The Committee adopted a resolution on the closure to the public of the 16 May committee meeting on SAA. The Chairperson spoke about stakeholder response to the Committee Report on Financial Sector Transformation and publicising the Committee's recommendations in the build-up to the Financial Sector Summit in July. The private sector seemed to be taking it seriously. However, there seemed to be slow progress in the public sector. The Committee wanted to know what work was being done together with civil society, trade unions and other stakeholders, leading up to summit
There was a brief digression when an EFF member raised his objection to National Treasury always being represented by Deputy Director-General Ismail Momoniat. The EFF saw this as a deliberate attempt to undermine African leadership in the National Treasury. The Committee refused to entertain the objection which had been raised before and said that an earlier letter had been sent to the Finance Ministry for a formal response and a response would be insisted on.
NEDLAC spoke about preparations for the Second National Financial Sector Summit. The first Summit was convened in 2002. As part of preliminary preparations for the Second Financial Sector Summit, NEDLAC convened a Transformation of the Financial Sector Workshop in April 2018 to agree on recommendations for consideration at the Second Summit. Topics discussed at the workshop: market concentration, monopolization, ownership and licensing; support for emerging enterprise and black businesses through procurement and supplier development; the role of development finance institutions and state owned entities in transformation of the financial sector; and the role of Financial Sector Charter Council and regulatory bodies. The workshop welcomed this Committee's Report on Transformation of the Financial Sector. The workshop agreed with most of the recommendations in the Committee Report. The outstanding recommendations which were not agreed on are still being discussed at length at NEDLAC. These include: The licensing of Postbank as soon as possible; phasing out of a panel system; the Financial Sector Charter Council targets to increase procurement from black suppliers to 50% by 2021. The workshop agreed that in order to make concrete proposals for consideration by the Summit, further engagements had to take place at NEDLAC prior to the Second Summit. Engagements at NEDLAC were underway and were expected to be finalised by 19 June 2018. The proposed date for the Summit was 6 July 2018, yet to be confirmed, subject to the availability of the President.
Members expressed appreciation for the work of NEDLAC. There seemed to be progress towards realisation of the Committee recommendations. NEDLAC should come up with concrete resolutions on how much should be invested in the financial sector to spearhead transformation. A Member noted the objectives of the Second Summit and said NEDLAC seemed unconcerned about financial sector growth as well as the creation and retention of jobs. He asked if NEDLAC agreed with the recommendation that the Reserve Bank should be nationalised.
PIC Deputy Board Chairperson briefed the Committee on the process and rationale behind its investment decisions in order to ease concerns about 'questionable' deals. The PIC Board was concerned about the negative media publicity about PIC. The allegations in the media were twofold. The first was about the CEO which was discussed last year by the Committee in September 2017. The story had resurfaced without any new evidence. Nothing new had come to the fore to justify the PIC Board reopening its examination of allegations against the CEO. For the Board to revisit the matter, it would have to be presented with something different or be shown there was something ill-considered. This had not happened. With regard to the recent transactions - dubbed "controversial" investments, the PIC Board had revisited these and found nothing untoward about them.
PIC CEO spoke on PIC investment decisions. PIC manages investments for the Government Employee Pension Fund (GEPF), its largest client. The PIC has over R2 trillion worth of assets under its management. In the year ended March 2018, PIC assets under management grew by 8.6% (R165 billion) to R2.084 trillion, mainly due to good performance in listed equities. The PIC local unlisted portfolio was R69.4 billion at end March 2018, local listed bonds R692 billion, local listed equities R965 billion, cash and money market investments R110 billion, local property R108 billion, Africa (outside SA) R25.4 billion and global investments R115 billion. Of the total portfolio, 70% was in listed shares, 20% in unlisted investments and 10% in nondomestic investments. PIC was a lean and mean organisation that would pay a dividend to the government. He acknowledged that some work needed to be done on risk management, but this was being tackled aggressively, with improvements made to information technology infrastructure. Most importantly, as the CEO he did not and could not singlehandedly approve investments. Applications for investments are received by PIC which then go through a rigorous process of due diligence. A committee within PIC has the final say over approvals. On the 'questionable' PIC investments which have surfaced in recent months in media reports, it was a little bit unfair of the media to single out these few transactions, as PIC has a portfolio with more than 300 securities. The PIC was outperforming benchmarks which indicates there are good assets which have generated returns that the media was not picking up or have chosen not to look at.
