Crisis looms for PIC dual mandate

Raiding the coffers of the Public Investment Corporation (PIC) should confirm one thing – it’s desperate days in SA. In years past, and, let us just say, before December 2015, access to funding – even for problem children such as SAA – would have been a much easier affair.

There was a very willing market out there to provide funding for what was a credible Treasury, despite concerns about the administration of Jacob Zuma. December 2015 is a clear marker for that loss of credibility.

Until that point there may have been growing unease about just how the country was being run, but little more.

The politics was bad, but that was the case with most emerging-market nations, Brazil at that time being the poster child.

But on that December evening when the president decided in his infinite wisdom to surprise party, country and global markets with his decision to fire finance minister Nhlanhla Nene and destabilise the Treasury, the unease quickly spiked to panic. And it was from that moment that the costs of running SA Incorporated spiralled out of control.

We are now at a crisis point where our wily politicians feel the R1.9-trillion in assets overseen by the PIC must be used to rescue SAA, among other entities.

The desperation will make this pursuit the ugliest of affairs over the coming weeks and months. It’s going to be quite the ride as politicians – who must think there’s a vault of money somewhere in the asset manager’s Pretoria offices – seek those keys.

But there isn’t a safe. These are assets that don’t belong to Dan Matjila or anyone of his executive or his investment team. They are merely managers of assets that belong to state employees.

They are merely custodians that are following a mandate that is set by its client, the Government Employees Pension Fund.

A smarter politician or faction would know that if there is anything to be captured, it’s the ladies and gentlemen who are responsible for setting that mandate.

To quote famed US author and humorist Mark Twain on the politicians in his 19th-century days, and sadly in my 21st century: “Suppose you were an idiot, and suppose you were a member of Congress; but I repeat myself.”

Anyway, I digress. What politicians and the biggest critics of the PIC fail to understand in their battle to gain control of the corporation is that it has a dual mandate – both “to generate returns on behalf of clients and to contribute to the developmental goals of South Africa”.

It’s an instruction from outside its offices, set up to protect people like nurses, teachers and police officers.

Should the PIC fail to meet its mandate, it can – and in fact should – lose the custodianship of those assets.

So the question is, does SAA, without a well-crafted recovery plan, with an “executive” chairwoman who has been at the centre of its crisis over the past decade, fit the second aspect of the mandate? It clearly doesn’t fit the first.

Even if it had an exceptional turnaround plan and a cleanup of its administration, we’d still have to ask the hard question of whether or not it meets the country’s developmental goals.

I’ve heard some excellent arguments on why it does, and why it doesn’t.

But as it stands, there’s simply no way the PIC could justify supporting the Dudu Myeni-led airline. Members of the new board have been at pains to show that she doesn’t run it as she once may have, using the appointment of a CEO who she didn’t favour as evidence.

But it’s a perception that sticks, especially as she has met with Matjila to request R6-billion.

Now there are times when, in following its mandate, the PIC exposes state employees to some rather poor decisions, on the surface of it anyway. What comes to mind is platinum miner Lonmin, whose shares have plummeted 98% since the Marikana tragedy on August 16 2012. Clearly, as a shareholder it hasn’t been a good investment, there’s no arguing that.

But can and should the PIC exit tomorrow? For the mere fact that the miner has more than 24000 employees and operates in what’s still a very volatile mining sector, I think it would be disastrous. A fire sale of its 29% stake – which may be one of the decisions it would have to make to reinvest into SAA – would send that stock stumbling even further and threaten not only the company, but the entire platinum belt in North West. That’s not development-positive. As much as being forced into investing in a badly run state airline that still has no turnaround plan that anyone can buy into, is not either. But, I guess, these are desperate times.

Ron Derby is the editor of Business Times