Africa's Biggest Money Manager Attacks South Africa Pay Policies

  • PIC says fees paid to Accelerate chairman are `excessive'
  • Independence of some non-executive directors questioned

The Public Investment Corp., which oversees the bulk of the South African government’s pension money, voted against pay policies at more than one third of the annual general meetings it attended between July and September last year.

The PIC, as it’s known, refused to endorse compensation policies at Telkom SA SOC Ltd., South Africa’s biggest fixed-line operator, and Investec Plc, the country’s fourth-largest bank by value, according to the Pretoria-based money manager’s proxy voting report, published on its website

The PIC, Africa’s biggest money manager with more than 1.8 trillion rand ($119 billion) in assets, owns shares in most of South Africa’s listed companies. While the country, which has one of the world’s highest levels of inequality, has a corporate governance code, there are no laws dictating directors’ pay. As yet, while shareholders may vote on pay at most annual general meetings, the votes are not binding and, unlike jurisdictions such as the U.K., there also aren’t rules about how long a non-executive director can sit on a board before no longer being considered independent. 

Wrong Benchmark

Tito Mboweni, a former governor of the South African Reserve Bank, is receiving “excessive” pay as chairman of Accelerate Property Fund Ltd., after his fees tripled to 1.58 million rand from 506,667 rand a year earlier, the PIC said. At Investec, which has operations spanning South Africa, the U.K. and Australia, “the PIC considers the quantum of the remuneration to be excessive,” while the 10 percent cap on increases in director’s fees for the next 24 months is “too high,” the money manager said.

Concerns around Telkom include that its short-term bonuses are based only on profitability, no sustainability targets have been set, and one-off items shouldn’t have been used in pay calculations. It also benchmarked its pay with the wrong companies and former Chief Financial Officer Jacques Schindehutte was paid almost 19 million rand “despite being suspended and retiring only five months into the year.”

Independence Questionable

The PIC questioned the independence of Len Konar after 20 years at Illovo Sugar Ltd., Hugh Herman with 39 years at Pick n Pay Stores Ltd., and David Nurek, Ben van der Ross and Hilton Saven, who have all been on Lewis Group Ltd.’s board for 11 years, according to the money manager’s report.

The PIC attended 32 annual general meetings between July and September last year, according to the report. It voted against pay policies at 12 of those meetings and in seven instances it voted against directors not considered independent, according to Bloomberg calculations based on the report.

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