The judicial commission of inquiry into the Public Investment Corporation has heard that there was no policy in place in March 2014 to regulate a deal between the asset manager and the son of then-deputy minister of finance and chairperson of the PIC, Nhlanhla Nene.
The corporation's executive head of impact investing, Roy Rajdhar, returned to the stand on Monday to give testimony about a $63m (R681m at the time) investment in 2014 in the S&S Refinery LDA in Mozambique.
The commission is investigating governance and investment decisions taken by Africa’s largest asset manager, which has R2trn under its control, mostly on behalf of government employees.
The Mail & Guardian and amaBhungane reported in October that Siyabonga Nene approached the PIC in 2014 to fund a deal between a company he was linked to with his business partner Amir Mirza, Indiafrec Trade and Invest, for a stake in a palm oil refinery in Mozambique.
On Monday, Rajdhar testified that the issue of Siyabonga Nene’s father being the chairperson of the PIC was raised by the portfolio management committee in March 2014.
However, at the time, the asset manager did not have a policy in place to deal with the provision of finance to inter-related parties.
Nene, who stepped down as minister of finance in October 2018, told the Zondo Commission of Inquiry into State Capture in the same year that he only learned of the PIC's role in funding his son’s business from a casual conversation, and their relationship had not influenced the transaction.
Rajdhar said on Monday that a legal team was appointed to investigate the framework for financial assistance to Nene’s son. The resulting legal opinion was that nothing prevented the PIC from funding an inter-related party.
A policy relating to politically exposed persons (PEP) was only approved in December 2014, after the transaction was approved.
Siyabonga Nene did not become a shareholder in the S&S refinery after the PIC funding was secured. Rajdhar said the finance minister's son did not play much of a role in the actual negotiations.
"It was Mr [Amir] Mirza who always took the lead in terms of explaining things or if we needed any information," he said.
Assistant commissioner Gill Marcus asked Rajdhar if Siyabonga Nene's role was "to open the door".
"Look, in retrospect I think that was probably the case," Rajdhar said.
Referral fee policy outstanding
Another policy that also came under scrutiny during Rajdhar’s testimony was the referral fee paid to Mirza of R18.5m, for the investment proposal for the S&S refinery and three other business project suggestions.
Rajdhar acknowledged that the referral fee should have been based on the PIC’s stake of 50% in the project, and not the total amount - and only once the deals had been concluded.
He added that the asset manager held a meeting on March 19 and agreed to develop comprehensive guidelines for the payment of referral fees.
Marcus questioned why it had taken five years for the PIC to put guidelines in place for referral fees, and asked evidence leaders to furnish further details of referral fees undertaken by the state-run asset manager.
Meanwhile, the S&S refinery has been beset by major operational and financial challenges, in part due to the volatility of the currency, the Mozambican metical.
Rajdhar confirmed that the $30m in senior debt (R432m) to the PIC had not been serviced yet. He added that the capital structure of the S&S refinery would need to be changed.