Daniel Matjila. Picture: TREVOR SAMSON
Daniel Matjila. Picture: TREVOR SAMSON

The first two days of Daniel Matjila’s testimony at the commission of inquiry into the Public Investment Corp (PIC) have reinforced the idea that SA would benefit from less political meddling in its state entities. While the government has every right to exercise oversight of the PIC, which invests public servants’ savings, the testimony by Matjila (and others over the past seven months) describes the corrosive effect of too much political meddling on the organisation’s functioning.

One of the issues being probed at the inquiry has been the tradition of appointing the deputy minister of finance as the PIC chair. It is the only public agency at which this is the practice.

The "hard-fought" PIC Amendment Bill, lying unsigned on the desk of the president, legislates that the deputy finance minister is appointed as the chair. But Matjila is opposed to politicians being appointed to the role.

His testimony described the obvious conflict of interest that arises when a representative of the government chairs board meetings in which an appraisal of investments — that could include the purchase of sovereign or state-owned entity bonds — takes place. With a chair who is also the deputy finance minister, it puts the individuals in a conflicted situation as they would owe a duty of care to both.

Matjila also took umbrage with the delays linked to recent cabinet reshuffles, which left the PIC without a chair and meant that the board could not convene to review and authorise a range of documents, including some necessary for regulatory compliance.

But Matjila described a more rapacious form of political meddling that put him, as the long-serving CIO, under immense pressure from senior politicians, from a number of political parties, to fund transactions. He considered this a form of elite entitlement.

From earlier testimony of other executives at the asset manager, together with the answers Matjila provided in response to questions from commissioner Gill Marcus, it is surprising that the PIC lacks clear, comprehensive protocols on how to manage deals that are introduced by politically exposed individuals.

Many of the controversial transactions under scrutiny by the commission implicate individuals with strong ties to the ruling party and who were introduced to the firm through the office of its chief executive. At the least, then, the PIC needs to future-proof itself from the influence, and perceived influence, of anyone with political power.

Defining who a politically exposed person (PEP) is, including categorising known associates such as family members, friends and past business associates, should be a first step.

Then, any deal involving a PEP, or associate of a PEP, should be brought to the attention and documented by the company’s risk department before a foot is even through the door. That’s a solid second step.

The PIC’s CIO(s) should also be precluded from meeting with PEPs, and should instead send deal principals to discuss transactions. This would put a firewall between the person signing off on deals and the ones putting them together, in much the same way as credit committees work at banks.

Protocols should be in place for any PIC executive meeting a PEP. Taking a colleague to meetings and minuting them, even if they are informal, should be mandatory.

But protocols must ultimately fall back on the integrity of the process. This means developing a comprehensive policy on how the merits of the investment are weighed, including how attractive the deal looks in relation to other transactions competing for the PIC’s capital.