Political Correspondent

CAPE TOWN The cabinet has agreed to the corporatisation of the Public Investment Commissioners (PIC) as a state-owned entity outside the public service.

The PIC manages and invests funds for public-sector pension funds, notably the Government Employees Pensions Fund, and has assets under management of more than R309bn, making it the largest asset manager in the country.

Corporatisation was aimed at creating a modern, world-class asset-management company with the ability to compete in the market for skilled asset managers and specialists, PIC head Brian Molefe said this week, after the cabinet announced it had approved the Public Investment Corporation Bill.

Molefe said the PIC's name would change to the Public Investment Corporation, which would be governed by a board of directors. It would no longer have commissioners.

Molefe said corporatisation would lift the constraints under which the PIC currently operated. For instance, at present PIC staff are seconded from the national treasury by the department's directorgeneral.

Although not responsible for the appointment of asset managers, the PIC was responsible for investment performance.

As a corporatised entity it would be able to employ its own staff and pay market-related salaries rather than being bound by public service salary scales.

It could also give more focus to improved corporate governance. In the past, auditor-general's reports have highlighted deficiencies in the PIC's internal financial management, largely related to the lack of skilled personnel.

After corporatisation, the PIC would continue to be accountable to Parliament's standing committee of public accounts as well as the Public Finance Management Act.

Molefe also said the PIC would become subject to the Financial Services Board regulations and the JSE Control Act, bringing its disciplines into line with those imposed on private sector institutions.

He said the reconstituted PIC would not actively seek asset-management funds from private sector institutions.

Molefe said the bill would not change the PIC's investment mandate which was laid down by the institutions that entrusted it with their money.

The mandate would have to be aligned with the pension fund's liability profile, which would dictate the division of asset allocations between long-term and short-term assets. Molefe said this project would be undertaken some time this year.

Feb 06 2004 07:22:41:000AM Linda Ensor Business Day 1st Edition