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There won't always be good investment decisions, former PIC boss Dan Matjila has said.
Matjila made his eighth appearance before the commission of inquiry into the continent's largest asset manager on Monday. The commission, led by Judge Lex Mpati, is investigating allegations of wrongdoing at the PIC, which manages R2trn in state funds.
Before the lunch break Matjila discussed the PIC's investments in Daybreak farms and Erin Energy.
The PIC managed to improve circumstances at Daybreak Farm by making leadership changes and addressing governance challenges. However, the Erin Energy investment at the outset was doomed, as operational challenges were exacerbated by the falling oil price, the commission heard.
Speaking specifically about the failure of Erin Energy, which eventually filed for bankruptcy in 2018, Matjila said: "You cannot get everything right in investments. There will always be bad ones, as long as you learn from bad ones so that you do not repeat them again. There will be new bad ones for some other reasons - that's investment."
Matjila said that due to having a diversified portfolio, its clients – notably the Government Employees Pension Fund (GEPF) – can withstand losses.
Assistant commissioner Emmanuel Lediga asked Matjila if he thought Erin Energy would have survived if the oil price had remained at $100 per barrel. Matjila responded that it would have helped the company, but that there were other technical deficiencies that had to be addressed.
'Not a great investment'
The GEPF was the main client in the Erin Energy investment. Matjila said GEPF CEO Abel Sithole felt it was a "terrible investment" given negative media reports about it. Matjila agreed that Erin energy was "not a great" investment.
The PIC ultimately lost around $333m on the Erin Energy investment – $270m in the initial investment and an additional $67m it had to pay on Erin Energy's behalf to the guarantor of a $100m loan from Mauritius Commercial Bank, the inquiry heard.
Matjila said this loss was just a fraction of the percentage of the portfolio, but it did not mean the loss was "insignificant". Matjila said it was important to consider what went wrong with Erin Energy for the PIC to tighten processes in other, future transactions.
Given the money the PIC made out of "good decisions", Matjila said the losses in the Erin Energy transaction had been dwarfed.
The afternoon will see Matjila giving evidence on the PIC's investment in Ecobank. Follow the live update here.
