Amid growing calls to privatise several ailing government entities, an economist says South Africa’s government pension fund members could do better without the Public Investment Corporation (PIC).
Dawie Roodt, who specialises in fiscal and monetary policy, said that taking into account the risks and costs of running the PIC as an entity, outsourcing the management of government pension funds and the other portfolios at the PIC’s desk to private fund managers would result in a net saving for government.
This week government announced the commission of inquiry into allegations of corruption at the PIC would begin work “in due course”, a message that did not satisfy the United Democratic Movement (UDM).
The party’s leader Bantu Holomisa complained that the names of the chair of the commission and the supporting team, as well as the detailed terms of reference, were yet to be announced.
“The UDM outright rejects the idea that the PIC board – which includes CEO Dr Dan Matjila, who is also under a cloud of suspicion – should be given the task of appointing the forensic company,” said Holomisa.
“The board appointing the audit firm is tantamount to a thief appointing his own judge and jury. National Treasury or the commission itself should appoint such a forensic company.”
The PIC, which Roodt explained was created by the apartheid government, partially as a means to access funds to close the gap in budget deficits, did initially improve the fiscal health of the country.
Of late, however, government coffers were deteriorating partially because of the growing conflict of interest in the way the PIC was managed.
“There is a conflict simply because government cannot be the borrower and the manager of a fund. We can live without [the PIC] because a lot of the work that goes into managing the funds controlled by them is outsourced to private entities in any case,” said Roodt.
He added that taking into account the cost of running the PIC as an entity, dissolving the entity made financial sense.
Roodt also lamented the lack of control pension fund members had over the management of their funds. He said that while in theory, workers did have a say in the handling of their monies in the fund, in practice, this was not the case.
“The PIC has been treating the government pension fund poorly. The message we get from the PIC is that they treat this money like it’s their money, like it ’s government ’s money.
“That money belongs to the members of the pension fund and it should be controlled by them.”