Dan Matjila responsible for disastrous Ayo investment
PIC's head of internal audit says there was no due diligence done before the deal was approved
The investment in Ayo Technology Solutions by the Public Investment Corporation (PIC) appeared to be grossly negligent and responsibility should be placed at the door of the PIC’s ex-CEO, Dan Matjila.
This was the testimony given before the Mpati commission on Wednesday by the PIC’s head of internal audit, Lufuno Nemagovhani.
He concluded, based on an audit of the process relating to the R4.3bn investment in December 2017, that little to no due diligence was performed on the company and there were a number of irregularities relating to the investment.
“We found that the Ayo initial public offering subscription form was signed off on 14 December before the meeting of 20 December in which the delegated committee could approve the investment. This was a clear breach of the company’s policies,” said Nemagovhani.
The investment, thus far, has been a spectacular disaster. From its listing price of R43 per share, the share price traded as low as R14.04 in the last year. Ayo’s closing share price on Wednesday was R22.50 per share, representing a decline of 47% since listing.
“I have never seen anything like this before,” said Nemagovhani when asked by evidence leader advocate Jannie Lubbe whether it was standard practice for the state-owned asset manager to make an investment of this size without conducting due diligence.
According to Nemagovhani’s understanding of the company’s protocol, the transaction should have been presented to the portfolio management committee (PMC) for screening. At this meeting, resources should have been allocated to undertaking due diligence. But this did not happen.
Nemagovhani said three executives were responsible for approving the investment: Matjila, the former CEO, executive head for Listed Investments, Fidelis Madavo, and GM for Listed Equities, Lebogang Molebatsi.
However, in response to questions from Business Day Matjila on Wednesday refuted this account. “The due diligence done was sufficient for us to take a decision to invest in Ayo as the prelisting statement contained enough information for an investment holding company that was seeking cash to acquire technology assets in the near future. The team was satisfied with the pipeline and execution timetable. Mr Nemaghovani was in the PMC that ratified the transaction.”
The audit team raised an audit query regarding the transaction in May 2018. “We found in our query that the transaction was not ratified,” said Nemagovhani. He said he raised the issue with executives and while there was an ongoing dialogue about what transpired, nothing was ever done about it, until the board got involved in December 2018.
Matjila resigned in November, but Nemagovhani's interim report, which was presented to the board on Monday evening, led to the board suspending Madavo with immediate effect, as well as assistant portfolio manager, Victor Seanie.
The PIC said both were suspended in relation to “blatant flouting of governance and approval processes”.
Despite being suspended, Madavo agreed to testify on Tuesday. He told the commission that the deal had originated from the office of Matjila. He said he was not in the country when the deal was approved and therefore was not responsible for the investment.
The PIC could not be reached for comment at the time of going to press.