The majority of Members expressed concern about the questions posed by one Member that they termed could be market sensitive. They said questions should focus on process.
The Chairperson said in view of PIC’s strategic role and the persistent allegations, the Board might want to look into the issues much further. He urged the Board to look into the delegation of duties acknowledging its non-executive members were not there full time. The Committee would need to consider how the PIC Bill could be altered to address the concerns being raised about accountability, though mindful of the need to protect market sensitive information. He suggested Members forward questions in writing to the PIC. At this stage there was no evidence of wrongdoing by the CEO but in the same vein, the Committee had no capacity to make such a conclusion. He pointed out that it was an offence to lie to Parliament and that the CEO’s denial had been expressed adamantly.
On the PIC Bills, the Chairperson said the Committee might need to consider the best way to get what it desired. Would it be through amendments to GEPF Act, the Pension Funds Act or some such? Policy issues would be clarified before the Committee returns from recess in August. It was the Committee’s objective to complete the PIC Amendment Bill before the end of the Fifth Parliament.
SAA meeting resolution
The Chairperson took the Committee through a resolution about the closure of the SAA meeting on 16 May:
"The Committee Section’s lack of capacity and knowledge of the rules led to an erroneous application to close the 16 May SAA meeting without the involvement of the Committee Chair and the prior knowledge of the Acting Chairperson. The Committee requests the managers of the Committee Section to ensure that the staff are better capacitated. The Committee once again appeals to the managers of the Committee Section to improve the capacity of the staff to write minutes that are accurate and of a reasonable quality.
At the 27 March 2018 quarterly meeting with SAA, the Committee agreed to explore the possibilities of discussing market sensitive issues relating to SAA in a closed session of an otherwise open meeting as a whole. Obviously, the Committee would need to consider the Rules of the National Assembly before implementing the decision. Prior to using rule 184 to close the meeting, the Committee was required to apply for this to the Office of the Speaker in terms of parliamentary practice. The aim would be to close the meeting only in respect of the market sensitive issues and not the entire Quarterly Report (unless, of course, the entire report was on market sensitive issues). The aim is not that all SAA Quarterly Reports to the Committee would be in closed meetings – and in any case the Rules of Parliament will not allow this. The application to close the 16 May meeting made by the concerned staff member, unfortunately, did not follow the correct procedures.
The Committee is clear that the public has a vested interest in the performance of SAA, especially since the government bail-outs for SAA are ultimately funded by the taxpayer and the company is ultimately owned by the public. SAA therefore has to answer on its quarterly performance in Committee meetings that are open to the public. However, the Committee is acutely aware of how competitive the airline industry is and believes that it is not fair to expect SAA to report on market sensitive issues in the public domain that would serve to advantage its competitors. The privately-owned airlines are not, after all, required to report market sensitive issues in the public domain. Hence while SAA is a state-owned company and answerable to the public, it is operating in a market economy just like any privately-owned airline, and its reporting to parliament should not undermine its prospects of doing better than its competitors.
The closure of a part of a meeting would broadly be consistent with the following process:
• At least 10 working days before an SAA Quarterly Briefing the Minister or Deputy Minister or SAA Chairperson or CEO may request that specific market-sensitive issues should be dealt with in a closed session of a meeting and provide the reasons for this.
• The Committee will refer this to the Speaker’s Office.
• If the Committee is granted permission to discuss those issues in a closed session of a meeting, it will do so, using rule 184 to close the meeting.
• The documents related to the closed session of a meeting will be separated from other documents dealing with issues that are addressed in the open session of a meeting and the documents related to the closed session will only be distributed at that session and returned to the Committee after the session ends.
• Where questions relating to market sensitive issues are raised unexpectedly in a fully open meeting, these will, through, preferably, consensus or with a decision of the majority, be deferred to the end of a meeting to be dealt with in a closed session.
• However, if after consideration of the market sensitive issues in a closed session the Committee decides that the issues are not market sensitive, it will decide to release the documents or information in some other way and report on the content of the closed session in an open session."
The Chairperson put forward the resolution for adoption. The majority of the Committee adopted the resolution. The DA objected to the resolution.
