THE Public Investment Corporation (PIC), managing more than R2.6 trillion in assets, faced intense scrutiny during a parliamentary engagement with the Standing Committee on Public Accounts (Scopa).

The meeting, chaired by Rise Mzansi’s Songezo Zibi, delved into the PIC’s investment practices, particularly concerning funds managed on behalf of the Unemployment Insurance Fund (UIF) and the Compensation Fund (CF).

Concerns were raised about billions lost in underperforming unlisted investments, governance failures, and discrepancies between committed capital and current market value.

As of the latest reporting period, the PIC had committed R23.6 billion for the UIF and R3.1bn for the CF, yet the current market values stand at only R11bn and R1.7bn, respectively. This staggering gap has drawn sharp criticism from Scopa members.

The MK Party’s Thalente Kubheka questioned why the PIC tolerated such losses, pointing out that private asset managers report credit loss ratios of less than 5%, while the PIC recorded a 30% loss ratio in unlisted investments. “We are talking about an estimated R9bn in write-offs,” he said. “Who is responsible for valuing these financial assets?”

The PIC’s chief financial officer, Batandwa Damoyi, said the PIC appointed independent valuers through a tender process, ensuring a panel inclusive of black-owned companies. However, she admitted challenges in aligning accounting standards, particularly between Generally Recognised Accounting Practice (Grap) used by government entities and International Financial Reporting Standards (IFRS) applied by private firms.

“The divergence often arises when information is unaudited,” Damoyi said. “External valuers may not apply Grap standards.” Despite this, no new impairments have been recorded since 2020, according to the PIC’s chief investment officer, Kabelo Rikhotso.

Several high-profile cases highlighted the PIC’s poor investment decisions. The ANC’s Ntando Maduna cited Africa Oil, where R97 million was invested in December 2014, yielding only R7m before exit. In 2017, another R300m went into the same company, returning just R134m. Similarly, Musa Capital saw two separate investments totalling R500m with zero returns. “Why does the PIC continue reinvesting in underperforming companies?” Maduna asked.

Other notable failures include DayBreak Chicken Farm, Nature Cell, and Berlin Beef. ActionSA’s Alan Beesley pressed for answers regarding DayBreak, reportedly nearing liquidation despite a former PIC banker being appointed chief executive to assist with its turnaround.

On Nature Cell, which suffered a fire, questions lingered about insurance claims and revival prospects. Meanwhile, Berlin Beef remains in critical financial condition under the Turnaround and Value Add (TOVA) unit.

Scopa members expressed alarm over governance lapses contributing to these failures. The DA’s Farhat Essack, asked pointedly: “What advice can the PIC offer on urgently addressing governance failures?” He also sought clarity on the Special Credit Risk Committee’s composition and proactive measures.

PIC chief executive Abel Sithole responded that the committee included the chief risk officer as chair and benefits from an ethics office established post-Mpati Commission recommendations.

However, litigation looms large. Sithole confirmed ongoing legal actions against entities like MOSA, whose US-based directors were being pursued personally. When queried about associated costs, he deferred to providing a written response later.

The debate extended to whether the PIC’s social mandate undermines its competitiveness. The EFF’s Chumani Matiwane questioned if socio-economic transformation goals conflicted with delivering competitive returns.

Deputy Finance Minister David Masondo reassured the committee, saying: “The PIC aims to generate strong returns while making a positive social impact.” He attributed past challenges to operational decisions rather than to the dual mandate itself.

Despite this, concerns persist. The MK Party’s David Skosana noted the lack of equity ownership opportunities in township malls, asking: “Are investments benefiting black communities meaningfully?”

Sithole highlighted recent strides, including allocating R18bn to black women-led businesses since 2022 and pushing for at least 30% women’s ownership among investees.

The Chairperson emphasised the need for greater transparency, strengthened governance, and strategic alignment with national development priorities. “The Committee will schedule another meeting in the next parliamentary term to focus exclusively on the unlisted portfolio,” he said. This follow-up aimed to address auditing issues flagged by the Auditor-General and explore potential solutions.

For now, the PIC faces mounting pressure to justify its decisions, recover lost funds, and prevent future missteps. As Sithole acknowledged: “While the proportion of bad investments may be small, the absolute value is significant.”

With billions at stake and South Africa’s economic future hanging in the balance, the PIC must act swiftly to restore trust and deliver sustainable financial returns.

investment scrutiny

PIC grilled over R9bn write-offs and governance failures