FSCA Investigation into PIC: An Analysis of Governance and Its Consequences

The Public Investment Corporation (PIC) is experiencing a serious corporate governance crisis, exacerbated by ongoing internal power struggles, despite key recommendations from the Mpati Inquiry Commission.

Governance Issues and Allegations

The Association for Monitoring and Protecting Public Pensions (AMAGP) notes that PIC has long been in the news for negative reasons because two important politically significant requirements have not been implemented. This situation followed the PIC board of directors suspending the CEO, Patrick Dlamini, on preliminary charges of corruption, mismanagement, and abuse of power.

Unresolved Reforms

This chaos revealed that critical reforms proposed by the Mpati Commission in 2020 remain unresolved. This occurred even though PIC management had previously assured Parliament of the full implementation of all recommendations. The Mpati Commission was established in October 2018 to investigate allegations of misconduct at PIC, which handles investigations into corruption, management failures, and improper investment decisions in Africa's largest shareholder company.

Commission Recommendations

The Commission presented an important report containing 276 recommendations aimed at systemic corruption and governance issues. Specifically, the commission concluded that appointing a deputy minister as chairman of the board subjected PIC to serious political interference and institutional instability. The appointment of an independent, non-executive chairman with specialized expertise in finance, pension funds, and corporate governance was recommended. The report clearly stated that board member appointments should be based solely on professional merit and independent capability, not on political placement or patronage.

History of Personnel Changes

Furthermore, the commission instructed the PIC board of directors to officially review compliance, oversight, and governance structures concerning the reinstatement of company secretary Bongani Mathebula. After the report was published in 2018, a former risk management head was dismissed for his role and connections in the VBS Mutual Bank case. In October 2021, former CFO Matshepo More was also dismissed due to misconduct related to institutional irregularities. PIC is currently challenging a previous arbitration ruling that required its reinstatement.

Former Head of Legal and Compliance Ernest Nesane resigned before the completion of official disciplinary proceedings but was heavily involved in the VBS scandal. Kabelo Rikhotso, a former investment director, previously reached a settlement and left PIC following allegations of wrongdoing. Nevertheless, Nesane is currently facing legal action regarding his liability and recovery of funds.

Anti-Fraud Measures

Meanwhile, PIC has approved an updated anti-fraud and corruption system, ensuring independent investigation of internal whistleblowing from executive management. A specialized Ethics Office has also been established to monitor organizational ethics, manage consequences, and provide stricter oversight of daily operations and employee conduct.

Current Conflicts and Suspicions

Despite all the recommendations, PIC is now embroiled in serious internal disputes, culminating in the preliminary suspension of Dlamini and the removal of Acting Investment Director Augustus van Heerden. These disagreements coincide with increased public scrutiny of PIC's unlisted investment portfolio, where approximately 67 billion rand was invested in unlisted entities that have recorded significant financial losses.

At the heart of this board struggle lies a deeply contentious multi-million rand investment deal related to the Lanseria airport, which reportedly led to a 400% overvaluation error.

Expert and Regulator Comments

AMAGP Chairperson Zirk Gus stated that the current board conflict provides a clear picture of how the company is managed. He noted that it reinforces the view that PIC operates with questionable motives, jeopardizing institutional trust in the management of public pension funds. Gus called on the Standing Committee on Finance (SCOF) to demand full disclosure of hidden documents, adding that the first document for full disclosure should be GEPF's investment mandate for PIC, especially concerning unlisted investments.

He also emphasized that the commission recommended the board chairman be independent with a defined term and experience in the pension sector. Gus described the state-owned company's statement about fully implementing the recommendations as 'dishonest, which has eroded trust through its actions.' He concluded that removing political influence and controlling PIC and basing appointments on merit would be the first steps toward ensuring governance integrity.

Government and Union Reaction

Neither PIC nor Deputy Minister of Finance David Masondo, who chairs the PIC board, responded to requests for comment. Masondo's representative, Sifo Mofokeng, stated that the Deputy Minister would not respond to media inquiries while the Financial Sector Conduct Authority (FSCA) investigation is ongoing. The regulatory intervention by the FSCA under Section 135 of the Financial Sector Regulation Act follows serious concerns regarding governance, transparency, and leadership stability at PIC.