Financial Sector Transformation Project / Summit
The Chairperson said the Committee wanted to know what stakeholders were doing in respect of the financial sector transformation project. The private sector seemed to be taking it seriously - at least on the surface. However, there seemed to be slow progress in the public sector. The Committee would want to know from the Finance Minister when the financial sector transformation summit would be convened, and more importantly, what work was being done together with civil society, trade unions and other stakeholders, leading up to summit. The summit was however not a tick box compliance exercise. He suggested the Committee Report on Financial Sector Transformation be converted into a bulletin which would be distributed as widely as possible as a way of leveraging the Committee’s positions. An application for printing 5000 copies to be distributed as widely as possible would be made.
Digression about Mr Ismail Momoniat
Mr F Shivambu (EFF) interjected: Why is it that National Treasury is always represented by one person on every issue? Is he a parliamentary liaison officer? Isn’t there leadership in the National Treasury like the DG, or why is it that National Treasury is represented by one person every time here? Is he responsible for everything? Is he National Treasury?
Ms T Tobias (ANC) responded: I am starting to be worried about the aggressive nature at which Floyd is attacking Momo (Mr Ismail Momoniat) all the time. It is starting to sound like it is personal. I mean, can you really imagine we sit here and process who is the representative of National Treasury in the meeting when you have got important things to deal with? To a point, I mean, we will be fiddling with the workings of National Treasury. Do we want specific people? If it is specific people, it should have been by the request of the Committee. I mean to always, always raise unsubstantive issues that border along the lines of undermining individuals. Is there a personal tiff between Momo and Floyd so that it can be dealt and dispensed with, really? I mean... is it a question that can be entertained in a meeting?
The Chairperson replied to Mr Shivambu: Look, firstly, the main organisation here is Nedlac. They are mainly here because they have to answer for preparations for the financial sector summit, which the Minister announced will be the end of June. But what we thought is, let’s invite Treasury because they will give us an overview of what they have done in a response to the Report. Now I want to make something very clear; I have requested on behalf of the Committee a reply to your allegations against Momo. I also think it’s very unfair and once again I want to repeat I’m raising this vigorously before my term ends, how people attack others who can’t (I can defend myself, I’m an MP). But, you know, to attack Momo in a house debate, was totally uncalled for. I really plead with Floyd. Momo’s going, I think, Momo can’t reply for himself. We are instructing you, you have seven days to reply to his letter and send a copy to us. Nobody’s integrity, we had this problem with Dudu Myeni. I wrote to Floyd in December 2016 and said it's out of order. I wrote to Richard Mdakane, I wrote to (House Chair) Cedric (Frolick), I spoke to them. I raised this to the Committee repeatedly; MPs abuse our rights to attack people. The only option they have is to go through a petitions process, and that’s very difficult. So what I want to say is, Floyd, can we just stop this thing? It’s uncalled for, really. You were not here when he replied, and can we have a written reply from the Minister? It’s not fair not to reply to Floyd. Allan, we are instructing you as committee secretary to demand, by Friday, we must have a reply. Now Floyd, he is responsible for financial sector transformation. We can't call on underlings and ask where is the manager. He is the senior most person, he is the correct person. We can't call underlings; people will ask 'where is the manager'. The main purpose is to engage with Nedlac. Floyd, can we settle this offline, please?
Mr Shivambu added: Our issue that is of genuine political concern is that National Treasury is led by a director general who is an African. But there it looks like there are deliberate attempts to undermine African leadership in National Treasury. And it was raised openly, in public.
Ms Tobias interjected on a point of order: To even characterise Momo as not being African is out of order for an ideology that me and him follow because Momo himself falls under the category of African. It’s quite absurd to even allow this type of discussion.
The Chairperson said: Momo is a former MK, underground activist, operation Vula activist, who works 25 hours a day, 8 days a week. I fundamentally disagree with him, as he knows, on his broad policy...
Mr Shivambu interjected: And he was part of a faction of the cabal which worked to destroy the movement of that time, you must mention that as well.
The Chairperson said: But the fact is, he’s not somebody who hails from India. He’s been here for generations, I’m not gonna allow this nonsense! What is he gonna say next? That Mangope is more important that Mac Maharaj? Please, no! And Jay Naidoo? No! You come from the same ideology broadly, Floyd. This is going too far, really. What are gonna say next that Mangope is more important than Ahmed Kathrada? No, Floyd, you are letting yourself down, and you're letting government down.
Mr Shivambu said: He is undermining African leadership!
