PIC Amendment Bills: hearings

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Finance Standing Committee

15 August 2018
Chairperson: Mr Y Carrim (ANC)
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Meeting Summary

The Committee held public hearings on the two Public Investment Corporation (PIC) Bills. The Public Servants Association (PSA), the Public Service Collective Bargaining Council (PSCBC) and AmaBhungane Centre for Investigative Journalism made oral submissions.
The PSA opposed the provision that would require the PIC to consider certain matters when exercising its powers, namely securing the financial sustainability and security of the fund; creating and protecting local jobs; industrialising the economy, building the manufacturing sector and boosting exports; sustainable development; preference for investments inside rather than outside SA; the country’s development objectives; building a capacitated development state; and transformation of the economy and society. This would mean the proposed law would supersede the investment mandate depositors give to the PIC. There should be nothing in the statute that permits the PIC to ignore or over-rule or depart from the investment objectives of its clients. The PSA was of the view that PIC’s investment mandate should be coming from the depositors. Neither the finance minister nor the deputy minister should be the chair of the PIC. Further, there should be no political interference within the PIC. The chairperson should be appointed from the board of directors who are duly appointed in terms of the procedures of the Act.

PSCBC welcomed the PIC Bill as its objective was to promote transparency and good governance within the PIC. Of interest to the PSCBC were two clauses as follows: Clause 2- empowering the corporation to finance the buying of property for the members of the GEPF; and Clause 3- allowing for two or more but not more than three representatives of a registered trade union, whose members are the majority of the members of the GEPF, to form part of the group of non-executive members. For the PSCBC, the amendment to clause 3 is fundamental in ensuring transparency in governance of the PIC; and it further indirectly allows for the principle of worker control or utmost worker input into interest matters.

AmaBhungane Centre for Investigative Journalism commended the Committee for taking an initiative which would strengthen accountability and transparency of the PIC. AmaBhungane urged that the public participate in the appointment of PIC board directors. This would ensure greater public transparency. It also welcomed the proposed disclosure of all listed and unlisted investments, but appealed for much more detail to be made obligatory and that investment decisions be disclosed retrospectively after a certain period. Records on selection criteria should be made public retrospectively to ensure greater transparency.
The PIC CEO pointed out that the PIC is a fund manager regulated by the Financial Sector Conduct Authority. The Financial Advisory and Intermediary Services Act stipulates clearly what must be done, and investors provide the PIC with a clear framework and investment mandate. The performance of these investments could be monitored by following the various indices at the Johannesburg Stock Exchange. Extending disclosure in the fashion that was being spelt out might be problematic as noted by some Members. PIC has to outperform the benchmarks given to it by investors within stipulated parameters. The risk of deviating from these benchmark was very minimal as monitoring is robust. He expressed the PIC’s commitment to transparency on its unlisted investments as per the approval from clients.

Members said PIC’s capacity to continue running profitably and competitively should not be thwarted. A Member disagreed with AmaBhungane’s call for extended disclosure. There was already separate legislation enabling access to information from public institutions. Opening up PIC meetings where investment decisions are being taken would not be ideal as competitors, in the name of the media, might have access to such market sensitive information- which could undermine the performance of the PIC.
The Chairperson said it was unlikely that the Committee would agree to have PIC’s investment decisions being made public. It was unlikely that it would be agreed that Parliament make board appointments, but it should be ensured that Parliament exercises necessary scrutiny. There must be mechanisms to obviate populism by Parliament but at the same time giving the executive so much of power. He pointed out that there were two PIC Bills, the Committee and the Private Member. When making comments going forward, the public should do it for both Bills. It was easy to do so because there were significant overlaps between the two Bills. Furthermore, there were two inquiries in relation to PIC which were being mulled; the one relating to specific individuals and the other, which would require the President’s approval, related to the operations of the corporation. He suggested the Committee process the Bills but do not vote on them up until the commissions of inquiry finish their work. The enquiries would probably have proposals for amendments, and these should be considered. He added that the PIC should not compare itself to other private asset managers as the state would have to come to its rescue in the event of a botch up.
 

