Focus on quantity rather than quality in PIC investments - former director

According to the interim findings of an internal Public Investment Corporation governance review report, concluded in 2014, the state-run asset manager appeared more focused on getting as many deals signed as possible, rather than focusing on quality. 

This is according to evidence by Vuyo Jack, who was appointed to the PIC board in 2012.

His evidence on Monday before the judicial commission of inquiry into allegations of impropriety at the PIC provided a glimpse into the business operations of the asset manager in past years. 

The PIC manages assets worth more than 2trn, with its biggest client being the Government Employees' Pension Fund.  

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The findings of the interim report, which was based on interactions with employees, included concerns regarding weak and unaccountable leadership, said Jack. 

He testified that "much energy and attention in past years has been [focused] on getting as many deals as possible to push the quantity line and meet numerical outputs, irrespective of the quality of the benchmarks set by clients in their investment mandates."

While this was "not explicit in our interviews with staff, it was most certainly implicit in data from PIC documents supplied to us," he said. 

'Compromised quality'

Jack said the danger to this approach was that "it compromised quality and results in an exponential rise in the number of bad deals."

Some of the questionable investment decisions undertaken by the state-run asset manager include investment in the disgraced VBS Mutual Bank and retailer Steinhoff, which saw billions lost as a result of drastic fall in the company’s shares following an international accounting scandal in December 2017.

• READ: Split PIC into four units to curb political meddling, inquiry hears

Last week, the Companies and Intellectual Property Commission (CIPC) ordered the PIC recover the R4.3bn capital it invested in AYO Technology Solutions, stating that the asset manager did not not act in good faith and in the best interests of the company when making the investment.

AYO said in response that the notice was based on "incorrect information" and that the CIPC had not taken all its revenue into account. 

Calls for clarity 

According to Jack - who is the founder of BEE verification agency Empowerdex - to remedy the governance related challenges, the draft report recommended urgent interventions, including clarity on the role of the chair. It raised the question of whether a "deputy non-political chairperson" should be appointed.

Last week, a number of PIC board members appeared before the commission, including chairperson and deputy finance minister Mondli Gungubele. 

Board members spoke of anxieties and distrust among them following the arrival of anonymous emails that claimed there was corruption among directors. 

The commission has revealed that executives who earlier presented evidence had received death threats, but officials are adamant that the threats have not deterred witnesses from coming forward.