The Chairperson said: He is not an Indian. Is he from India? He didn’t ask to be here, he was sent by the DG!
Mr Shivambu said: No, he sent himself!
The Chairperson said: Fine. Floyd, we are not entertaining this. Can we move on?
Ms Tobias said: We need to clear this, you see there are things we can discuss in the meetings. We can’t discuss views and opinions of people that cannot be justified. It must never be allowed.
The Chairperson added: We are done. Ahmed Kathrada is more important in this country than Mangope ever will be, that’s it. Let’s move on. Right. Now, financial sector transformation report...
Financial Sector Summit: NEDLAC preparations
Mr Ismail Momoniat, Treasury DDG: Tax and Financial Sector Policy, said that since the process is led by NEDLAC and Treasury is one of four parties, NEDLAC should give the submission.
Ms Nobuntu Sibisi, NEDLAC Head of Programmes, spoke on preparations for the Second National Financial Sector Summit. The first Financial Sector Summit was convened in 2002. In 2016, NEDLAC saw the need to convene the Second National Financial Sector Summit. A task team to prepare for the summit was established and went on to develop a research study to look at the progress made with the 2002 Summit Agreement. The 2002 Summit agreement included: ensuring access to basic financial services; development of sustainable institutions to serve poor communities; new enabling legislation for second and third tier deposit-taking financial institutions; proposals on ways to enhance the developmental impact of the regulatory framework; regulation of credit bureaux; development finance institutions (DFIs) and other state-owned financial institutions, among others.
The environment in which the 2002 Agreement was taken was completely different to today. Notable changes included promulgation of a number of Financial Regulations and Acts, tightening up of regulations on how financial support and aid is provided, more people having access to financial products, and there is more cooperation between the public and private sectors on financial matters. More so, there has been a major overhaul of the credit processes and procedures in South Africa. The National Credit Regulator plays a regulatory role over credit bureaus, credit providers and debt counsellors.
As part of preliminary preparations for the Second Financial Sector Summit in 2018, NEDLAC convened a Transformation of the Financial Sector Workshop in April 2018. The purpose of the workshop was to propose and agree on recommendations and declaration for consideration by the Second Summit. The following topics were discussed by the workshop: market concentration, monopolization, ownership and licensing; support for emerging enterprise and black businesses through procurement and supplier development; the role DFIs and state owned entities in transformation of the financial sector; and the role of Financial Sector Charter Council and regulatory bodies. Further, the workshop welcomed the Committee’s first Report on the Transformation of the Financial Sector. The workshop agreed with most of the recommendations on the Committee Report. The outstanding recommendations which were not agreed on are still being discussed at length at NEDLAC. These recommendations include: The licensing of Postbank as soon as possible; phasing out of a panel system; the Financial Sector Charter Council targets to increase procurement from black suppliers to 50% by 2021.
The following proposals for consideration by the Second Summit were agreed to by the workshop:
• Department of Education and National Treasury should work together to ensure financial education is implemented.
• To facilitate growth and emerging companies, a framework should be developed to focus on changes in legislation, funding and setting up of a fund. This framework should take into account legislation in relation to the Competition Commission.
• There is a need to strengthen the role of Financial Sector Council.
• There is a need to reprioritise the role of DFIs and SOEs to focus on the role of the financial sector.
• Cooperatives should develop mechanisms and monitor their own funds in order to become sustainable.
The workshop agreed that to make concrete proposals for consideration by the Summit, further engagements had to take place at NEDLAC prior to the Second Summit. Engagements at NEDLAC were underway and were expected to be finalised by 19 June 2018. The proposed date for the Summit was 6 July 2018, yet to be confirmed subject to the availability of the President.
Ms Tobias expressed appreciation in the work of NEDLAC. There seemed to be progress towards realisation of the Committee recommendations. NEDLAC should come up with concrete resolutions on how much would be invested in the financial sector to spearhead transformation.
Mr D Maynier (DA) noted the objectives of the Second Summit. NEDLAC seemed unconcerned about the growth of financial sector as well as the creation and retention of jobs. He asked if NEDLAC agreed with the recommendation that there should be discussions on the status of the Reserve Bank and that it should be nationalised.