Meeting report

Public Servants Association (PSA) submission
Mr Leon Gilberts, Assistant General Manager, PSA, took the Committee through the Association’s submission on the Committee’s Public Investment Corporation (PIC) Bill. The PSA represents more than 237,000 people employed in the public service. The PSA was of the view that PIC’s investment mandate should be coming from the depositors. Neither the finance minister nor the deputy minister should be the chair of the PIC. Further, there should be no political interference within the PIC. The chairperson should be appointed from the board of directors who are duly appointed in terms of the procedures of the Act.

The PSA opposed the provision that would require the PIC to consider certain matters when exercising its powers, namely securing the financial sustainability and security of the fund; creating and protecting local jobs; industrialising the economy, building the manufacturing sector and boosting exports; sustainable development; preference for investments inside rather than outside SA; the country’s development objectives; building a capacitated development state; and transformation of the economy and society. This would mean the proposed law would supersede the investment mandate depositors give to the PIC. There should be nothing in the statute that permits the PIC to ignore or over-rule or depart from the investment objectives of its clients.

The PSA objected to the clause that would allow the PIC to assist with financing the purchase of property by Government Employees’ Pension Fund (GEPF) members. This should not be embodied in law. The rules of the GEPF make no provision for assistance to members for the purpose of buying property. It is inconsistent, therefore, for the PIC to provide that assistance using GEPF funds. The PSA fully supported housing assistance to PSA members through the GEPF but believed the provision was misplaced in the PIC bill.

Public Service Collective Bargaining Council (PSCBC) submission
Mr Frikkie de Bruyn, General Secretary, PSCBC, welcomed the PIC Bill as its objective was to promote transparency and good governance within the PIC. Of interest to the PSCBC were two clauses as follows: Clause 2- empowering the corporation to finance the buying of property for the members of the GEPF; and Clause 3- allowing for two or more but not more than three representatives of a registered trade union, whose members are the majority of the members of the GEPF, to form part of the group of non-executive members.

Clause 3
For the PSCBC, the amendment of the clause is fundamental in ensuring transparency in governance of the PIC; and it further indirectly allows for the principle of worker control or utmost worker input into interest matters.

Clause 3(2) (b) (iii), which reads as follows:
“Two or more, but not more than three representatives of a registered trade union, whose members are the majority of the members of the Government Employees Pension Fund. These representatives are to be selected by the trade unions at the PSCBC based upon their proportional composition;”

The PSCBC believed the clause as is may be ambiguous and opens up the notion for interpretation and debate. The Committee may want to consider amending the wording to be similar as the wording of the clause on representation on the GEPF board in PSCBC Resolution 12 of 2002; which read as follows:
 
“Three representatives, nominated by the trade union parties admitted to the Public Service Coordinating Bargaining Council (PSCBC) in accordance with the proportionate representation off their membership to the total membership in the Council.”

AmaBhungane submission
Ms Karabo Rajuili, Advocacy Coordinator, AmaBhungane Centre for Investigative Journalism, commended the Committee for taking an initiative which would strengthen accountability and transparency of the PIC. She took the Committee through the submission as follows:
  
Clause 3: Transparent selection of the board
Clause 3 of the Bill provides for the minister to appoint board members in consultation with Cabinet. In keeping with other institutions that exercise significant public power and oversight, AmaBhungane’s view was that appointments to the PIC board should follow a public interview process conducted by the National Assembly. Not only stakeholders, but also members of the public should be able to make nominations.

Extending disclosure
In leaked information that has come to light, AmaBhungane had seen that internal concerns, such as those raised by the Risk Committee, have been ignored. To that end, it proposed a provision enabling public access to records of the PIC’s investment decisions. This would include board, portfolio and investment committee minutes in so far as they deal with investment decisions. AmaBhungane noted that the Promotion of Access to Information Act (PAIA) may not be the appropriate mechanism for such access, given that Section 44, Operation of Public Bodies, allows a public body to refuse access to records containing inter alia:
(ii) An account of a consultation, discussion or deliberation that has occurred, including, but not limited to, minutes of a meeting for the purpose of assisting to formulate a policy or take a decision in the exercise of a power or performance of a duty conferred or imposed by law. AmaBhungane recommended a dedicated provision with the following features: Any member of the public may request, and the PIC must provide within seven days, any minute of a decision regarding a PIC investment, provided that:

a) A prescribed period must have passed after the investment was made;
b) Disclosure may be refused for reasons of commercial confidentiality, subject to all reasonable efforts to redact the relevant records on the same grounds;
c) Any records that are already publicly available in some form may not be refused;
d) Where there is an overriding public interest, records may not be refused.

