In hindsight Barloworld’s 2007 AGM may have been the high point of the Public Investment Corp’s (PIC) relatively new role as an active investor. A fiery Brian Molefe let it be known before that dramatic meeting that he would be going head to head with one of the grand old institutions of SA business. Indeed, by 2007 Barloworld seemed a bit too grand, a bit too old and a bit too institutional for the new SA. Long-term chair Warren Clewlow may also have been a bit too grand, at 70 a bit too old and a bit too much of an institution.
To Molefe, who never shied away from an abrasive interaction with white-dominated corporate SA, Barloworld may have epitomised a determination to ignore the political changes that had swept through the country in the previous 13 years. The unwieldy conglomerate had never had a black executive director.
Since his transfer from national treasury in 2003 Molefe had shown determination to use the PIC’s considerable financial muscle to transform the business community.
Back then, covering the PIC was pretty much a labour of love for journalists, who for decades had tracked a largely staid corporate sector dominated by a club of white cronies.
While transformation was probably the single most compelling of the PIC’s missions, corporate governance was also high on its list. Perhaps because it was willing to take a public stand on transformation and executive remuneration and drive initiatives such as the code for responsible investing in SA, the PIC escaped close interrogation of questionable deals.
The PIC is providing funds to well-connected individuals who fritter them away on dismal investments
— Ann Crotty
Funding the politically connected Elephant Consortium’s acquisition of a valuable stake in Telkom in 2004 should have sparked greater outrage.
A year after the Barloworld drama, the PIC launched one of the most significant corporate governance initiatives SA has seen, publishing on a quarterly basis details of its voting at shareholder meetings. Other major institutional investors were cowed into providing the same disclosure.
For almost 100 years, state employee pension funds had been excluded from investing in equities. After little more than a decade, the PIC looked set to be a force for positive change in this multibillion-rand market.
What a disappointment it has proven to be. That the most recent voting results available are for the quarter to March 2017 is symptomatic of part of what went wrong. On corporate governance there appears no capacity or even willingness to follow through on the early promise.
Of much greater concern is that instead of the substantive transformation SA needs, the PIC has succumbed to the politically pragmatic strategy of providing funds to well-connected individuals who invariably fritter them away on dismal investments.
Sadly, the inflation of financial asset prices and the growth in government employees has sheltered the PIC from the full consequences of its value-destroying investment decisions. With an investment kitty of nearly R2 trillion, it has been able to distort the effective functioning of the market for the benefit of a few cronies.
Not unlike the previous regime.
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