and Chief Technology Officer (CTO) were re-introduced to the executive structure, in terms of the revised operating model. All C-Suites positions have been filled except for the CIO position. The changes to the PIC Operating Model are in line with reviewed client mandates.

“Assets under Management (AuM) by the PIC grew by almost R440 billion to R2.339 trillion by 31 March 2021, in line with the recovery in the global economy and financial markets. Importantly though, the PIC’s relationship with its clients and stakeholders, especially regulators, has improved considerably which is attributable to constant open communication on strategic matters and standardized biannual meetings with all major clients at governance level above the regular operational engagements,” reflected Dr. Khoza.

For the Interim Board, the following key performance areas attest to the degree of progress made over the past two years in respect of governance, improving the investment decision process and internal controls:

Strengthening Governance

From 2019 the PIC conducted a review of Policies and Standard Operating Procedures across the organization to strengthen governance and compliance. It included Investment and Corporate activities. Some 80 internal policies and procedures are being reviewed with 90% of proposed changes having been approved. 

The separation of duties in management was introduced (demarcation and alignment of C-suite responsibilities and that of executive heads) to avoid the concentration of executive power and improve levels of accountability.

The Social and Ethics Committee’s (SEC) function was enhanced to include monitoring the implementation of enterprise-wide transformation in 2019. The SEC was renamed as SETCO (Social, Ethics and Transformation Committee) and the Terms of Reference of the Committee were reviewed to include the monitoring of transformation.

The PIC established a working relationship with the Ethics Institute and developed an ethics strategy and ethics management plan. Both were approved, together with a Code of Ethics for the PIC. The Board established an Ethics Office in 2020 to build on this foundation. 

A new investigation model was approved, in terms of which Internal Audit ensures that all whistle blower reports are investigated independently.

Strengthening Investment Processes

Investment processes are now overseen and implemented by the (acting) CIO whilst investment operations are overseen and implemented by the COO. Overall operations are overseen and implemented by the CEO.

The anomalous reporting structure between the Portfolio Management Committee (PMC) and Executive Committee (Exco) on investment decisions has been eradicated to ensure independent oversight, risk-evaluation, and accountability.

The PMC now reports to the Investment Committee (IC), a sub-committee of the Board. The IC now comprise of two committees – for listed and unlisted investments – to specifically address long delays in the unlisted investment selection process. Independent experts have been appointed to the IC to assist it on technical matters and to strengthen dialogue around the incorporation of ESG (Environmental, Social and Governance principles) into investment processes.

The inefficient substructure of different Fund Investment Panels (FIPs) has been collapsed into a single, separate Investment Committee for all unlisted investments. A Turnaround Business Unit was established for all unlisted investments to provide strategic focus on distressed investments.

“A perception existed previously that no investment proposal would be accepted unless it came through specific ‘gatekeepers’ within the PIC. Any investment proposal can be submitted via the PIC website and all investment proposals follow approved processes and are decided by established governance structures. No single individual in the PIC has powers to approve investments,” Dr Khoza stated.

Full Statement Attached

Issued by PIC Corporate Affairs