Finance Minister Enoch Godongwana insisted in a statement made Wednesday morning that PIC has completed the implementation of the Mpati Commission's recommendations. Godongwana added that although challenges persist, PIC has made significant progress in strengthening the Corporation's governance system and oversight processes.

Meanwhile, the Public Service Association (PSA), representing over 240,000 public servants, expressed deep concern over developments at PIC. PSA stated: 'While GEPF remains financially sound and well-funded as a pension fund, recurring governance issues at PIC inevitably undermine the confidence of public servants whose retirement savings are entrusted to this institution. The most immediate impact is the erosion of trust. Members need assurance that investment decisions are made solely in their best interests and free from political or improper influence.'

The National Treasury's recent decision to suspend the allocation of 13.5 billion rand to municipalities due to persistent financial mismanagement has sparked serious discussions about the state of local governance in South Africa. The question arises whether the crisis is rooted in technology, funding, or deeper issues. Professor Eldrid Jordaan emphasizes that effective leadership and accountability are necessary to achieve significant change.

The Nature of the Municipal Crisis

The suspension of funds by the National Treasury was caused by chronic financial inefficiency. While adherence to financial discipline is a necessary condition, it does not solve the core problem. In the expert's view, the crisis in South African municipalities is not fundamentally a technological or purely financial issue; it is a problem of leadership and responsibility.

The Experience of the GovChat Platform

This conclusion was drawn from Professor Jordaan's experience founding GovChat—a national platform for South African citizens to interact with the government. GovChat aimed to strengthen the link between citizens and state structures. In collaboration with the Department of Cooperative Governance and Traditional Affairs (CoGTA), a digital service was developed allowing residents to report municipal problems via WhatsApp. Residents could specify GPS coordinates to report potholes, water leaks, power outages, sewage spills, and garbage collection failures, while also indicating their ward councilor.

Technology Versus Institutions

The initial hypothesis was that if municipalities received accurate real-time information directly from citizens, the quality of service delivery would improve. However, the platform revealed a much more complex institutional problem. Despite thousands of service requests being submitted through GovChat, many remained unresolved. As reports accumulated without visible action, citizen trust in the complaint process gradually declined, and eventually, the reporting function became one of the least used on the platform, not because service problems disappeared, but because citizens stopped believing in the effectiveness of their reports.

Comparison with Aid Programs

The technology worked as intended, but the institutions did not. The contrast with another GovChat initiative was particularly telling. During the COVID-19 pandemic, GovChat, in partnership with the Department of Social Development and SASSA, digitized access to hardship relief grants. Over 13 million South Africans successfully applied for social grants through this platform. Citizens trusted the system because applications led to tangible results: grants were processed and paid out monthly. The conclusion was clear: technology only delivers value when institutions act upon the information provided by it.

Scale of Platform Operations

The GovChat citizen engagement report demonstrates achieved results: the platform processed over 700 million citizen interactions, covered approximately five million households in South Africa, received 16,876 reports on municipal services, and collected over 30,000 citizen ratings on public facilities and services. Municipalities gained access to one of the richest sources of real-time citizen feedback in the country.

Lack of Response

Thus, the problem was never a lack of data. South African municipalities have had access for years to digital reporting tools, geospatial information, citizen feedback mechanisms, and real-time monitoring dashboards. It is known where water leaks occur, where power outages persist, where road conditions have deteriorated, and where garbage collection is not taking place. However, there has often been a lack of institutional readiness to act.

Digital Transformation and Governance

This distinction is crucial because digital transformation is often mistakenly equated with governance reform. Technology can increase transparency, automate processes, and improve visibility, but it cannot replace competent administration. Monitoring dashboards do not fix plumbing infrastructure, mobile apps do not fill potholes, and artificial intelligence cannot replace political leadership or administrative competence. Technology serves as an enabling tool, not the final outcome.

