Deputy finance ministers should no longer chair the Public Investment Corporation (PIC) as this practice has caused significant damage to the asset manager, the Commission of Inquiry Into Allegations of Impropriety Regarding PIC has recommended in a report.
“The deputy minister of finance should not be the PIC chairperson. This has caused considerable instability. Skills needed to chair the board may well be different from those that the deputy minister of finance brings,” the report says.
“The chairperson [of the PIC] needs to be independent and non-executive, and he/she needs to have experience and expertise in pension funds, finance, markets as well as governance.”
Frequent changes to the finance portfolio in Cabinet under former president Jacob Zuma also contributed to “instability and a vacuum of leadership at the helm of the PIC”, the commission found.
Between 2015 and May last year, South Africa had five ministers of finance and three deputy ministers.
This created major instability at the National Treasury and within the institutions that fall under its control.
Alf Lees, the DA’s spokesperson on the PIC, said in a statement that the commission’s recommendation about an independent PIC chairperson meant that the PIC Amendment Bill, which is currently on President Cyril Ramaphosa’s desk for his signature, must be sent back to Parliament.
As it stands, the bill will not address the governance crisis at the state asset manager, as explained in the damning report which was released on Thursday.
“The bill, in its current form, makes no provision for the appointment of an independent chairperson,” said Lees.
“If Ramaphosa is to sign the PIC bill in its current form, he will not only go against the commission, but will also expose PIC money to further abuse.”
Ramphosa set up the commission of inquiry under retired Judge Lex Mpati in 2018, after allegations of corruption, collusion and a series of inexplicable investments led to the PIC losing millions of rands.
The PIC is a state-controlled institution that manages assets of about R2.13 billion on behalf of the Government Employees Pension Fund, the Unemployment Insurance Fund and the Compensation Fund, and invests funds on behalf of these entities.
The commission found that there were flagrant irregularities in the investment choices made by the PIC, including nepotism, political interference and the unjustified enrichment of certain individuals.
Altogether, the commission investigated eight transactions, including investments in Iqbal Survé’s Sekunjalo Group, Steinhoff and VBS Bank.
The transactions were concluded when Dan Matjila was still chief executive of the PIC.
In the 995-page report, the commission said Matjila abused his authority to give financial assistance and contributions to individuals, organisations, and even Cosatu and the ANC.
The commission recommended that all the transactions between the PIC and Sekunjalo be subjected to a forensic investigation to trace the flow of money into and out of the group.
Matjila’s close relationship with Survé placed intense pressure on employees of the PIC to circumvent the necessary approval processes so that money could be invested in Survé’s company, the report said.
One of the most controversial transactions was the PIC’s investment in Ayo Technology Solutions, another Surve company, in December 2017.
According to the report, Matjila himself signed the share subscription which would see the PIC purchase a 92% interest in Ayo at R43 per share.
He did not have the approval of the necessary stakeholders to make that investment.
In October last year, Ayo’s share price fell to R5.60 per share – an 87% reduction in value.
This raised the question of whether the PIC obtained these shares at a reasonable price.
The PIC’s investment in Independent News, another Surve project, was equally questionable.
The commission found that the media group did not repay its loan of nearly R1 billion to the PIC.
An agreement was concluded, in terms of which some of the debt was converted into an interest the PIC acquired in another of Survé’s companies, Sagarmatha Technologies, in December 2017.
“This demonstrates a lack of ethics, lack of compliance with laws and regulation, and a disregard for the best interests of the PIC and its clients,” the commission said.
In a press statement, Ramaphosa said that the report would be handed over to the National Prosecuting Authority to take the necessary steps against those involved.
The president said it was concerning that the PIC’s investment choices led to large losses and that the organisation seemingly did not see the need to try and recoup any of the losses.
Joe Maswanganyi, chairperson of Parliament’s standing committee on finance, said the committee would demand feedback from the PIC and Treasury in light of the findings contained in the report.