The Chairperson said the imperatives of black and particularly African entrepreneurs had to be balanced with those of black and particularly African consumers. He welcomed the 6 July as the tentative date for the summit and hoped it would take place sooner. On questions about the nationalisation of the Reserve Bank, as per the Report, the Committee did not call for immediate nationalisation. It had recommended the buying out of private sector shareholders progressively as funds permit. However, given the ANC had taken a decision on this, the Committee may have to reconsider its position at a later stage. He urged Members to desist from misrepresenting Committee positions. He asked about NEDLAC’s stance on the Reserve Bank. He added that unless the financial sector is transformed, the economy as a whole could not be effectively transformed.
Ms Sibisi replied that NEDLAC, in principle, believed the Reserve Bank should play an active role in the transformation of the financial sector. Discussions were still underway and NEDLAC as a collective had not made a definitive determination as yet. The perception that NEDLAC is unconcerned about economic growth and job creation was incorrect. The need for higher economic growth and job creation was one of the key discussion points at the workshop. The importance of balancing both economic growth and transformation objectives was well understood.
Mr Shivambu said ANC Members had to articulate their party position on the Reserve Bank more clearly. The Committee Report was agreed to in principle before the ANC December 2017 conference at Nasrec. However, most of the conference resolutions were not in line with the Committee recommendations; foremost being the nationalisation of the Reserve Bank. Members must not be apologetic about the empowerment of black people. Transformation is a political process spearheaded by politicians. Technocrats would only be given instructions to implement in accordance with the law.
Ms Tobias said the ANC conference at Nasrec indeed took decisions on the Reserve Bank. The perception that ANC Members did not hold the party view was incorrect.
Public Investment Corporation (PIC) process and rationale behind its investment decisions
Dr Xolani Mkhwananzi, PIC Deputy Board Chairperson, said the Board was concerned about the negative media publicity about PIC. The allegations in the media were twofold. The first was about the CEO - on a matter which was dealt with last year, discussed in the Committee in September 2017. The story had resurfaced without any new evidence or additional information being presented. Nothing new had come to the fore to justify the PIC Board reopening its examination of allegations against the CEO. For the Board to revisit the matter, it would have to be presented with something different or new, or be shown there was something ill-considered. This had not happened. With regard to the recent transactions - dubbed "controversial investments", the Board had revisited these and found nothing untoward about them.
Dr Dan Matjila, PIC CEO, spoke on the process and rationale behind PIC investment decisions to ease concerns about questionable deals. PIC manages investments for the Government Employee Pension Fund (GEPF), its largest client. The PIC has over R2 trillion worth of assets under its management. In the year ended March 2018, PIC assets under management grew by 8.6% (R165 billion) to R2.084 trillion, mainly due to good performance in listed equities. The PIC local unlisted portfolio was R69.4 billion at end March 2018, local listed bonds R692 billion, local listed equities R965 billion, cash and money market investments R110 billion, local property R108 billion, Africa (outside SA) R25.4 billion and global investments R115 billion. Of the total portfolio, 70% was in listed shares, 20% in unlisted investments and 10% in nondomestic investments. PIC was a lean and mean organisation that would pay a dividend to the government. He acknowledged that some work needed to be done on risk management, but this was being tackled aggressively, with improvements made to information technology infrastructure. Most importantly, as the CEO he did not and could not singlehandedly approve investments. Applications for investments are received by PIC which then go through a rigorous process of due diligence. A committee within PIC has the final say over approvals. On the 'questionable' PIC investments which have surfaced in recent months in media reports, it was a little bit unfair of the media to single out these few transactions, as PIC has a portfolio with more than 300 securities. The PIC was outperforming benchmarks which indicates there are good assets which have generated returns that the media was not picking up or have chosen not to look at.
Mr Maynier noted that the Board had cleared Mr Matjila of wrongdoing in September 2017. However a document recently emerged from the media which suggests the Board had not been circumspect and did not fully apply its mind in dealing with the case. In one of the allegation, about the instruction of a company director by Mr Matijila to settle a Ms Pretty Louw’s legal fees, the finding was vague. He asked if the Board did fully apply its mind. Did Mr Matjila instruct the payment? The Committee had traversed what was termed a ‘smear campaign’ against the CEO prior. Who was responsible for the smear campaign and what was the motivation? He made reference to a letter written to the Board by the former Minister of Finance requesting what was termed ‘specific matters’. What specific matters was the Minister referring to at that time? It is common cause that PIC pulled back from the Sagarmatha investment. It had to be understood why it pulled out. Was PIC not concerned about the transaction costs for the investment at Ayo Technology Solutions? It appears VBS Bank had an expectation that it would receive a PIC loan? Was there any basis for that expectation? Who are the owners of Lancaster Group and who ultimately benefited from that deal? What was the breakdown of fees for the Steinhoff and Lancaster deals?
