Crisis at South Africa’s state-owned asset manager puts 1.3 million pensions at risk

Africa’s biggest fund manager is again tangled up in a governance and management crisis, while its unlisted investments continue to underperform. 

South Africa’s Finance Minister Enoch Godongwana and the Public Investment Corp.’s board met on Thursday as a public rift over the management of parts of the R3.6 trillion fund exposed the latest bout of executive and political infighting. 

The PIC manages the pension savings of 1.3 million civil servants and has endured serious governance breaches and financial losses due to investment decisions often linked to politically connected individuals. 

It has invested about R67 billion in nearly 150 unlisted entities since its inception in 2005, and at least 78 of these have lost some or all of the money, according to parliament data.

The fund manager has suffered significant losses with deals done around cement-maker AfriSam and chicken company Daybreak Farms, among many others, according to the data.

Godongwana is said to have been at odds with PIC’s Chairman David Masondo, who is also his deputy in the finance ministry, over the handling of a report commissioned by PIC CEO Patrick Dlamini.

Their divide also extends to a subsequent whistleblower tip-off, according to people familiar with the matter who asked not to be identified because they aren’t authorised to speak publicly.

An investigation by PriceWaterhouseCoopers was ordered by Dlamini into valuations related to a Black economic empowerment deal linked to an investment in Lanseria airport outside Johannesburg.

The report exposed alleged wrongdoing and named PIC staff. A whistleblower report later accused Dlamini of overstepping his mandate and breaching governance limits by issuing the investigation. 

“The meeting today resolved that the response by Mr Patrick Dlamini, the PIC CEO, to allegations in a whistleblower report, submitted to the board last week, will be dealt with according to the PIC policies and applicable legislation under the oversight of the board,” the PIC said in a statement.

“Today’s meeting agreed to develop a program to address public and client concerns about legacy investments in the PIC’s unlisted portfolio.”

The latest battle follows the suspension of former Chief Investment Officer Kabelo Rikhotso last year, along with unlisted portfolio head Thabiso Moshikara.

The country’s second-largest political party, the DA, on Wednesday said it had submitted parliamentary questions regarding “reckless” investments, and demanded reform to “the process by which the board and chairperson are selected.”

South Africa’s Finance Minister had confidence in the current PIC board and management team, according to the statement from the fund manager.