ATC190319: Report of the Select Committee on Finance on the Public Investment Corporation Amendment Bill [B 4 - 2019] (National Assembly- section 75), dated 19 March 2019

NCOP Finance

Report of the Select Committee on Finance on the Public Investment Corporation Amendment Bill [B 4 - 2019] (National Assembly- section 75), dated 19 March 2019.

The Public Investment Corporation (‘‘PIC’’) is a key component of the financial services sector and as a financial services provider for the government of the Republic and bodies, councils, funds or accounts established by law, plays an important role in the financial security of South Africa.

The PIC Bill, which is a committee Bill, amends the Public Investment Corporation Act, 2004 (Act No. 23 of 2004) (‘‘the Act’’), in order to promote transparency and good governance within the PIC. The Bill also amends the Act to require the PIC to invest in accordance with the instructions of the depositors, and in so doing the PIC must seek investments that will meet certain guidelines. The Bill further provides for greater transparency in the operations of the PIC through the publication or tabling of various directives, regulations and reports.

1.Objectives of the Bill


The Bill seeks to provide greater transparency and better governance in the PIC as follows:


2.1          The Minister must appoint 10 non-executive Board members, including a representative of National Treasury; two representatives from the largest depositor and one representative of any depositor whose assets under management by the PIC are at least 10 per cent; and two representatives of the trade union with the majority of the members in the Government Employees Pension Fund (GEPF and one representative from another trade union, as decided by the Public Service Co-ordinating Bargaining Council (PSCBC) based upon proportional representation.


2.2          The Minister of Finance must designate the Deputy Minister of Finance or, in consultation with Cabinet, any other Deputy Minister within the economic cluster to chair the PIC Board. The Board must include two executive members – one of which must be the CEO or of a similar designation. All Board members should have the necessary knowledge and expertise, including those representing the unions. The Minister must progressively comply with the appointment of Board members according to these requirements taking into account the rights of current members of the Board. 

1.3The PIC must invest in projects that will benefit the beneficiaries of the depositors and act in accordance with the instructions of the depositors and, in doing so, seek to invest according to certain guidelines. The PIC investment policies must also consider to these guidelines.

1.4The Minister must table a report annually to Parliament on all investments of deposits and requests for approval of any significant transactions in terms of the Public Finance Management Act (PFMA) and must table regulations on the PIC in Parliament. 

2.Committee process

2.1On 26 February 2019, the National Council of Provinces (NCOP) referred the PIC Amendment Bill [B4 - 2019] (National Assembly – section 75) to the Select Committee on Finance for consideration and report.

2.2The Committee called for public submissions on the PIC Amendment Bill [B 4 - 2019] (National Assembly – section 75).

2.3On 06 March 2019, the Committee received a briefing on the PIC Amendment Bill (Committee Bill), from the Chairperson of the Standing Committee on Finance Mr. Y Carrim.

2.4The public hearings on the Bill were held on 12 March 2019, and the Committee received written and oral submissions from the Black First Land First Movement (BLF); AmaBhungane Centre for Investigative Journalism; the Association of Black Securities and Investment Professionals (ABSIP); and the Congress of South African Trade Unions (COSATU). The National Treasury also made oral input to the Bill.

2.5The following organisations made written submissions but did not make oral submissions:  Helen Suzman Foundation; Mr. FG Werner; and Mr. Mabotha Arthur Moloto. The Parliamentary Legal Services responded to the matters raised by the stakeholders.


3.Inputs from stakeholders

3.1Black First Land First Movement (BLF)

The BLF argues that, the PIC Bill does not address social responsibility commitments in relation to unemployment, poverty and poverty arising from the historical question of dispossession, which in turn is based on colonialism. To this end the PIC’s relationship to the state and the State’s responsibilities and obligations to its people are inextricably linked to each other and must not be separated. The BLF proposed that pension contributions by workers has to be abolished. The state must provide the total pension of the worker at the relevant time.

The BLF calls for a Judicial Commission of Inquiry into the PIC, which must make findings, report on and make recommendations on the following:

(a) how the funds of the PIC have been employed from its inception in 2004 to date.

(b) the anti-black annual spending of government on procurement of services and       infrastructure annually which benefits white companies;

(c) the anti-black demographic representation in the asset management industry;

d. state capture by white monopoly capital by virtue of the issues raised herein

e. all the issues raised herein regarding capture of the PIC by white monopoly capital.

f. All impropriety or other criminal conduct regarding investment decisions

g. consequently to ineffective functioning or governance by the PIC Board;

h. If any PIC employee/director used her/his privileges or position or confidential information to improperly benefit another person or for personal gain.

