Much to do for new PIC board
The composition of the Public Investment Corporation (PIC) board announced by the government last week had the hallmarks of a classic Cyril Ramaphosa negotiated settlement. In stark divergence from the PIC amendment bill which sits unsigned on the president’s desk, the new chair of the PIC will most definitely not be the deputy minister of finance, in contrast to past established practice that the bill is trying to formalise despite the inherent conflict of interest.
The latter feature had been fought for tooth and nail by the governing party’s alliance partner, Cosatu.
The federation reportedly was a key player in the PIC’s decision to take part in the rescue of Edcon, allegedly lobbying then deputy finance minister Mondli Gungubele to ensure the deal happened, or face the prospect of the federation neglecting to encourage its members to vote for the ANC in the May elections.
As chair of the PIC, whoever is the deputy finance minister would find him or herself with a conflicting set of obligations. The fiduciary duty to the asset manager and its beneficiaries cannot be easily reconciled with being a leading member of a government that is funded by the same PIC.
It can only be a good thing that this will be removed. But this does not mean Ramaphosa has ignored his power base. Three union representatives will be on the 15-person board.
Its first task will be to appoint a chair and deputy chair. There is no shortage of appropriate candidates, such as Irene Charnley, Reuel Khoza, Xolani Mkhwanazi and Maria Ramos.
Khoza, a former chair of Nedbank and Ramos, most recently CEO of Absa, have experience heading financial services companies that make them the frontrunners. Appointing a CEO to oversee the restructuring of the PIC into as many as five autonomous business units is likely to be the defining requirement for the individual that will head the organisation in the short term.
The restructuring should be an opportune time to reset the organisation’s culture and values in addition to its organogram, something Ramos had recently done at Absa. To undertake a fundamental reset, careful thought needs to be given to whether or not a complete clearing of the executive decks is necessary to point the organisation in a new direction.
There are a slew of current and future disciplinary processes under way or likely to be brought against senior executives, and even if these don’t result in dismissals, honest conversations need to happen about whether some executives are still the right people to lead this R2-trillion asset manager into a new era.
A fundamental reset entails resolving a long list of complaints that have contributed to the abominable staff morale that permeates the organisation and which is likely to require sign-off from the board. Top of the list is resolving how short-term and longterm incentives are awarded. Unlike many of its private sector peers, the PIC lacks a transparent mechanism to keep the very best there over the long run.
The PIC has a mountain to climb to attract the finance industry’s finest, as well as convince established businesses that partnering with them as a shareholder or financier will not end in controversy and recrimination. (Just ask SA Home Loans and Karan Beef if they would entertain the corporation as a major shareholder again).
But trust in the organisation will not be regained easily. It’s going to be a long, hard, slog to convince parties that this is not just another institution that had become inept and corrupt during former president Jacob Zuma’s regime.
The fact that its largest client — the enormous Government Employees Pension Fund — seems willing to stand by the PIC as its only major investment service provider regardless of what has happened, is another depressing sign that political influence is far from removed when it comes to handling the savings of more than 1.7-million public servants.
RESTRUCTURING SHOULD BE AN OPPORTUNE TIME TO RESET ITS CULTURE AND VALUES