Tito is right: kick politics out of the PIC, finish and klaar
To prevent abuse, it should be isolated from everything other than a mandate to make pots of money
There is something almost existential in the row developing between finance minister Tito Mboweni and the National Council of Provinces (NCOP) select committee on finance over the progress of the Public Investment Corporation (PIC) Amendment Bill.
Basically, Mboweni wants them to stop debating the bill and wait until the commission of inquiry into the PIC is completed and its recommendations known. Some of them may require being put into law and the Amendment Bill would be the obvious place to do that.
But the committee insists on pushing ahead. Changes to the bill, it says, can be made by the new parliament after the May 8 election.
In this, parliament is completely wrong. One of Mboweni’s issues is key. As it stands, the bill maintains the tradition that the deputy finance minister chairs the PIC board. Mboweni wants that stopped. He wants a non-politician running the board.
Given the many billions invested and lost by the PIC in shady companies and enterprises, the commission of inquiry is an exhibition of just how easy it is to steal seriously big money from the state in SA. Of course, the finance minister could simply stand by and allow the knuckleheads in the NCOP to finish their work in the sure knowledge that President Cyril Ramaphosa will never sign it into law.
But he would be encouraged by a hot-tempered debate under way right now in, of all places, Oslo. Norway runs the world’s biggest sovereign wealth fund. It is one of the few to have been created in a democracy. It is built on the country’s oil and gas wealth in the North Sea. It is designed to collect and invest the oil profits of today for the benefit of future generations.
It is hugely successful, with more than $1-trillion under management and it owns about 1.3% of all the world’s stocks and shares. And it has always had just one guiding principle – that all its decisions must be strictly financial. In other words, no political investments. The government has the right to take 3% of the fund’s annual profits for its budget. And that’s it.
Then, last Friday, the fund did something unusual. It announced it will be withdrawing its investments in companies that explore for, and produce, oil (think of a Tullow Oil, for example), but that it will remain invested in major integrated energy companies like BP, Exxon and Royal Dutch Shell.
The Norwegian finance minister was quick to insist the decision had not broken the golden rule. But the greens in the ruling coalition were delighted and boasted about their part in the fund’s decision. For them it was an environmental victory. The debate now raging in Oslo is whether the “no politics” rule around the fund has been irrevocably broken and the damage that might inflict on the fund in the future.
Try then to imagine what the PIC here would look like if it literally were not allowed to make “political” decisions and that all it was required to do was to maximise its profits, a percentage of which the government could take and use.
It would mean the end of the queue of putative black businesses lining up outside the PIC offices to ask for funding for their projects, on the grounds that these would be “transformative” or BEE investments. The PIC is in trouble because it has lost its focus as a fund manager and become a political enabler.
That has just got to be wrong. Far better, surely, to create a separate agency to drive black empowerment and investments and funded with money skimmed, transparently, from the PIC profits each year and its use declared in the national budget.
It’s a bit like the arguments the Reserve Bank makes about its mandate. Its job is to control inflation, a terrible curse if it ever gets going. I liked this quote from Benoît Cœuré, a member of the executive board of the European Central Bank, in an interview earlier this month: “People expect too much from central banks, considering what we can do and the mandate they have given us in the first place. If you give a central bank too many objectives, you transform it from an apolitical entity with a narrow mandate into a political institution. We have a duty to deliver on our mandate, that is price stability. But giving us too many objectives would make us political, which we certainly don’t want to be.”
You get the picture. The PIC should be wrapped up and isolated from everything other than a mandate to make as much money as possible. A bit for the state, OK, but primarily for its pensioners.
The PIC may not quite be the $1-trillion giant the Norwegians have created – it manages about R2-trillion – but it is the nearest wealth-creating investor of that size that we have. And as we discover how it has been abused, surely the right thing to do is to wait for the commission of inquiry to finish its work and then make legislation to make sure it doesn’t happen again.