3.2AmaBhungane Centre for Investigative Journalism

The AmaBhungane emphasises that it supports all of the measures in the Bill which promote better transparency and accountability over the PIC. The relevant members of both houses of Parliament and its committees should be congratulated for their hard work in vastly increasing the PIC’s accountability.

The AmaBhungane does, however, have grave concerns that the Bill (despite its improvements) does not go far enough in ensuring that the public, including the millions of government employees affected by the PIC’s decisions (managing trillions of rand), have sufficient information to hold the PIC accountable, and to understand for themselves how decisions were made.

AmaBhungane submits that the present version of the Bill still suffers from constitutional difficulties and fails to satisfy the limitations clause under section 36 of the Constitution. In its present form, the Bill plainly limits the constitutional rights to freedom of information and the media as well as access to information. The Constitutional Court has emphasised that access to information must be the rule and any secrecy must only be countenanced in exceptional cases.

The AmaBhungane submits that one should not test whether the Bill adequately safeguards accountability on the assumption that any people presently in, or to be appointed to, key positions at the PIC will be fit and proper people and will do their jobs honestly). Rather, one should test the provisions on the basis that those in key positions would seek to undermine the objectives of the PIC and check how any offenders could be discovered and held to account promptly. AmaBhungane draws attention to the various portions of the testimony by Mr Seanie and Mr Jack referred to in its written submissions and submits that one should imagine how best to prevent those ills. One of the best safeguards to do so is providing the public with access to adequate information about the functioning of the PIC and its decisions.

3.3Association of Black Securities and Investment Professionals

The Association of Black Securities and Investment Professionals (ABSIP) proposes that all mandated investments (retirement funds, umbrella funds, collective investment schemes, medical aid funds, mandated funds such as the Public Investment Corporation and Industrial Development Corporation etc.) on a look through basis gets counted in the determination of the Black and Women ownership of companies in the Financial Sector (and other sectors). This encourages more broad-based empowerment as opposed to narrow BEE. The PIC should disclose on its website the demographic and gender liability profile of its beneficiary members to enable investee companies to get B-BBEE ownership credits for broad based Black and Women shareholding on a look through basis. However, the B-BBEE targets should first be changed to reflect population and gender demographics. The “Once Empowered and Always Empowered” notion is not consistent with reducing increasing inequality in South Africa and should be removed from all B-BBEE legislation.

ABSIP submits that, any potential nominees being considered for the non-executive role on the PIC board must be fiercely independent as defined and/or guided by the King IV Code. Each board member should not hold more than four other directorships in listed and/or unlisted companies/entities. The King IV Code supported by the Institute of Directors allows for nine other board memberships; this entrenches the “old boy network” club and discourages independence and diversity by not limiting non-executive directorships to four positions. More than 50 per cent of the non-executive members of the board must be independent and have good investment experience in investment management firms and investments. No board member should have a conflict of interest in any of the PIC investments or transactions and not only recuse themselves from such decisions but resign from PIC board positions if a potential conflict position arises.

3.4Congress of South African Trade Unions

The Congress of South African Trade Unions (COSATU) submits that, the Bill is reasonable and rational.  It is in line with legislative norms.  It will provide the required intervention and framework to preserve the integrity of workers’ pensions and insurance monies invested in the PIC.  It is progressive, long overdue and urgently needed to address the litany of corruption allegations and governance crises engulfing the PIC. 

COSATU argues that, workers are represented on the boards of the GEPF, Unemployment Insurance Fund (UIF) and Compensation for Occupational Injuries and Diseases Act (COIDA), yet they have struggled to hold the PIC accountable.  They are often informed of matters late or long after they have happened, critical issues are omitted and looting has been hidden. 

In the spirit of compromise and negotiations, COSATU has made several major concessions on the issue of worker representatives on the PIC board. 

Firstly, COSATU has agreed to reduce the demand for worker representation on the board from 50 per cent of the board to only three representatives on a board of 13.  In other words, less than 25 per cent.  Secondly, they had agreed that the union representatives must meet the same qualification and skills and experience requirements of all other board members.

The investment guidelines are important to help, where financially viable, to encourage investments that will benefit society at large.  It will help hold the PIC accountable in future if they have been found to have invested in very dubious investments that cannot be explained.

