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AS IT HAPPENED: PIC inquiry hears from Matjila, govt pension fund

Former Public Investment Corperation (PIC) CEO Dan Matjila gives evidence during the Judicial Commission of Inquiry into the PIC on Monday, 8 July 2019. (Photo by Gallo Images / Phill Magakoe)
Former Public Investment Corperation (PIC) CEO Dan Matjila gives evidence during the Judicial Commission of Inquiry into the PIC on Monday, 8 July 2019. (Photo by Gallo Images / Phill Magakoe)
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15 Jul 2019

The inquiry adjourns for the day.

It will resume at 09:30 where Matjila will continue testimony on Ascendis. 

15 Jul 2019

Matjila says it is not strange that Mulaudzi sent him Christmas greetings.

He says many people would do that- even his bank does that and sends nice cookies.

When asked if receiving greetings from someone would make them his friend - Matjila says no.

Commissioner Lex Mpati asks would Matjila get greetings from strangers. Matjila says no - he would know them, one way or the other.

15 Jul 2019

Matjila maintains he did not force the two parties to merge.

15 Jul 2019

Matjila has no comment. 

He says he has explained himself.

15 Jul 2019

Marcus says it is unusual that someone could follow Matjila - as a CEO - into another room for a separate meeting.

She asks if records were kept on a decision involving nearly R2bn. 

15 Jul 2019

Marcus probes Matjila on the separate meetings with Mulaudzi and Mseleku arranged on the same day.

Mseleku ended up joining Matjila and Mulaudzi for their meeting too.

Marcus suggests it appears that there was influence for the two entities to merge.

Marcus says the merger is clearly a desired outcome of Matjila's so that the PIC did not have to choose between the two companies.

15 Jul 2019

Monnahela aks Matjila again why no due diligence was done on the newly formed entity.

To this Matjila replies that the entity was newly formed. "I do not know the extent to which we can do due diligence on a newly formed entity."

He reiterates that due diligence as done on the separate entities prior to their merger.

15 Jul 2019

Matjila says non-binding letters of interest are issued to all parties approaching the PIC - to ensure a competitive bidding process.

15 Jul 2019

Matjila said he cannot comment on evidence the commission has that no due diligence was done.

15 Jul 2019

Monnahela asks Matjila if he still stands by his statement that the PIC followed the investment process to the letter in both the Tosaco and Ascendis deals.

Matjila says he does.

Monnahela asks if the PIC conducted a due diligence of the newly formed company - merger between KiliCap and Tosaco.

Matjila said he did not expect a separate due diligence- because the entities were merged. The PIC had information on both of them- he did not expect a due diligence on the newly formed company.

15 Jul 2019

Matjila says Sakhumnotho is small by value relative to the transaction being dealt with.

15 Jul 2019

Monnahela asks Matjila to confirm that he said in his statement that KiliCap and Sakhumnotho had to merge because they are small companies.

Matjila confirms - he did say a merged entity stands a better chance than two separate entities, that have different weaknesses. 

15 Jul 2019

The inquiry resumes

15 Jul 2019

Evidence leader Isaac Monnahela now asks when Sakhumnotho approached the PIC for funding.

Matjila says he does not know when they approached the PIC.

The head of legal of Sakhumnotho had sent a letter expressing interest.

 

15 Jul 2019

Matjila said he never called a meeting specifying a merger. 

15 Jul 2019

Marcus brings up testimony from Mulaudzi - that Matjila compelled Mulaudzi to help Pretty Louw with her business.

Matjila responds - he asked Mulaudzi to assist and said he does not understand what Mulaudzi meant that Matjila ostracised anyone. 

15 Jul 2019

Matjila says he did not influence a merger between KiliCap and Sipho Mseleku of Sakhumnotho so that they could pursue the Tosaco deal with funds from the PIC. 

15 Jul 2019

Matjila discusses the creation of KiliCap, a company created to pursue an investment in Tosaco.

15 Jul 2019

The inquiry resumes, Dan Matjila to continue his testimony.

15 Jul 2019

Commission hears from GEPF's Abel Sithole

PIC did not consult GEPF on AYO Investment CEO of the Government Employees Pension Fund Abel Sithole told the PIC Commission of Inquiry that the asset manager did not consult it before it made a decision to invest R4.3bn in Ayo Technologies.

Sithole appeared before the commission, investigating allegations at the PIC which oversees R2trn in state funds. There is an investment agreement between the two organisations in that the PIC invests on behalf of the GEPF, Sithole told the commission.

In a meeting, the PIC clarified why it invested R4bn in Ayo despite the R2bn limit the GEPF placed on investments, Sithole said. The PIC's explanation is that they understood the R2bn limit applies to the unlisted portfolio. It asked the GEPF to clarify that the R2bn apply to both unlisted and listed investments in future.

Sithole told the commission less than 5% of the GEPF's assets managed by the PIC. The unlisted portfolio is performing well - and getting returns and there is a case to invest more in the unlisted portfolio.

Sithole also explained that the GEPF's investments have a high exposure to the SA economy, and to manage risk the GEPF's board of trustees is looking to diversify its investments. Sithole also said that the GEPF is not limited to choosing the PIC as an asset manager.

