High drama as suspended PIC boss goes to court

Patrick Dlamini, the CEO of the Public Investment Corporation (PIC), has approached the North Gauteng High Court in Pretoria on an urgent basis for an order declaring that his “precautionary suspension” last week was “unlawful”. 

Dlamini, who learnt of his suspension from a media report following an anonymous “whistleblower complaint” against him, is set to argue that the PIC’s board did not apply their minds when doing so, thereby casting the leadership of a systemically important economic institution into crisis. 

This new twist in the high-octane drama at the country’s largest fund manager, which oversees R3.7-trillion in pensions belonging to 1.2-million civil servants, threatens to put the PIC back where it was in 2020, when the Mpati commission made searing findings over its shoddy governance. 

This crisis, affecting an entirely new incarnation of the PIC, comes amid persistent questions over whether the right process was followed when it came to investing in companies like Lanseria Airport and poultry operator Daybreak Foods.

Dlamini’s suspension has had serious political implications too, driving a wedge between finance minister Enoch Godongwana, who appointed him a year ago and evidently did not believe he should have been put on ice, and deputy finance minister David Masondo, who chairs the PIC board which took that decision.

On Monday, Godongwana told the PIC’s directors he planned to dissolve the board at next week’s AGM, and they could resign if they want to. The following day, four directors resigned, leaving just five members of the board, including Masondo.

Then, late on Thursday, Masondo resigned as the PIC’s chair. It is understood that all directors have now resigned, effectively dissolving the board.

In a statement, Masondo said he was pleased that Godongwana had “recognised that, in performing my duties, I acted with integrity and in good faith”.

Critically, Masondo said he hoped that the matters the board was dealing with – including the whistleblower report into Dlamini – “will be thoroughly investigated and appropriately addressed, rather than being swept under the carpet”. 

Now Masondo’s resignation leaves Dlamini’s court case in an odd area: with Masondo and the board effectively dissolved, there can be no AGM on Monday and no directors to oppose the court action.

‘Weaponising’ anonymous reports

Contacted this week, Dlamini tells Currency that he had no option but to approach the court. 

“I have to challenge the unlawfulness of the board’s conduct and its decision. They have a fiduciary duty to apply their mind, and what I am arguing in court is that they failed to do this,” he said. “I’m not saying these should sweep the whistleblowers complaints against me under the carpet, but we cannot have a situation where anyone can make a report, no matter how false and spurious, and someone gets immediately suspended for this.”

This, Dlamini said, amounted to “weaponising” anonymous reports in a way that has crippled many state-owned enterprises in the past. 

The 26-page whistleblower report, dated June 9 and sent to Masondo and several other directors, accused Dlamini of attempting to “centralise power in his office”, “intervening in investment decisions” and bypassing the board “on material decisions”.

In particular, the whistleblowers took issue with how Dlamini had commissioned PwC to probe a deal involving Lanseria Airport.

The story there is that back in 2013, the PIC lent R333.2m to a company called Acapulco to buy a 25% stake in the airport. When Acapulco defaulted on the loan, the PIC took over the shares. However, an arbitration award later found that the PIC needed to pay R411m to Acapulco to compensate it for the rise in value during its tenure as shareholders. 

Dlamini then appointed PwC to examine the circumstances under which it had lost the arbitration and ended up having to pay R411m of its pensioners’ money.

PwC reached a number of damning conclusions, including that the payment to Acapulco “reflects a series of decisions and actions in which contractual and governance mechanisms were not consistently applied”. 

The report suggests the PIC paid far too much, as Lanseria was vastly overvalued – yet the PIC’s officials hadn’t properly challenged this value.

The whistleblowers, however, claimed that Dlamini had no authority to commission PwC and relitigate the case after the arbitration was concluded. And they said he had failed to declare his conflict of interest in this case, since he had been a director of Lanseria Holdings for 10 years until November last year.

Dlamini, however, has said he had a fiduciary responsibility to ensure the pensioners’ money he oversees is used properly. 

“I had a duty to ensure there was proper due diligence at the PIC involved in paying out Acapulco, and if not, who should be held accountable. We needed to know whether we dropped the ball. This was done with the full knowledge and support of the board,” he said. 

Masondo did not return calls on Thursday seeking comment. 

‘Escalating interference’

This case has become increasingly bitter. On Wednesday, the whistleblowers sent a letter to parliament’s standing committee on finance, asking for it to intervene to protect the PIC from Godongwana’s “escalating interference” which “imperils the governance of the PIC and the retirement savings of the public servants”.

They say Godongwana is acting to “shield” Dlamini by dissolving the board, which will cause the complaint against him to collapse. This, they say, will allow Dlamini to get “personal control over the governance of the largest pool of workers savings” in the country. 

In the original whistleblower complaint, they say “we represent a body of concerned individuals, counterparties, stakeholders and citizens of the Republic of South Africa”. They say, “our anonymity is a necessary precaution against retaliation”, which they fear would result. 

Either way, this battle has thrown the central outstanding recommendation of a 2020 commission of inquiry into sharp relief. Back in 2020, the Mpati commission examined a series of investment disasters that took place under the previous regime at the PIC, and provided 308 recommendations.

Nearly all those recommendations were implemented. Yet, there was one that Khaya Sithole, the independent analyst, says the ANC government pretended was never there: the need to have an independent non-executive chair. Instead, the PIC has been chaired by the deputy finance minister.  

“You get told to appoint a political deployee as a chair of the board when ideally you could have chosen someone else,” Sithole says.

This is a point made by a number of other experts, and a central reason why the DA this week proposed new legislation to outlaw anyone from being a PIC director unless they had been out of active politics for more than three years.

“There’s no doubt in my mind that the political influence is playing out in the governance here,” the DA’s Mark Burke tells Currency. “In a moment like this, you would have wanted to see an independently minded, industry-experienced board chairperson take control of the situation.”

Instead, he says, you have a highly factionalised organisation, with a litany of empty positions. “It’s a complete bonfire of governance, so there’s no doubt that the place is highly dysfunctional.”

The PIC whistleblowers echo this imperative to depoliticise the PIC. 

“On any sober assessment, it is the only path by which the corporation can be what it is meant to be: a professional asset manager, capable of delivering on its mandate, insulated from the political fortunes and personal entanglements of whoever happens, from time to time, to hold office,” they say in the letter to parliament. 

“Recent events are not an argument against that reform. They are proof of its urgency.”

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_{Top image collage: ChatGPT; Currency.}