Battle over South Africa’s R3 trillion state-owned asset manager

The top two officials in South Africa’s finance ministry are divided over the decision to suspend the chief executive officer of the nation’s R3 trillion money manager because of alleged governance issues, according to people familiar with the matter.

The state-owned Public Investment Corporation, Africa’s biggest fund manager, on Monday suspended Chief Executive Officer Patrick Dlamini amid a probe into allegations of impropriety raised in a whistleblower report.

The nation’s financial regulator has announced an investigation into governance issues at the fund.

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

The removal of Dlamini deepens a sense of crisis at the fund, which has had a revolving door of senior executives over the past decade.

The PIC named its Chief Financial Officer, Batandwa Damoyi, as acting CEO on Wednesday.

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, 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 and plans to conduct an investigation, it said in a statement late Tuesday. 

The PIC welcomed the announcement.

“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 2020 judicial commission of inquiry, which called for sweeping changes to laws governing the PIC after finding that senior management 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, the people said.

The PIC has made progress in strengthening governance and oversight and remains “fully committed to cooperating with all regulators and ensuring that governance matters are addressed through independent, credible and transparent processes,” according to its statement on Tuesday.