The case against Dan Matjila

The long, meandering commission of inquiry into affairs at the Public Investment Corp (PIC) has reached its apex with the appearance of its erstwhile CEO and long-serving chief investment officer (CIO), Dan Matjila.

Matjila joined the PIC in 2003, a period of transition for the organisation previously known as the Public Debt Commissioners. At the invitation of its then CEO Brian Molefe, Matjila was tasked with implementing a risk framework for a company in the process of modernising, including by broadening its discretionary mandate to invest in equities and, later, private equity and property. He would soon be appointed its first CIO — a position he held until his resignation in November 2018. From December 2014, he held that post in tandem with that of CEO.

So Matjila has little wriggle room. Quite how he came to occupy the roles of both CIO and CEO is still a mystery at the PIC — it appears to contravene the company’s memorandum of incorporation. Regardless, it left him with ultimate executive power and responsibility for the shape the organisation now finds itself in — and for the deals it funded with the savings entrusted to it by public servants.

It is the specifics of some of those deals that will preoccupy the commission in Matjila’s second week on the stand. In particular, his testimony about the Independent Media/Ayo/Sagarmatha transactions will be a focal point as far as any determinations of possible impropriety are concerned.

There are two consistent strands in all three transactions: Matjila’s involvement as PIC CIO; and businessperson Iqbal Survé as the ultimate beneficiary of invested funds (he indirectly or directly controlled all three entities). Executives at the PIC and Ayo have testified that Survé and Matjila were intimately involved in getting the deals prepared at their respective organisations.

But Survé, in particular, went to great lengths to show how little he knew about — and was involved in — the Ayo deal, in which the PIC acquired 29% of the company at a price of R43 a share, valuing the business at the time of listing at R14.8bn.

This was almost immediately contradicted by Malick Salie, an executive at African Equity Empowerment Investments, Survé’s listed holding company and the largest shareholder in Ayo.

Another forensic report tying ties Matjila directly to VBS, suggesting he received receiving a loan from the bank

He testified that Survé provided direct input into the valuation of Ayo, which garnered such controversy.

Besides the tremendous reputational damage the deal inflicted on the PIC, the most destructive effect may be to the careers of many fundamentally good people at the asset manager who were seemingly cajoled and co-opted into signing the payment authorisation for the Ayo shares before the PIC had approved the investment.

A leaked document prepared by the PIC’s lawyers seems to indicate that as many as 11 staff members, including PIC CFO Matshepo More, may be sanctioned to varying degrees for their role in the fiasco.

The Ayo deal has also exposed a serious shortcoming in the way in which the PIC assesses risk.

Survé first approached the PIC in early 2012 when he was seeking funding to acquire Independent News & Media SA. After repayment of a bridge funding facility, the investment and loan represented an outlay to the PIC of R888m. Of this, approximately R722m took the form of debt — none of which has been repaid by Survé’s consortium.

How the PIC could even entertain a proposition to acquire all the shares offered in Ayo four years later needs some explanation from Matjila.

But things apparently got worse.

Matjila also has to respond to allegations that the decision to invest billions more in Sagarmatha Technologies, another Survé creation, was approved at the same time (December 2017) — before anyone at the PIC had even heard of the company.

It’s been alleged that these decisions were linked to the looming change of leadership in the ANC at its Nasrec elective conference, which might have had implications for the leadership of the PIC.

Ayo may have represented an entry into another industry — a move away from the structural decline of print media. But increasing exposure to businesses affiliated to an individual whose company was effectively in default with the PIC would always invite scrutiny.

Perhaps the most toxic deal was the PIC’s investment in, and loan to, VBS Mutual Bank.

The nominal amount invested to buy a 25% shareholding and extend a loan facility amounted to only a couple of hundred million rands — barely a decimal point in the sea of money the PIC manages. But the complete looting of the poor and elderly that followed took place with not one, but two PIC-appointed directors on the board of the bank.

Those directors were both senior executives at the PIC — head of legal Ernest Nesane and head of risk Paul Magula. Both left the company under a cloud. Magula was dismissed and Nesane resigned.

At the time of going to print, Matjila had not yet testified about VBS. But he would undoubtedly want to put as much distance as possible between himself and the "Great Bank Heist", as advocate Terry Motau called the mutual bank’s failure in his 2018 forensic report.

But that has become increasingly hard for Matjila to do.

Another forensic report ties him directly to VBS, suggesting he received a loan from the bank — something that has not previously been reported on, and which certainly did not feature in Motau’s report.

At the request of the PIC board, Nexus Forensic Services conducted an investigation into certain aspects of the PIC’s involvement with VBS. The report, completed on April 15 and which the FM has obtained extracts of, concludes that there was a "reasonable suspicion" that Matjila received a loan of R2.45m from VBS on March 28 2017.

The conclusion is based on a general ledger, in the form of an Excel spreadsheet, that had been e-mailed by VBS to the PIC.

Extracts of the report were also circulated on social media, and UDM leader Bantu Holomisa referred to them in his July 8 letter to the PIC commission.

Matjila and his legal team were given the chance to respond to the report after reviewing it.

They maintain their initial position: emphatically denying that Matjila ever received a loan from VBS, and calling the evidence supporting the assertion "flimsy".

The PIC inquiry is scrutinising the specifics of some questionable deals by the state-owned asset manager

—  What it means

Another deal that puts Matjila extremely close to the fire is the disastrous investment in Camac Energy, run by Nigerian-American businessperson Kase Lawal.

Camac would later change its name to Erin Energy and list on the JSE — with Matjila as a director.

Lawal would famously fly then president Jacob Zuma to his alma mater, Texas Southern University, to receive an honorary degree in 2013. This was shortly before the PIC invested about R3bn for a 29% stake in the company.

The PIC then doubled down on its investment, ignoring a report by its own employee, Ndivhuwo Tshikhudo, who has impressive expertise in the oil and gas sector.

When Camac listed on the JSE, Tshikhudo — then an employee of Stanlib — had rejected the investment proposition it offered.

Shortly after he joined the PIC in August 2016, he says, the PIC asked him to conduct a review of its investment into Erin.

This was because Erin was seeking a $100m guarantee from the PIC to obtain a loan from a bank in Mauritius.

Tshikhudo did his work and, among a rash of negative findings, concluded that Erin was "insolvent and required capital injections to remain a going concern". Hardly words of comfort for a company looking to take on more debt. Tshikhudo e-mailed the report to a group of senior executives at the PIC, and was told his manager would discuss it with Matjila. It appears nothing was done, and Tshikhudo discovered indirectly that the "PIC had proceeded with offering the guarantee for Erin’s loan".

It is unclear whether the PIC will have to honour the guarantee, given that the US-domiciled company is now in bankruptcy proceedings.

The deals listed here are but a sample of the serious professional allegations Matjila will have to respond to.

Other transactions, like those involving SA Home Loans and Total SA — transactions in which Matjila also played a direct role in proceedings — will be under scrutiny.

And there could be more to come as the commission, already severely stretched, tries to meet its end-July deadline to report back to President Cyril Ramaphosa.