February 10, 2004

By Ann Crotty

Johannesburg - The Public Investment Commissioners (PIC) would initiate a study this year to see how the disparity between the lowest-paid workers and the highest had changed over the past few years, Brian Molefe, the PIC's chief executive, said yesterday.

Molefe was addressing a retirement fund seminar on the role of the PIC in the local equity market.

The PIC manages and invests public sector pension funds and has R309 billion of assets under management, of which R110 billion are in equities. In 1994 it had no exposure.

"Our equity investments currently constitute between 8 percent and 10 percent of the JSE's market capitalisation," said Molefe, adding that the PIC's growing involvement in equity investment inevitably meant it was involved in shareholder activism "in a bid to ensure the best corporate governance practices" were in place.

Molefe told the seminar that people had blamed the government for the increase in the gap between the rich and the poor that had occurred over the past 10 years.

"But nobody has blamed the private sector", which is where the increasing disparity had occurred. "It is on the back of the efforts of the workers that executives are paying themselves these packages," he said. 

While government bonds continued to represent the single largest asset type in the PIC's portfolio, Molefe did not believe it had to focus as much pressure to ensure good governance at government level because "people can vote every five years". But he noted: "The private sector is less democratic."

Sarah Ryklief, the director of Labour Research Services (LRS), welcomed the news of the PIC's study and said she hoped it would be objective and comprehensive. Ryklief said LRS would be bringing out a 10-year review next month that would chart the trend in the wage gap, which had grown significantly.

In addition to "looking closely" at executive remuneration, the PIC would also use its position to promote black economic empowerment (BEE).

Molefe, who recently caused a stir when he criticised Sasol's description of BEE as a risk for the company, said the PIC did not share the view.

"There's a risk in doing business in any country, whether it's China, France or South Africa, and that risk is incorporated in the sovereign risk measured by ratings agencies. I don't believe that over and above this sovereign risk, there's a risk of doing business with black people," he said.