"Some people believe there is an unbroken umbilical cord between the two organisations. In law there is no such," he said. The GEPF can look for other avenues to manage its assets to the extent it believes it is correct to do so – this might not necessarily will be easy.

The commission resumes at 14:15 with testimony from PIC's former CEO Dan Matjila

15 Jul 2019

It is preferred more is invested in the unlisted portfolio because of the good returns.

15 Jul 2019

Sithole says the unlisted portfolio comprises less than 5% of the GEPF's assets managed by the PIC.

The unlisted portfolio is performing well - and getting returns. 

15 Jul 2019

The PIC Act does not prescribe the chairperson of the board must be the deputy finance minister.

In practice, the finance minister appoints the chairperson and often appoints the deputy minister. 

15 Jul 2019

Sithole says the constitution of the PIC board is prescribed in the PIC Act, and is being addressed in the PIC amendment bill.

15 Jul 2019

Loans related to the Lebashe transaction have been repaid with interest, Sithole confirms.

15 Jul 2019

Lebashe Investment Group

Sithole says the decisions in Lebashe did not involve the GEPF.

The PIC engaged with Lebashe independent of the GEPF.

Who's who at Lebashe, the investment group that just acquired Tiso Blackstar's media assets

15 Jul 2019

Sithole says he is still making enquiries on how the joinder application against Ayo came about.

The GEPF will seek legal advice on the best course of action.

15 Jul 2019

Sithole says the GEPF's legal counsel advised the fund not to undertake any action in parallel to the commission's work.

The commission's work must be concluded before it takes any action.

15 Jul 2019

Sithole says it was aware that the PIC had issued a summons to Ayo.

But was shocked to learn that when it saw the summons, the GEPF was a joinder to the summons.

15 Jul 2019

The GEPF was shocked to learn of Fidelis Madavo- head of investments' - and assistant portfolio manager's suspension due to preliminary findings in a report reflecting flouting of governance wrt Ayo Investment transaction.

The PIC assured the GEPF that the correct governance process was followed in the Ayo transaction.

The GEPF views this as a breach of trust.

15 Jul 2019

In a meeting, the PIC clarified why it invested R4bn in Ayo despite the R2bn limit the GEPF placed on investments.

The PIC's explanation is that they understood the R2bn limit applies to the unlisted portfolio. It asked the GEPF to clarify that the R2bn apply to both unlisted and listed investments.

The PIC believed it did not need the GEPF approval- Sithole says this is wrong.


15 Jul 2019

The GEPF also requested information on all investments made on behalf of the PIC into companies linked to Sekunjalo Investments.

15 Jul 2019

The GEPF requested a detailed report of the Ayo transaction from the PIC, Sithole says.

The PIC noted the request. 

15 Jul 2019

Ayo Technologies

Sithole says the PIC did not consult with the GEPF when it invested in Ayo.

The PIC only responded to questions from the GEPF when it learnt of the investments after the decision was made.

15 Jul 2019

Lediga asks about the GEPF increasing its local allocation in the unlisted portion as well as the global portion.

To this Sithole replies that the GEPF has a significant home bias with 92.5% of it funded in the SA market.

This is not wrong and historically served the GEPF well.

But from a risk management point of view, there is a need to diversify the GEPF's investments.

There is a risk of concentration in the SA economy. 

The GEPF is a significant investor in SA government bonds and state entities.

There is nothing wrong- but there is a need to diversify investments beyond the listed environment and also geographically.

The board has been reviewing its strategic allocations- but no decisions have been made, there needs to be an agreement reached with the finance minister. 

15 Jul 2019

The chair of the GEPF does not necessarily have to be the hair of the investment committee. That is a decision taken by the GEPF board at its inauguration, says Sithole.

15 Jul 2019

Sithole says fees paid to the PIC ar agreed to in advance.

He says the fees are not subject to contention.

15 Jul 2019

Sithole says that process of doing due diligence could be better and it is possible that parties the GEPF is involved with, in investing in entities might not be the parties the fund should be doing business with. However the intentions are good.

15 Jul 2019

Lediga says there are allegations BEE only benefit a few people. BEE trusts are supposed to be broad-based - but it is not in reality. He asks Sithole's views on perceptions that BEE trusts are not working well.

Sithole says the GEPF believes transformation is necessary and correct which is why it wants to play a role in it.

He says when it comes to execution, the GEPF is playing its role and doing so properly.

 

15 Jul 2019

It is the view of the GEPF that it plays a role in driving transformation.

15 Jul 2019

The GEPF is a significant investor in the SA economy.

There has been a strong correlation between the returns to the GEPF and the SA economy's performance.

The GEPFs returns through the PIC largely reflect how the SA economy is performing, given the significant exposure to the SA economy.

it is important for the GEPF's portfolio that the SA economy performs well.

15 Jul 2019

Sithole says the GEPF believes it has a role to play in addressing some of the challenges the country faces.

15 Jul 2019

The inquiry resumes

15 Jul 2019

The inquiry adjourns for a 15-minute tea break.

15 Jul 2019

The PIC is required to seek approval from the GEPF for investments in listed and unlisted portfolios exceeding R2bn, Sithole says.
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