Issue: Mar/May 2011


PIC of the bunch

A better choice to head the Public Investment Corporation couldn't have been made. Make no mistake that Elias Masilela has a mind of his own.

"Everything starts and ends with the real economy. The financial sector is there only to provide oil for the engine. It's not the engine itself." Thus does Elias Masilela express an article of faith that guides his passion for economics. Now he's in a pole position of the financial sector. Newly-appointed chief of the Public Investment Corporation -- SA's largest asset manager with over R900bn under management, the bulk of it from the Government Employees Pension Fund – he himself will be an asset to it.

Not only is he a strongly independent thinker, but he isn't shy to say what he thinks. Watch how he says it: carefully rather than cautiously; thoughtfully and often provocatively. He'll bravely push the envelope. He'll constructively stimulate debate. He'll be mainstream touched occasionally by maverick, unfettered by political opportunism. Thus, in an interview with TT:

On the role of the economy

The relationship between savings, investment, growth and employment is critical to deliver higher welfare for society (as opposed to social welfare). At its heart is savings. The real economy generates the ability to save. The financial sector enters the equation to intermediate between owners of surplus capital and those who demand capital. That intermediation can only happen if the real economy is sufficiently productive to generate wealth. So the financial sector can't be an end in its own right.

To influence society's welfare, the financial sector's intermediation needs to be efficient and optimal. It must take account of the economic structure within which it operates.

On problems of intermediation

The contribution of SA's financial sector to gross domestic product competes favourably with the most successful economies of the world. But the nature of our intermediation is such that SA does not benefit to a similar extent.

This could be because intermediation in SA is too traditional. It ignores the dichotomous nature of the SA economy. It sees traditional investment as one thing and socially-responsible investment (SRI) as another. SRI is vital if economic participation of all societal groupings, human and geographic, is to increase.

On prescribed assets

There ought to be a fine line between SRI and asset prescription. The latter is sub-optimal. It shifts the decisions of when, where and how to invest from investors to government. Investment decisions must be based on commercial criteria, not driven by politics.


Masilela . . . thoughtful views

On stakeholder activism

As a philosophy, it's crucial at the individual and institutional levels. For service delivery to be optimal, there must be countervailing balances in the relationship between the service provider and the consumer. It's about a symmetry of information where the consumer fully understands what he's buying, why he's buying, and what the value is.

Then the consumer can act timeously and appropriately. This puts the service provider on its toes, to deliver an optimal service, because it knows that the consumer can vote with his feet.

On labour market flexibility

A labour market that's efficient and productive must be able to allocate resources across business cycles. In SA, for instance when there's a slowdown in mining, it's difficult to retrain miners for other jobs because their skills and literacy levels are lacking. In a flexible market, this would not be a constraint. Literacy levels will be sufficient for them to be retrained for other disciplines.

Another characteristic is making labour mobile across geographic boundaries. Where transport and search costs are high, mobility is compromised and the ‘reservation wage' is also high. This prices out labour because its cost is not necessarily consistent with productivity. Another way to reduce labour costs is to reduce administered prices.

If we can successfully address these issues, we can halve unemployment. We can allow the market to clear the present imbalance between a surplus of ‘unqualified labour' on the one hand and a shortage of ‘qualified labour' on the other.

On asset management

People make sacrifices to save. They reduce their consumption, balance short-term household expenses against long-term retirement needs, and pay for their money to be looked after. The asset manager is at the tail end. He must be the honest servant of the vulnerable worker.


Elias Masilela is an economist. One the one hand, he's ready to smile and joke. On the other, he's intellectually hard and forceful. Better not think his approachability allows for triviality or the two hands might come together on your ears.

Brought up in a Swaziland “safe house", run by his mother and used as a base for armed sorties against the apartheid government, Masilela warmly records his memories as a young boy of the ANC and PAC cadres who passed through it. Adding to his credentials, Number 43, Trelawney Park is an immensely readable piece of liberation history.

Trained as an economist at Swaziland, Addis Ababa and Harvard universities, Masilela (46) has been appointed by cabinet to head the PIC. He is or has been chair of the SA Savings Institute, on the boards of the SA Reserve Bank and Government Employees Pension Fund, acting deputy director general for economic policy in the Department of Finance, a National Treasury representative at Nedlac, inaugural chair of the Financial Sector Charter Council and a member of Trevor Manuel's national planning commission.

Those are amongst his official designations. Unofficially, it's commonly known that he was a main author of National Treasury's first discussion document (in 2004) on reform of retirement funds.

In 2005 he left the public sector to join Sanlam as executive head of stakeholder strategy, ultimately to become head of corporate affairs and retirement reform. In this role his responsibilities included strategic direction of sustainability management, corporate social investment and public affairs.

Masilela leaves Sanlam with praise: “It gave me the level of intellectual freedom I wouldn't have enjoyed anywhere else. It allowed me to speak my mind in public without any need for having to seek authority. Even where we disagreed on matters of principle, I would not be prevented from expressing it. To that extent, I'll miss the institution and the visionary leadership of Johan van Zyl."