Trust is Built on Results

Citizens judge municipalities not by the complexity of their digital systems, but by whether water comes from the taps, whether electricity is restored on time, and whether service requests receive substantive answers. Trust in government is built not when citizens are invited to participate, but when that participation leads to measurable outcomes. The intervention by the National Treasury sends an important signal about the consequences of financial mismanagement, but simply withholding funding will not restore trust in local government. Accountability must be measured not only by audit results or financial compliance, but also by how municipalities respond to the daily needs of the communities they serve.

The Main Challenge is Leadership

South Africa does not need another municipal reporting platform, nor any pilot project or additional digital dashboard. It needs municipalities that treat every citizen report as an obligation to act. The technology exists; the data is available. Citizens continue to show willingness to engage when they believe the government will respond. Only one challenge remains—leadership. Ultimately, digital transformation cannot be successful without institutional transformation. Technology can identify every municipal failure in real time, but only responsible leadership can turn information into improved services. Until that moment, the greatest obstacle to service delivery will not be the lack of digital innovation, but the lack of execution.

Songezo Zibi, chairperson of the Standing Committee on Public Accounts, stated that the Ministry of Finance is not omnipotent, and the National Treasury cannot constantly monitor the financial accountability of municipalities.

Johannesburg Governance Issues

Zibi noted that the City of Johannesburg is overly complex, and the quality and rigor of political oversight and leadership from its officials require improvement. He participated in a briefing by the Parliamentary oversight committees where the recent appearance of the municipality before Parliament was discussed.

Audit and Financial Status

The latest report by the Auditor-General, Tsakana Maluleke, indicated that municipalities in the Gauteng province, particularly, are facing declining audit outcomes, deteriorating financial health, and service delivery challenges. The City of Johannesburg was highlighted as an entity requiring continuous intervention from both executive and oversight bodies after its audit opinion downgraded from unqualified to qualified.

Mayor Dada Morelo, speaking before the Scopa Committee and the Portfolio Committee on Joint Municipal Affairs and Traditional Affairs (CoGTA), assured that his administration intends to restore the city's financial health. It was revealed that over the past five years, the city has written off R45.16 billion in expenditures that were unauthorized, irregular, fruitless, and wasteful (UIFW).

Three Key Observations by Zibi

Zibi emphasized that work with the City of Johannesburg is being conducted jointly with CoGTA, but it will continue across all municipalities. He stated that they will work with the Auditor-General, other departments, the National Treasury, and CoGTA until the end of the seventh Parliament to ensure a visible level of service delivery to the public.

He outlined three main points observed by the two committees in their work with the City of Johannesburg. Firstly, there is a need to improve the quality and rigor of political oversight and leadership from the Mayoral Committee Members (MMC) and the board governing the large number of agencies in the City of Johannesburg. Since there are about 12–13 agencies plus the core administration, increased control from the MMC, the mayor, and council committees is required, especially the Municipal Public Accounts Committee.

Zibi added that with the effective execution of these functions, it might even become unnecessary for municipalities, including the City of Johannesburg, to appear before Parliament.

Structural Complexity and Contracts

The second observation concerned the excessive complexity of the city. In Zibi's view, there is no other city on the planet that has 13 structures, each with its own management system, board of directors, and leadership, which the Auditor-General must assess separately. This complexity hinders effective political and executive oversight.

The third observation, named by Zibi, related to contract and project management. The Auditor-General raised numerous questions regarding contract management, unpaid supplier invoices, and the unavailability of technical drawings, despite contractors performing the work and continuing to receive payment. These issues extend to agencies such as City Power and Pikitup, some of which are experiencing cash flow problems.

Further Steps and Remarks by Mkhize

Zibi confirmed that they are not satisfied with the current situation but intend to engage with the City of Johannesburg and other metropolises on an ongoing basis with other institutions so that residents receive a decent level of service. Zweli Mkhize added that they have been tasked with clarifying many issues. He mentioned the shift from financial management problems to difficulties arising from credit institutions, which expressed dissatisfaction over huge debts, service delivery problems, high water losses, and arrears owed to municipalities and Eskom.