New PIC Amendment Act aims for more transparent investments
THE PUBLIC Investment Corporation (PIC) Amendment Act, introduced to bring more transparency and accountability to the country’s biggest pension fund investor, has been promulgated two years after the entity’s governance failures were exposed in a commission of inquiry.
According to the act, the chairperson of the PIC would from now on either be the deputy finance minister or any other deputy of the government’s cluster of economic departments, a move that essentially strengthens government control over its asset manager.
Other provisions include a requirement for the PIC to publish the details of new investments on its website on behalf of its clients and to report, annually, the total number and details of “significant transactions” to the minister of finance.
The PIC also has to “publish and submit a report on all investments to the minister of finance for tabling” in Parliament, and the PIC would also need to “consider certain guidelines when investing deposits” on behalf of its clients.
It is also now required to receive a mandate from its depositors regarding how the depositor’s funds were managed. The new law now also requires the PIC to have three board members selected by organised labour in the Public Service Collective Bargaining Council – the first time labour workers will be represented on the board.
Among guidelines that the PIC should also comply with “as far as possible” when investing, according to the act, are among others the creation and protection of local jobs, to industrialise the economy by building the manufacturing sector and boosting exports, promote sustainable development, be in line with government development objectives and transform the economy and prioritise local investment.
PIC chief executive Abel Sithole said the amendment was a significant step towards greater transparency and accountability, regarding the PIC’s investment processes.
“Ultimately, the PIC is accountable to its clients and their beneficiaries and to the government as shareholder and guarantor of its clients. The new legislation provides for greater oversight by all stakeholders,” he said.
The Act’s promulgation follows revelations at the Mpati Commission last year that the PIC had been involved in a number of suspect investments and corporate governance failures.
The inquiry found also that the PIC’s former management did not inform the Government Employees Pension Fund and the Unemployment Insurance Fund on some crucial investment decisions.
AUDIT firm PricewaterhouseCoopers (PwC) has forecast that the country’s estimated economic growth could more than double this year if fewer restrictions are implemented during winter and completely wiped out at the start of the fourth quarter.
In its SA Economic Outlook report released yesterday, PwC outlined economic growth and employment scenarios for 2021 based on different perspectives on the expected third wave of Covid-19 infections.
PwC’s baseline scenario sees lockdown restrictions eased further in March to level 2 followed by a return to the stricter full level 3 in May, peaking at level 4 in July.
Under this scenario, PwC said the economy would grow by 3.4 percent overall this year as level 1 lockdown was anticipated to remain from September towards year end.
PwC chief economist Lullu Krugel said the downside scenario assumed a more severe infection level during the third wave and no exit from the lockdown until 2022.
“The severity of this mid-year wave, and the accompanying strictness of associated lockdowns, will directly determine the nature of the economic recovery,” Krugel said.
“In addition to lockdown levels, this outlook also assumes the negative impact of continued electricity load-shedding, albeit not as serious as that seen in 2020.”
Last month, the SA Reserve Bank forecast that the gross domestic product will recover by 3.6 percent in 2021 as global growth, vaccine distribution, low cost of capital and high commodity prices were supportive of growth.
The government has already warned that South Africa might experience a third wave of infections around June or July in spite of the roll-out of a vaccine programme.
South Africa kicked off its Covid-19 vaccination programme with frontline healthcare workers on Wednesday following the arrival of the 800 000 Johnson & Johnson vials in the country.
PwC said economic growth could expand by 6.7 percent in an upside scenario as the country’s largest industries will recover some lost ground, albeit fixed investment would remain under pressure.
“The upside scenario assumes less restrictive lockdowns, reduced pressure from electricity supply challenges, as well as greater fiscal stimulus on the back of better-than-expected tax collections,” Krugel said.
PwC’s modelling also showed that the economy would add only 467 000 jobs in 2021 under the baseline scenario. It said employment would return to pre-pandemic levels by 2024.
However, PwC said the upside scenario would lift this number to more than 900 000 jobs.
Krugel said the government needed to be an enabler of economic growth as private sector businesses wanted support to lift their investment spirits while consumers wanted certainty.
She said next week’s Budget speech would provide an opportunity to deliver key messages on a range of topics in order to boost confidence and certainty in these key areas.
“For answers to their concerns about Covid-19, load-shedding and policy uncertainty, among other worries, many businesses will be looking towards Budget 2021 for guidance and inspiration about the government’s approach to supporting the economic recovery,” Krugel said.