Two internal legal opinions obtained by the beleaguered Public Investment Corporation – Africa’s largest asset manager – gave the now-dissolved board the greenlight to suspend the entity’s CEO and concluded that finance minister Enoch Godongwana’s approval was not legally required before the move.
Sunday World has seen copies of the legal opinions, which formed part of the board’s deliberations before PIC CEO Patrick Dlamini was placed on precautionary suspension.
On Thursday, government announced a new board chaired by the deputy minister of planning, monitoring and evaluation, Seeiso Mohai, after the dramatic implosion of the board of the entity that manages R3.6-trillion in assets. The board’s collapse was seen as the culmination of a high-stakes power game that has pitted Godongwana against his deputy David Masondo, who chaired the PIC until his resignation from the board last week.
Masondo, who has been criticised by ANC secretary-general Fikile Mbalula over the handling of the saga, has denied that a rift exists between him and the finance minister.
Dlamini’s suspension, based on a whistleblower report that laid bare a governance crisis under his watch, prompted the ire of the finance minister who did not believe the contents of the report warranted such action.
Dlamini and Godongwana are said to be close, having served together as CEO and board chairperson of the Development Bank of Southern Africa.
The legal opinions that assessed the legality of Dlamini’s suspension relied on information from the whistleblower report, an account from the PIC and a response from the suspended CEO’s lawyers.
In the one opinion, addressed to former board member Mugwena Maluleka, Malatji & Co concluded that the PIC board had the authority to regulate and manage his employment relationship. “The PIC is the employer of the CEO and the board is vested with the requisite authority to regulate and manage the employment relationship, including the power to impose a precautionary suspension where the circumstances justify such a course.”
The lawyers further found that section 6(1)(b) of the PIC Act does not give the finance minister the authority to appoint, discipline or suspend the chief executive in his capacity as an employee of the corporation.
Although the PIC’s delegation of authority provides that the suspension of the chief executive is subject to ministerial approval, Malatji & Co found that the provision cannot override the memorandum of incorporation or the broader governance framework.
“The DoA … permits deviations approved by the board and further provides that, where a resolution of the board conflicts with a provision of the DoA, the board resolution prevails.” The firm advised the board to notify Godongwana of its decision and the reasons for it as a matter of transparency and accountability.
The legal opinion became a source of tension after Godongwana learnt of Dlamini’s suspension through correspondence from Masondo.
In an email dated July 15, just a day after Dlamini’s precautionary suspension, Godongwana acknowledged receiving Malatji & Co’s legal opinion but said he was considering the legal position and reserved his rights on the matter.
The minister questioned whether the board had properly exercised its fiduciary duties before making the decision.
“The PIC is one of the most important institutions in the country. It manages vast assets. It is a role model on matters of governance. Its conduct and performance is a matter of great importance and concern to a multiplicity of stakeholders including, not only its own beneficiaries but also the wider economy, regulators and rating agencies.” Godongwana said the board should have weighed the seriousness of the allegations against Dlamini against the consequences of suspending the head of the country’s largest asset manager.
“I really need to be informed by you as to the evaluation and deliberation by the board in taking the decision to suspend. Why it considered the allegations, individually and collectively, against the CEO to be so serious as to justify the huge consequences of the fact of the suspension of the CEO of South Africa’s premier institution?”
The minister expressed disappointment that he had not been informed before the decision was taken.
“Whether or not you were obliged to consult me or even inform me in advance of the decision, I would have thought that in the context of our relationship, you would have seen fit as a minimum to inform me in advance of the decision, let alone to seek my views,” he wrote.
In a separate legal opinion, Malatji & Co also backed the board’s decision not to dismiss the anonymous whistleblower report that triggered Dlamini’s precautionary suspension.
Responding to questions, Masondo dismissed suggestions that his relationship with Godongwana has broken down over the affair. He said their differences were limited to aspects of the state asset manager’s governance and that they continued to work well together.
His remarks came after Mbalula weighed in on the PIC saga at a media briefing on Tuesday, saying a deputy minister must “stay in your lane” and if the differences could not be resolved, “someone must go”.
Masondo said the focus should instead be on restoring stability at the PIC after the new board’s appointment.
“The president has provided guidance … and we must all support the newly appointed board and its chair, Seeiso Mohai,” Masondo said.
The Ministry of Finance said there were four institutions investigating several matters at the PIC. “The Minister will provide a view once those investigations are concluded.”
- Legal opinions advised the PIC board that they had authority to suspend CEO Patrick Dlamini without finance minister Enoch Godongwana’s approval, citing governance rules over ministerial consent.
- Dlamini’s suspension followed a whistleblower report revealing governance issues, sparking tension as Godongwana questioned the board’s fiduciary duty and lack of prior consultation.
- The board collapsed amid a power struggle between Godongwana and his deputy David Masondo, who chaired the PIC until his recent resignation.
- Malatji & Co legal firm supported both the suspension's legality and the decision to take the whistleblower report seriously.
- Masondo denied any rift with Godongwana, urging unity to restore stability at PIC, while ongoing investigations by four bodies continue.
