PIC launches investigation into alleged misreporting of Mpati reforms

The Public Investment Corporation (PIC) has instituted an investigation into whether the recommendations of Judge Mpati on governance improvements at the entity were falsely reported as implemented by the previous CEO to Cabinet, deputy finance minister and chairperson of the PIC, David Masondo, has said.

Responding to questions in Parliament on Friday, Masondo admitted that the PIC had been led to believe the recommendations had been fully implemented, but after persistent questioning from Parliament, the corporation had to initiate an investigation when no record of implementation could be found.

“The report that went to the DTIC Minister said the implementation had been 100% done, but thanks to the persistence of MPs on this matter, we had to check our records to validate what the previous CEO had assured the Board — that this matter was settled. Until there is acceptable evidence that this matter was settled, I would not say that the PIC had achieved 100% implementation of the recommendations. That is why, when we submitted the report, we expected the shareholder Minister to conduct an audit. Our understanding is that the audit is being done, and if it proves there was not 100% implementation, we, as the PIC, are willing to be corrected,” Masondo said.

He also clarified to MPs that the PIC could not legally take action against former board chairperson Bojane Segoa, who secured a R625 000 payment of the R1.2 million in board fees requested before she resigned at the height of a catastrophic week in which workers went unpaid and starving chickens resorted to cannibalism.

“What the previous Chair has done was wrong — unless it is proven that she forced someone to make the payment, which would obviously be illegal. But the fact that she prioritised herself in the midst of the crisis was wrong; it was bad judgement. Legally, it has to be determined whether it was illegal. Unless it is proven she forced someone to pay her, the payment itself — minus the allegation of forced payment — will make it interesting to get a legal view on whether anything illegal occurred,” Masondo said.

Masondo also ruled out the possibility of the PIC’s unlisted investment portfolio being shut down or transferred to another state entity such as the Industrial Development Corporation (IDC). He said the losses were historical, dating back the last 10 to 15 years.

“If you take the example of the unlisted portfolio, which is 4.5% of the PIC’s total investment, there are those who argue that the unlisted portfolio should be closed or transferred somewhere — either to the IDC or to the DBSA, for instance.

“I think the proposal ignores certain points. The first is that almost R1 billion is allocated to the DBSA and R8.5 billion to the IDC, and we are discussing with the DBSA how best we should work together to deliver infrastructure.”

He said another reason some argue for closure or transfer of the unlisted portfolio is that the credit loss ratio exceeds 39%. This reflects financial mismanagement within the PIC, but Masondo said the impairments and credit loss ratio were driven by historic transactions rather than recent investments.

Masondo said that despite challenges with investments in Daybreak Farms, Acapulco Trade and Investments, and more recently Enabled Capital, the unlisted portfolio has delivered a 16% internal rate of return, exceeding the benchmark set by the client.

“A R100 billion investment will generate R16 billion for workers, so it is performing. It has its own challenges, but it is, by and large, performing better. As I said, many of the bad investments are pre-party investments, and we are doing our best to sort out the challenges and strengthen our capacity to protect workers’ money and increase their wealth.”

He added that the PIC was not satisfied with the arbitration process on the Acapulco investment, which determined that the asset manager should pay R411 million to Acapulco to compensate for the collapse of an agreement involving Lanseria Holdings.

He said the first legal opinion the PIC received indicated that the prospects of a successful appeal were slim, and the PIC has decided to heed counsel to avoid frivolous litigation.

BUSINESS REPORT