Financial sector watchdog coming after South Africa’s biggest state-owned asset manager

South Africa’s financial regulator is investigating governance issues at the Public Investment Corporation (PIC) after the removal of top executives at the $219 billion asset manager.

The recent suspension of the PIC’s CEO indicated that tensions in the nation’s treasury are affecting the fund’s management.

The state-owned PIC, Africa’s biggest fund manager, on Monday suspended CEO Patrick Dlamini and replaced its acting chief investment officer amid a probe into allegations of impropriety raised in a whistleblower report. 

The move has left the PIC without a CEO, deepening a sense of crisis at the fund, which has had a revolving door of senior executives over the past decade.

Finance Minister Enoch Godongwana and Dlamini said they weren’t aware of the late-night decision by Deputy Finance Minister David Masondo, whose portfolio includes the chairmanship of the PIC.

Godongwana and Masondo are at odds over the decision to suspend Dlamini, the handling of a report that he ordered into a controversial investment in a Johannesburg airport, and a whistleblower tip-off that followed.

This is according to people familiar with the matter who asked not to be identified.

There’s also increasing disquiet within the PIC about the number of executives in acting roles and the lack of a CEO, another person with knowledge of the matter said.

In addition to suspending Dlamini this week, the PIC board also appointed Leon Smit to replace August van Heerden as acting chief investment officer. 

South Africa’s Financial Sector Conduct Authority has become “increasingly concerned” by developments at the PIC, it said in a statement late Tuesday. The PIC welcomed the investigation.

“The board believes that strong regulatory oversight is a hallmark of a healthy democracy and resilient financial system,” it said in a statement on Wednesday. 

Dlamini was suspended eight months after ordering an investigation by PwC into a Black economic empowerment deal linked to an investment in Lanseria, an airport on the northern outskirts of Johannesburg.

The report exposed alleged wrongdoing by members of the PIC’s staff, the people said.

A whistleblower report later accused Dlamini of breaching governance limits by ordering the investigation, which led the board to suspend him. Dlamini couldn’t be reached for comment. 

The PIC said its board has prioritised strengthening governance and implementing the recommendations of a judicial commission of inquiry in 2020.

The commission recommended sweeping changes to laws governing the PIC after it found senior management had flouted internal procedures.

Among the commission’s proposals was that the PIC appoint an independent, non-executive chairperson with expertise in financial markets, rather than the deputy finance minister.

Some stakeholders are concerned that this specific recommendation hasn’t been implemented, said the people.

The PIC said it has made progress in strengthening governance and oversight and remains “fully committed to cooperating with all regulators”.

The asset manager said it has also made progress in “ensuring that governance matters are addressed through independent, credible and transparent processes”, according to a statement on Tuesday.