3.5Helen Suzman Foundation (on behalf of Mr. Vuyo Jack)

The Helen Suzman Foundation (HSF) submits that, the proposed new section 6(1)(A) calls explicitly for the Deputy Minister of Finance, or any other Deputy Minister in the economic cluster, to be chairperson of the PIC board. On this matter the HSF is in agreement with the findings of a recent official governance report on the PIC, compiled at the request of the PIC itself, by the former executive director of the PIC, Mr Vuyo Jack.

Mr Jack argued that there is no legal or economic principle that supports the provision that the chairperson of the PIC board should be a political office bearer, and that it would exacerbate risk. Not because a political appointee would be a shareholder chair, nor that he or she would not have the requisite skills, but rather because of, as Mr Jack puts it, the fluid nature of politics should mitigate against a party political office bearer even if he or she would have the requisite skills. The HSF therefore supports Mr Jack’s call for the chair of the PIC board not to be a political office bearer.

Should the Committee proceed with the amendment as envisaged in the Bill, the HSF strongly urges that provision be made for a non-political deputy chairperson. This provision should also stipulate that the non-political office bearer deputy chairperson must take over chair duties when real or perceived conflicts of political interest arise for the political chairperson. Not only will this help to avoid conflicts of interest, but it will also ensure continuity should the political appointee be replaced.

While the Helen Suzman Foundation support efforts to improve the Act, and by extension, the ability of the PIC to fulfil its mandate, our key concerns with the proposed amendments in this Bill can be summarised as follows:

(a)        At all times, the PIC must act in accordance with its mandate which is primarily derived from the instructions of its depositors.

(b)        Any broader considerations in so far as they concern social, economic or political objectives must always be balanced against the risk of decisions detrimentally affecting returns on investment.

(c)        If the objectives described above are to be pursued, then these must be part of the instructions from depositors, as directives taken from elsewhere create the danger of depositors considering alternative asset managers.

(d)        We have sought, through the suggestions made in this submission, to promote greater transparency and accountability in terms of all external fees, including the disclosure of fees for consultants and the use of professional services.

3.6Mr. FG Werner

Mr. FG Werner submits that, it is with great dismay that there is poor institutional governance at the PIC and that it has been captured by rent seeking politicians as is being revealed in the current inquiry into the PIC.  To have the PIC with the Chairperson being political appointee again is not acceptable, it leads to a repeat performance of the last 10 years of political interference in the investment decisions to benefit the ruling political party politicians, not to ensure the proper growth on the GEPF funds the PIC is meant to invest on behalf of members of the GEPF.

He further submits that, members of the current Public Service do not trust the PIC and the great majority of those retiring now are opting to resigning to take their pension benefits and invest in private pension funds for fear of the PIC going bankrupt in the near future. The PIC must at least have an Independent Oversight Body and managed as Private Pensions in the Pensions Fund Act which the PIC does not fall under.

3.7Mr. Mabotha Arthur Moloto

Mr. Mabotha Arthur Moloto, humbly submit that the current process relating to the appointment of the board members of the PIC, as stipulated in 2004 Act, be maintained with the proviso that the Minister furnishes a full report to Parliament on whether the appointed board members meet the fit and proper test stipulated by the Financial Advisory and Intermediary Services (FAIS) Act and that the board reflect all sections of society as taxpayers are the ultimate guarantor of the largest depositor namely GEPF.

He states that, South Africans need to be assured that this liability they are collectively exposed to will be managed by a board that has passed a ‘fit and proper test’ and that their elected representatives in Parliament will ensure that good corporate standards are adhered to in the composition of the PIC Board. An important distinction needs to be made between benefits and liabilities in this whole debate. The benefits accrue to beneficiaries linked to the depositors whilst the liability is carried by all taxpayers.

He further submits that, it will be unconscionable to exclude the voice and representation of ordinary taxpayers in this matter. Any significant increase in the liabilities without a corresponding increase in assets has huge implications for taxpayers as tax rates might have to be increased to cover any significant shortfall in the Fund in the event of constrained borrowing capacity of government. Finally, we have not yet received the report of the Commission of Inquiry at the PIC (Judge Lex Mpati Commission) to be in a position to fully evaluate the cause and extent of the alleged lapses in corporate governance at the PIC. To assume that representation of depositors and trade unions on the PIC Board will remedy the alleged corporate governance lapses is premature at this stage.


The Select Committee on Finance, having considered the Public Investment Corporation Amendment Bill [B 4 - 2019] (National Assembly – section 75), referred to it, and classified by the JTM as a section 75 Bill, reports that it has agreed to the Bill without amendments.


DA strongly oppose this report.

Report to be considered.



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