The Chairperson noted Mr Maynier’s questions and said if the Committee wanted to convert itself into a commission of inquiry as his questions suggested, it would have to apply to the Speaker’s Office. The Board must be held to account however. No one could use market sensitivity to hide corruption, or not answer questions because of market sensitivity.
Mr Maynier noted the Chairperson’s concerns and asked in terms of which rule Members would not be allowed to ask questions to the PIC.
Ms P Nkonyeni (ANC) expressed concern about the questions posed by Mr Maynier. Some of the issues he traversed were market sensitive. The Committee needed to ask relevant questions as it was not a commission of inquiry.
Mr N Nhleko (ANC) emphasised questions should focus on process, not necessarily details, as these are still being finalised. The Committee had been taken through the processes which the PIC Board was undertaking, which some were still yet to be concluded. The Committee would have to interact with the product of such processes. There was a tendency of chasing the mirage and shadows without necessarily respecting institutional processes which were still yet to be concluded.
Ms Tobias expressed concern that the PIC, in responding to some of the questions, would inadvertently present its investment rationale in a public discourse. She felt it was not compulsory for PIC to disclose such information. Legislators had no interest in market sensitive investment decisions.
Mr Shivambu said Members should be allowed to speak openly without being suppressed. However, the market sensitivity issue was genuine. It would be sabotage to force disclosure. The PIC was doing well as it was outperforming the clients’ mandate and outdoing most of its competitors in this space. The narratives in the media did not deter that fact. The PIC is a victim of a media onslaught which seeks to prejudice it against its competitors. It should be unapologetic in facilitating black participation within the mainstream economy. Also, PIC should make efforts to brief workers about the deployment of their resources so that its work is appreciated.
The Chairperson acknowledged inputs by Members. They made sense from different vantage points. No Member could not be suppressed from asking questions but they should be restricted to PIC policy-related aspects. He appealed to Members to respect processes underway. However, if some of the allegations were not confronted, they would keep coming up. He suggested that at this stage market sensitive issues be held in abeyance up to PIC’s next appearance in September 2018. Does the PIC have a view why these allegations persist? He urged the Deputy Finance Minister as PIC Board Chairperson to look into these matters.
Mr Maynier said the object of the probes was to protect the PIC. The performance of PIC and its crucial role in the transformation of the financial sector was not being contested. The Committee should consider dealing with the allegations once and for all. Also, how could journalists get it so wrong? Clearly, information was coming from within PIC ranks. He emphasised the need to clear the air and provision of concrete evidence.
Dr Matjila replied that the PIC was taking aggressive steps in driving transformation and remained resolute in this objective. PIC was working on an exit strategy from Independent News & Media SA but would not answer questions about this due to market sensitivity. He emphatically rejected allegations that he had a personal relationship with Pretty Louw. Louw and her partner approached the PIC for financing and their application did not make the cut. Where possible the PIC referred applicants elsewhere, but this was not the case in this instance.
Mr Fidelis Madavo, PIC Head: Listed Investments, said the investment in Sagarmatha was not carried through. This owed to differences between book and listing values. An exit strategy that was being effected was sensitive information and could not be disclosed. On the R4.3 billion investment in Ayo Technology Solutions as part of an initial public offering in December 2017, the investment committee would look into the matter to ensure that investment processes were followed. The PIC saw potential in the Ayo investment that the technology company could increase its market share in the software and services sector. The PIC also believed that Ayo has an experienced management team in place which will be an advantage going forward. It also has the highest BBBEE credentials in the sector. On the corporation’s investment in Erin Energy, he clarified that PIC owns 29.58% of the stock, with unrealised losses of R167 million. As for its ties to VBS Mutual bank, the PIC first got involved in VBS in 1982 through the Venda GEPF. The investment was 34% equity of R10 million to form part of the GEPF portfolio in 1996, with the intention to hold the investment and use it as a vehicle to deliver other products like housing and education loans. In 2015 a significant investment for a revolving credit facility for the development for small and medium enterprises was made. VBS had serviced that until February 2018, when the bank went into curatorship. The PIC was in discussions with Sekunjalo to exit an investment in Independent News & Media which it made in 2013.
