South African Court Overturns PIC CEO Suspension, Citing Board Authority Lack

A court last week overturned the suspension of Public Investment Corporation (PIC) CEO Patrick Dlamini, ruling that the board that suspended him lacked the authority to do so; only the minister holds that power. That single finding tells you almost everything you need to know about what is wrong with how the PIC is governed. Read: Dlamini breaks silence after PIC reinstatement PIC CEO back at work three weeks after being suspended Godongwana: Dlamini court victory doesn’t end scrutiny The PIC is the largest shareholder in many large listed companies. Its views have significant influence in boardrooms. Its own governance should be beyond reproach. Instead, we are watching a repeat of the dysfunction that led to the Mpati Commission more than five years ago. That is not acceptable. I have watched this episode with growing concern. The PIC has the potential to be a powerful force for good: for the companies it invests in, for the pension fund members whose savings it manages, and for South Africas broader growth agenda. It cannot fulfil that potential while its own house is in disorder. What makes this worse is that it is not the first time. Instability has repeatedly plagued this institution, and each time the root causes are left unaddressed. There are some signs of stability returning. The newly appointed board has now had two weeks on the job. Dlamini has committed to cooperating with the investigations sparked by a whistleblower report. That is the right approach, and it creates the conditions for the institution to move forward. But stability is not the same as reform. What the PIC needs, and what it has needed since 2020, is a fundamental overhaul of how it is governed. Mpati Commissions work The Mpati Commission, which concluded in 2020, was established after a series of irregular PIC investments where political connections drove deal-making rather than investment rationale. The commission found that ministerial control over board appointments was a primary driver of poor decision-making – that successive ministers of finance had exercised total control over who sat on the board and, through that, over how the institution operated. I was struck, looking at recent events, by how little has changed. The fundamental institutional problems the commission identified remain unresolved. The PIC faces the same institutional flaws as the large state-owned enterprises before their reform processes began. The CEO is appointed by the minister, not the board, exactly the predicament that Eskom and Transnet faced when ministerial interference in senior appointments undermined both institutions. The court ruling last week showed the board cannot suspend its own CEO because that power belongs to the minister. Whatever the merits of the decision to suspend him, which the court did not assess, no company, public or private, can operate that way. A board without authority over its executive is inert. The principle here is straightforward. The board must have full authority over the executive. It must appoint the CEO, assess performance against a clear mandate, and support management in delivering without political interference. Back channels to politically exposed persons must be shut down – Mpati recommended this explicitly. Investment decisions must be made through professional committee structures that implement world-class processes, the kind that pension fund managers globally have refined over decades. And board members should be selected by the existing board, with the shareholders role limited to approval. The Mpati Commission made these recommendations in detail. It found that the convention of having the deputy minister of finance chair the board meant every cabinet reshuffle brought a new chair, a major source of instability. It recommended that the board choose its own chair. It recommended that the board select the CEO, subject to ministerial approval, with rejection permitted only on demonstrated good cause. In the commissions