In a nutshell, AmaBhungane urged that the public participate in the appointment of PIC board directors. This would ensure greater public transparency. She also welcomed the proposed disclosure of all listed and unlisted investments, but appealed for much more detail to be made obligatory and that investment decisions be disclosed retrospectively after a certain period. Records on selection criteria should be made public retrospectively to ensure greater transparency.

Discussion
Mr F Shivambu (EFF) noted that at the core of PSA’s submission was that the PIC’s investment mandate should come from depositors. However, as per the current framework, GEPF provides the PIC’s investment mandates. He sought clarity about the alternative mechanism envisaged by the PSA? He believed different roles should not be prescribed for the PIC. The PIC’s capacity to continue running profitably and competitively should not be thwarted. He disagreed with AmaBhungane’s call for extended disclosure. There was already separate legislation enabling access to information from public institutions. Opening up PIC meetings where investment decisions are being taken would not be ideal as competitors, in the name of the media, might have access to such market sensitive information- which could undermine the performance of the PIC. There was little wisdom in this call for extended disclosure.

Ms G Ngwenya (DA) sought clarity about the opposition to having the Deputy Minister as chairperson of the PIC board. In the event that board members nominate the Minister or Deputy Minister as their chairperson, would that be suitable?

The Chairperson said he agreed with most of AmaBhungane’s proposals in his individual capacity, but felt the Committee was not going to agree to them at this stage. Although the issues raised could be agreed upon in principle and value, some of the suggestions were not practical. He urged stakeholders to strike compromises. It was unlikely that the Committee would agree to have PIC’s investment decisions being made public. It was unlikely that it would be agreed that Parliament make board appointments, but it should be ensured that Parliament exercises necessary scrutiny. There must be mechanisms to obviate populism by Parliament but at the same time giving the executive so much of power. He pointed out that there were two PIC Bills, the Committee and the Private Member. When making comments going forward, the public should do it for both Bills. It was easy to do so because there were significant overlaps between the two Bills. Furthermore, there were two inquiries in relation to PIC which were being mulled; the one relating to specific individuals and the other, which would require the President’s approval, related to the operations of the corporation. He suggested the Committee process the Bills but do not vote on them up until the commissions of inquiry finish their work. The enquiries would probably have proposals for amendments, and these should be considered. He added that the PIC should not compare itself to other private asset managers as the state would have to come to its rescue in the event of a botch up.

Mr Gilberts believed there should be no distinction between PIC and other fund managers. No matter how noble the cause might be, this would be an unfair distinction. If investment decisions are left to the PIC as an asset manager, it would not be necessary for government to intervene. The money invested by PIC belonged to the more than 1.2 million contributors who are all workers and pensioners.

Ms Rajuili said as part of its public interest work, AmaBhungane strongly believed openness and transparency was crucial. Given that there is taxpayer liability in the event that anything goes wrong at the PIC- this means there is public interest in its operations. The public should be able to scrutinise how investment decisions are made. She added that PAIA is a general law and could not encompass the call for additional disclosure. Trying to limit disclosure would not take the country forward.

Remarks by the PIC
Mr Daniel Matjila, CEO, PIC, pointed out that the PIC is a fund manager regulated by the Financial Sector Conduct Authority. The Financial Advisory and Intermediary Services Act stipulates clearly what must be done, and investors provide the PIC with a clear framework and investment mandate. The performance of these investments could be monitored by following the various indices at the Johannesburg Stock Exchange. Extending disclosure in the fashion that was being spelt out might be problematic as noted by some Members. PIC has to outperform the benchmarks given to it by investors within stipulated parameters. The risk of deviating from these benchmark was very minimal as monitoring is robust. He expressed the PIC’s commitment to transparency on its unlisted investments as per the approval from clients.
 
The Chairperson thanked everyone and noted that COSATU was due to give a submission but its representative could not attend due to a clash in parliamentary committee appearances. COSATU would be invited to give its submission on a later date.

The meeting was adjourned.

 

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