Mr Mondli Gungubele, Deputy Minister of Finance, appreciated the manner in which the Committee had handled matters. He cautioned against exchanging processes for expediency at any point as there would be a huge price to pay. Denting people’s reputations in the name of protecting them should be avoided. There was no doubt that PIC had done good work but there must be no questions left unanswered. It would be important to know why the allegations were persisting in the media. He expressed his commitment in dealing with the issues. There will be no holy cows.
The Chairperson said in view of PIC strategic role and in view of the persistent allegations, the Board might want to look into the issues much further. He urged the Board to look into the delegation of duties acknowledging its non-executive members were not there full time. The Committee would need to consider how the PIC Bill could be tinkered with to address some of the concerns raised on the parameters of accountability, mindful of the need to protect market sensitive information. He suggested Members forward additional questions in writing to PIC. At this stage there was no evidence of wrongdoing by the CEO but in the same vein, the Committee had no capacity to make such a conclusion. He pointed out that it was an offence to lie to Parliament and that the CEO’s denial had been expressed adamantly.
PIC Amendment Bills: summary of public submissions
The Chairperson said the Committee would deal with the PIC Bills after the 30-day rule had elapsed.
Adv Frank Jenkins, Parliamentary Legal Advisor, took the Committee through a matrix of comments on the PIC Committee Bill following public submissions (see document). Some of the comments were:
COSATU strongly welcomed the proposed insertion in respect of the investment mandate of the corporation. They support it wholeheartedly and strongly urged the Committee to retain it in full. They submitted that it is in line with COSATU’s proposed mandate for the PIC and they believe it is in line with the PIC's commitment.
On the other hand, FEDUSA submitted that this provision should be reconsidered. According to FEDUSA it should be clearly expressed that the mandate is subject to any investment mandate that may be given by any of the PIC investors. The clause must be drafted in a way that allows the depositors to determine their own investment mandate and must oblige the PIC to act accordingly. According to FEDUSA the proposed amendment takes no account of, and appears not to recognise the duties of those pension funds to their members. Nor does it reflect the long-term objectives of its largest client, the GEPF. There should be nothing in the statute which permits the PIC to ignore or overrule or depart from the investment objectives of its clients. FEDUSA further submits that the phrase “securing funds investments financial sustainability and security” is vague and is inconsistent with the investment mandate which should be given by pension funds to their investment manager, and that is that the interests of the pension funds and their members and beneficiaries should take precedence over any other interests.
FEDUSA submitted that the clause –“The Corporation may assist with financing the buying of property by the members of the GEPF”, has no place in the PIC Act and should be deleted, as should the proposed definition of “property” in section 1. According to FEDUSA the GEPF Rules make no provision for assistance to members for buying property. It is inconsistent therefore for the PIC to provide that assistance using GEPF funds. A proper model for providing financial assistance to members of a pension fund in connection with immovable property is to be found in section 19(5) of the Pension Funds Act. The provision of such assistance is a matter for the pension fund and the employer who together have knowledge of a member’s financial position and needs. If the provision of such assistance is desired, then the GEPF legislation and Rules should be amended.
National Treasury submitted that the PIC makes investments (manages assets) on behalf of depositors (clients) and therefore it should only be required to act in accordance with the depositor's instructions. A depositor must give instructions in accordance with the legislation regulating that depositor. Any considerations to be taken into account by a depositor in its instructions to the PIC should be imposed on the depositor through its legislation. Any one or more of the considerations listed in the amendment of this clause may not necessarily accord with a depositor's instruction to the PIC.
The Chairperson said the Committee might need to consider the best way to get what it desired. Would it be through amendments to GEPF Act, the Pension Funds Act or some such? Policy issues would be clarified before the Committee gets back from recess in August. It was the Committee’s objective to complete the PIC Bill before the end of the Fifth Parliament.
The meeting was adjourned.
- Matrix of comments on the PIC Bills
- Finance Committee 1st Report on the Transformation of the Financial Sector
- Closure of SAA meetings 4 June 2018 for SCOF
- Nedlac presentation on preparations for Second National Financial Sector Summit
- Preparations for the Second National Financial Sector Summit: NEDLAC presentation
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