Former PIC CEO Dan Matjila at the PIC judicial commission of inquiry in Pretoria. Picture: Freddy Mavunda
Former PIC CEO Dan Matjila at the PIC judicial commission of inquiry in Pretoria. Picture: Freddy Mavunda

When President Cyril Ramaphosa announced a commission of inquiry to probe the affairs and functioning of the Public Investment Corp (PIC), it was expected to wrap up and submit its final report by mid-April.

Instead, it snowballed. Two extensions later, the inquiry only last week completed its hearings, following gruelling testimony from former CEO Dan Matjila.

For the most part, the hearings into Africa’s largest investment manager were conducted much like those in a court of law — an environment familiar to Lex Mpati, the former Supreme Court of Appeal president who headed the commission. But with one caveat: there was hardly any of the argumentative cross-examination that is common in situations where opposing parties are contesting the truth. Cross-examination by the evidence leaders was prohibited.

This has prevented a forensic examination of the thinking and motives behind the questionable decisions of the likes of Matjila, suspended CFO Matshepo More and other senior executives at the organisation.

Under its terms of reference, the commission was tasked with looking into allegations of impropriety at the state-owned asset manager. At the time, just a handful of deals had been brought to the attention of the public through media reports. By the end of July, these had burgeoned into almost 40, by one count, and Mpati hinted there could be even more that require close inspection.

"Further possible questionable transactions have come to the attention of the investigative team," he said at the conclusion of the hearings.

This stretched the modestly resourced forensic team to the maximum: the FM observed how additional forensic specialists were brought in as time wore on.

Still, it will require a mammoth effort to complete all investigations by the time the final report is due in late October.

Mpati did leave the door open for "further limited public hearings" as required, but the bulk of the remaining 2½ months will be set aside to "review, assess, make findings, propose recommendations and prepare our final report", he said.

Strictures aside, observers seem largely satisfied with the way in which the commission has been run.

"We were very impressed and think the commission has done extremely well, especially considering it had only four forensic investigators," Albert van Driel, deputy chair of the Association for Monitoring & Advocacy of Government Pensions (AmaGP), tells the FM. "We were glad to see the deadline extended and we expect very good recommendations to be made to the president."

Allan Greenblo, the editor of Today’s Trustee, a publication for principal officers of retirement funds, shares Van Driel’s sentiments.

The PIC should not be the biggest investment manager of GEPF funds, as the evidence before the Mpati commission has shown
Albert van Driel

"To me, the big value has been to shine the light on the whole of the PIC’s operations," says Greenblo. "Until recently we were unable to get any information on the unlisted investments of the Isibaya Fund. And that’s the main thing when people are looking after pensioners’ money — they need to be scrutinised."

The Isibaya Fund includes loans made to so-called BEE consortiums to buy stakes in established businesses. But as the FM previously reported, it seems a small group of businesspeople individually tapped the PIC for billions of rands in funding, simultaneously earning millions in fees on terms that defied commercial logic.

Van Driel says the funding to Isibaya increased 300% since 2016 and now stands at R140bn. But some of the investments — such as S&S Refinery in Mozambique, which was introduced by former finance minister Nhlanhla Nene’s son, Siyabonga — have been complete disasters.

"That has been one of the stumbling blocks right from the start," says Van Driel. "The PIC is a state-owned entity, and it wants to please the government and make a contribution to socioeconomic development, but the portfolios established for these purposes [such as Isibaya] have been problematic."

He adds that these portfolios were seemingly used as a cover for corrupt deals, with the PIC not considering the real interests of the pensioners whose funds it was investing.

AmaGP believes there have already been positive developments for governance at the asset manager, with the appointment of a new board and the naming of Reuel Khoza as the first nonpolitical chair of the company in nearly two decades. Khoza has extensive experience chairing boards in the private sector, including that of Nedbank.

But the choice probably rankled among some in Ramaphosa’s power base, including Cosatu. The trade union federation had lobbied to retain the practice of appointing the deputy finance minister to the position, as proposed in the PIC Amendment Bill that sits unsigned on the president’s desk.

