7 take-aways from the PIC inquiry

The PIC commission of inquiry on Wednesday concluded its public hearings. The commission was appointed by President Cyril Ramaphosa last year and was tasked with investigating allegations of impropriety in the corporation's investment decisions.

The PIC manages R2trn in public funds and invests on behalf of the Government Employee Pension Fund.

Over the past eight months, the commission heard from 77 witnesses. Among the witnesses were business people who had had dealings with the PIC, former board members, including former chairperson Mondli Gungubele, and axed CEO Dan Matjila, who responded to several allegations made against him.

The commission was led by Justice Lex Mpati and assisted by former Reserve Bank Governor Gill Marcus and veteran stock broker Emmanuel Lediga. They will prepare a final report for the president, to be submitted by October 31.

Mpati commented that during the course of the inquiry several more "questionable transactions" have been brought to the attention of the investigating team. This means their investigation is still ongoing and if warranted more public hearings will be scheduled.

Fin24 looks back on some of the key things the inquiry heard:

1. Identity of whistleblower 'James Nogu' still up in the air

Among the evidence presented before the commission include a set of emails from an anonymous whistleblower by the name "James Nogu".

In the emails, Nogu alleges that Matjila, during his time as CEO, facilitated funding to a business owned by a woman said to be his girlfriend.

The PIC had appointed a forensic investigator to find the identity of Nogu, with no final outcome.

Matjila in turn has told the commission that the allegations made against him are far too "malicious" to be from a whistleblower. Matjila had also been accused of nepotism, specifically for appointing his son at the PIC. Matjila has said the man in question is not his son. He added that the level of maliciousness in the allegations prompt him to commission an investigation into the whistleblower.

In an update to the commission, evidence leader Advocate Jannie Lubbe said that there have now been six investigators who have tried to uncover the identity of Nogu or rather the author of the emails. "The investigation is now with the sixth investigator, with little hope that anything will come of it," Lubbe told the commission. 

2. Lifestyle audit clears Dan Matjila and others

A lifestyle audit conducted by PwC director Lionel van Tonder found no evidence of criminal conduct by five officials.

Van Tonder conducted a lifestyle audit and do background checks on Matjila, Gungubele, former board members Sibusiswe Zulu and Dudu Hlatshwayo, and former chief financial officer Matshepo More. They had been implicated in allegations of wrongdoing by previous witnesses.

Mpati has ruled that van Tonder's affidavit will be made available on the PIC website, but the confidential information relating to the individuals will not be made publicly available.

The lifestyle audit also looked into an allegation that Matjila received a R2.5m loan from VBS as a kickback for the PIC's investment into the mutual bank, which has since been liquidated. There was no evidence in the lifestyle audit that Matjila benefited from the loan.

3. PIC had high hopes for VBS Mutual Bank

The PIC held a 27% shareholding in VBS Mutual Bank, with the hopes that it would grow to serve a significant market in rural Limpopo. However, when majority shareholder Vele Investments stepped in, the PIC's dreams for VBS "went up in smoke", Moyane told the commission.

The PIC's reputation was severely damaged following the VBS fallout, especially because the PIC appointed its directors – Paul Magula and Ernst Nesane- to safeguard it.

Magula was dismissed from the PIC following a disciplinary hearing in which was found guilty of charges, while Nesane resigned earlier this year following his testimony to forensic investigators looking into VBS.

4. AYO not worth the money the PIC poured into it

Several witnesses have appeared before the commission indicating that AYO was overvalued and the R4.3bn the PIC paid to acquire shares was far too much. The PIC invested in the IT company in late 2017.

Former chief investment officer of AYO Technology Solutions, Siphiwe Nodwele, who resigned in August 2018, said the IT company was valued between R700m and R1bn – and not R14.8bn as the PIC determined. AYO is linked to Sekunjalo Group, of which businessman Dr Iqbal Survé is the executive chairman.

Another former executive, Abdul Malick Salie, who resigned in May 2019, has said that the value of AYO was "stretched out" in its pre-listing statement. AYO had listed on the JSE in late 2017.

The PIC is currently in litigation to recover the R4.3bn in AYO. Survé said there was no reason for the PIC  to recoup its R4.3bn investment in AYO saying it was sound and Matjila says that the PIC has not lost money on the investment.

The IT group's share price has since declined from its listing price of R43 a share to R8 a share.

5. PIC missed a golden opportunity by rejecting Sagarmatha investment, according to Dr Survé

Survé appeared before the commission for 2 days in which an email correspondence trail between him and Matjila came under scrutiny.

Survé provided testimony on his involvement in the listing of AYO on the JSE and the attempted listing of another technology company, Sagarmatha – he is on the board of both companies. Both companies approached the PIC for funding but ultimately AYO received the funds.

Survé said that the PIC did not invest in Sagarmatha and this was a "missed opportunity". "For the first time a (technology) unicorn would emerge from the African continent," he told the commission. He compared Sagamartha to Uber and said it could have a market cap of $10bn.

6. False picture of employee satisfaction

Faced with a low staff morale and claims of victimisation, the state-run asset manager conducted a two-part survey between October 2016 and May 2017, Fin24 previously reported.

Ramabu Motimele, a senior HR business partner of the PIC, testified that staff were reluctant to participate in the survey, with employees not trusting the process. Motimele said that the majority of employees responded negatively to the survey but neural sentiments in the survey were coupled into the positive sentiments- this increased the scorecard of employee satisfaction from 56.7% to 74.8%.

Witnesses before the commission have spoken about a prevalent culture fear in the company, as well as the purging of those who fall out of favour with top management. The inquiry has heard that managers were reluctant to question instructions for fear of victimisation, even when these concerned critical investment decisions.

Assistant Portfolio Manager Victor Seanie, who was suspended in January 2019, after being linked to irregularities of the AYO investment along with executive head of listed investments Fidelis Madavo, testified of the culture of intimidation at the asset manager. He said sound investment recommendations by professionals was ignored and the work culture at the PIC was one of forced compliance where no questioning was allowed.

7. No investment is perfect

The commission heard of several investment the PIC made which went awry. This includes Steinhoff, the retailer's share value plummeted 98% on allegations of accounting irregularities, as well as an investment into Erin Energy linked to Nhlanhla Nene's son in which the PIC lost R333m.

Matjila, who had made 12 appearances before the commission, said that investments aren't always perfect. "You cannot get everything right in investments. There will always be bad ones, as long as you learn from bad ones so that you do not repeat them again. There will be new bad ones for some other reasons - that's investment," he told the commission.

He also has said that he cannot make investment decisions unilaterally and that there is an investment team at the PIC from whom he trusts to take advice.

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