Boardroom battle at South Africa’s largest asset manager

The Public Investment Corporation (PIC) has suspended its CEO and CIO following months of infighting and whistleblower reports.

The PIC is South Africa’s largest investment manager, holding approximately R3.6 trillion in assets, funded mainly by government employee pension funds.

The PIC acts as the investor for government pensions, and should work to ensure certainty for many South Africans’ futures.

Recently, the corporation has faced scrutiny for its investments in unlisted companies and its ongoing internal conflicts.

The PIC’s Isibaya fund, which invests in unlisted companies, faced criticism for posting a -100% rate of return in some investments.

This caused the corporation to lose roughly R4.5 billion, with the majority being government employees’ pensions.

The PIC has also struggled with ongoing internal conflicts between the corporation’s CEO, Patrick Dlamini, and its chairperson, David Masondo.

Recently, competing whistleblower reports have implicated both Dlamini and Masondo in potential wrongdoing.

The conflict has centred around an investment in Lanseria airport, which was made by the company Acapulco. It sought to buy a 25% stake in the airport using a loan from the PIC.

The PIC loaned approximately R333 million to Acapulco to make this investment, but the company defaulted on the loan.

This led to the PIC acquiring the shares in Lanseria airport, which was valued at roughly R4.16 billion, making the 25% stake worth R1.04 billion.

Since the value of the PIC’s loan, after inflation and interest, was approximately R600 million, the corporation was required to pay the R411 million difference.

The PIC said the airport was overvalued, and fought to regain its R411 million payout, but these attempts were unsuccessful.

Allegedly, Dlamini later ordered a forensic investigation into this transaction without approval from the PIC’s board.

This was alleged by a whistleblower report, which said Dlamini had acted outside of his authority and should have sought approval before investigating.

Masondo also referred some aspects of the Lanseria airport transaction to the Special Investigations Unit (SIU).

The referral followed a forensic accounting report by PwC, which found potential irregularities in the purchase of the 25% stake in the airport.

The PIC suspends Dlamini

Following the whistleblower report, the PIC has suspended Dlamini to investigate his potential misconduct.

The PIC said this was a precautionary measure and should not be taken as a sign of any wrongdoing.

“The precautionary suspension is intended to ensure a fair, objective and independent investigation into these allegations,” it said.

“The suspension does not, in any way, constitute a finding nor is it a pronouncement of any wrongdoing”.

It stated that the suspension was carried out in accordance with relevant labour laws and PIC internal policies.

Along with Dlamini, the corporation’s acting Chief Investment Officer, August van Heerden, was removed from his position.

This removal followed advice from the Government Employee Pension Fund (GEPF), the PIC’s largest client.

In the interim, former head of fixed income investments, Leon Smit, has been appointed the corporation’s CIO.

The PIC said this appointment will ensure stability and optimum management of its investment decisions.

Democratic Alliance (DA) MP Mark Burke said parliament’s finance committee should step in to resolve the issues in the PIC.

He said the finance committee has not met with the PIC in the past year to address the corporation’s infighting.

Parliamentary approval was recently granted for the PIC to increase its exposure to unlisted investments through the Isibaya fund.

Burke said this was a worrying decision given the fund’s recent losses and the current leadership problems plaguing the PIC.