Matjila in focus but PIC must be in picture

Finance Minister Nhlanhla Nene issued an interesting statement on Monday afternoon in which he announced his intention to make a statement by the end of the week about his decision regarding the serious governance allegations against the CEO of the Public Investment Corporation (PIC), which manages almost R2-trillion of social funds.

Apart from brief remarks on the governance of state-owned enterprises (SOEs), Nene also made known that he has completed a review of documentary evidence on how the board dealt with the Dan Matjila saga, and that he will first have to meet the board before announcing “decisive steps” to deal with the matter and restore the public’s confidence in the institution.

Two months ago Nene asked his deputy, Mondli Gungubele, to formulate a position on the allegations of serious wrongdoing by Matjila, including favouritism, and whether disciplinary action should be taken against him and other PIC executives.

Nene’s announcement about an announcement has sparked a new round of speculation.

Insiders believe his hand has been forced to ask the board to either act against Matjila or give him a chance to fall on his own sword. Either way, two things are clear: whether Matjila stays or leaves this week, it is hard to see how he can survive much longer; and an independent review that looks beyond Matjila is unavoidable.

Previously this column has argued for a two-pronged inquiry. First to look at the organisational culture, including Matjila’s leadership style, and second, a review of all transactions for the past decade, especially possible political influence over the PIC’s investment decisions.

This remains valid, but it is also time to look beyond the individual that is Matjila and focus on the bigger picture — the governance of the PIC and its role in the economy, including whether it needs a new business model.

The departure of senior executives under controversial circumstances is merely a symptom of a broader problem concerning the culture and toxic work environment at the PIC.

Beyond Matjila, if Nene is serious about restoring public trust in the corporation, he needs to stop resisting measures that are designed to improve transparency, especially with regard to investment decisions. The public needs access to the complete list of companies the PIC has invested in. As fellow columnist Stuart Theobald has cogently argued, this information is mostly publicly available in any case, except for South Africans who have no access to trading platforms.

“My approach to the oversight of state-owned entities is that the shareholder ministry should ensure that a board of directors and management with the requisite skills and experience are appointed, and that the shareholder ministry conveys [through a shareholder compact] to the board its expectations of the public institution,” Nene wrote in part in his statement.

This is a sensible and pragmatic approach, and should be embarrassingly obvious. Pity this hasn’t always been the case when it comes to the governance of other SOEs. There’s no doubt that the board includes technically competent individuals. However, the handling of the Matjila debacle — including the shock resignation of Claudia Manning — raises the question of whether it has reached the point of dysfunctionality that has been seen at other SOEs, such as the previous SABC board.

Similarly, as part of strengthening PIC governance, and as a former PIC chairman himself when he was deputy finance minister, Nene should push hard for a change to the memorandum of incorporation to remove the requirement that the deputy minister — a politician — should be the ex officio chairman of the board.

This would be in keeping with his understanding of the role of the shareholder ministry in relation to the governance of the boards of the SOEs. A clear shareholder compact plus the power to appoint qualified board members should be sufficient to ensure that the shareholder’s wishes and mandates are carried out.

That the government is the guarantor of the funds, especially its employees’ pensions, is not reason enough to believe only a politician can safeguard its interests in the PIC. Without commenting on the suitability of current or past chairmen of the PIC, politicians generally make poor business people. Removing his deputy from the helm of the largest fund manager might be politically difficult, but it will be part of fixing SOE governance, alongside removing nonexecutive directors from adjudicating tenders.

After Matjila, the PIC should urgently review the organisational structure.

One of its biggest blunders was to allow Matjila, previously the corporation’s chief investment officer, to continue in the role when he was elevated to the CEO position.

Concentrating so much power in a single pair of hands is problematic and is probably a contributing factor in the PIC’s governance crisis. The two roles should be separated again.

THE DEPARTURE OF SENIOR EXECUTIVES … IS A SYMPTOM OF A BROADER PROBLEM CONCERNING THE CULTURE AND TOXIC WORK ENVIRONMENT AT THE PIC