Matthew Parks, the parliamentary co-ordinator for Cosatu, says the appointment of the deputy finance minister as chair was never a matter of life and death.

"We wanted union representation on the board, as it is workers’ money at the end of the day, and they need to know it is safe and they should have a voice in how it is invested. There are now four directors representing workers on the board of the PIC."

Parks agrees that the commission has added value. But he thinks this should be just the beginning of a complete forensic review conducted by an agency with sufficient time and resources. "The commission has done good work exposing the governance gaps and shenanigans and looting. We think we have heard just the tip of the iceberg," he says.

"We want someone like the Special Investigating Unit to go through all the investments with a fine-tooth comb, because we think they could find even more corruption."

For Greenblo, the hope is that the commission will lead to more voluntary transparency. Though the Government Employees Pension Fund (GEPF) identifies the asset managers it uses, the PIC does not. He believes opening the books to scrutiny will allow for more transparent competition and will build trust — which is important, given that the GEPF provides 88% of the funds the PIC manages.

What it means

There’s a general sense that the PIC commission did a good job — but that this should be the start of a broader process of reform

Besides appointing a new board with a highly regarded chair and considering a range of sanctions for employees involved in the Ayo transaction — a highly irregular process in which the value of the PIC’s investment plummeted 80% — the PIC is considering other ways in which to address the nagging trust deficit. It has begun reviewing options to break itself up into a collection of more autonomously run specialist units, for example.

But this may not be enough. Van Driel, for example, believes there must be "much more drastic changes than just splitting the PIC up into three or more divisions".

He says: "The PIC should not be the biggest investment manager of GEPF funds, as the evidence before the Mpati commission has shown. It is not competent to handle all of the money. The new mandate must ensure healthy competition between external investment managers to decrease risks."

Greenblo, too, believes this is the right thing to do — and he says the PIC already has the necessary tools.

"The PIC already allocates parts of its portfolio to the private sector, including to BEE asset managers, so why not increase that allocation and then compare them to see who is doing the best for its clients?"

Either way, it appears hard decisions need to be made about the PIC’s core competence. The commission’s recommendations might provide guidance, but it’s the organisation itself and the GEPF that must conduct a critical examination of whether the PIC has the resources, processes and skills to undertake certain types of investments.

But first it will need to evaluate the commission’s recommendations — which should be made public by the president and which will be eagerly awaited.

Still in the dark

Despite the best efforts of the commission probing the Public Investment Corp (PIC), some central questions remain unanswered:

How was BEE defined?

The PIC doled out deals to the same "repeat customers" on such favourable terms that it appeared to be supporting nothing more than elite fronting. The businessmen seemed to have little expertise or experience in the industries in which they were investing funds borrowed from the PIC, they put no money down themselves, and they earned enormous transaction fees in the process. Is this what state-funded BEE is supposed to look like?

Why were the beneficiaries of PIC funding seemingly earning fees on their own deals?

When, for example, the PIC invested in Ayo Technology Solutions, whose largest shareholder was Iqbal Survé’s African Equity Empowerment Investments (AEEI), an AEEI subsidiary called AEEI Corporate Finance earned R57.7m in "placement fees".

And why were these fees so large?

The quantum of the transaction fees paid by the PIC appear to have been particularly egregious. Take, for example, the Total SA (Tosaco) deal: in funding a R1.7bn transaction, the PIC agreed to pay fees of R100m.

Just how deep were the ruling party’s tentacles in the PIC? How many deals were facilitated for politicians and those connected to senior figures in the ANC?

Former CEO Dan Matjila told the commission that one of the most difficult and stressful aspects of his job was trying to juggle the expectations of — and, perhaps, instructions from — his political masters in funding decisions.

But despite multiple references to the involvement of politically connected individuals, Matjila was never asked directly how many deals the PIC had funded, or had been asked to fund, for politically exposed persons.

It means, as Cosatu parliamentary co-ordinator Matthew Parks points out, that the commission may have only scraped the tip of the iceberg.