AS IT HAPPENED: Matjila wraps up first day of testimony at PIC inquiry

Matjila stats to talk about how the PIC's investment strategy was updated between 2005 - when it was corporatised - and 2010. 

This included bringing in more black-run fund managers to transform the asset management environment. 

The chairperson of the inquiry, Justice Lex Mpati, then calls time on Monday's proceedings. 

Earlier he had said the hearings would be cut short on Monday to give the commission enough time to familiarise itself with Matjila's affidavits and annexures. These were handed over late to the commission

Proceedings will recommence at 09:30 on Tuesday, with Matjila continuing to give evidence. 

The formation of the PAIDF lead to the establishment of Harith Fund managers, he says. Harith was set up in 2006 to manage the fund.

$625m was raised from mostly SA investors, including $250m from the GEPF. 

He says the AFC, led by Nigeria, had different investors. 

The PIC provided seed capital to Harith. Matjila says Tshepo Mahloele resigned from the PIC and became the CEO of Harith. 

Assistant commissioner asks for the record to be consulted on whether Mahloele was persuaded to become CEO while still at the PIC. Mahloele previously gave evidence before the commission. 

The record is consulted, and according to Mahloele's statement, the position was allocated to him while still at the PIC. 

Matjila now moves on to the establishment of the Pan African Infrastructure Development Fund, or PAIDF. 

He says that, in response to the vision of former SA President Thabo Mbeki and former Nigerian president Olusegun Obasanjo about the African renaissance, the PIC's former CEO Brian Molefe had an "ambitious plan" to open an office in Lagos. 

He said teams of experts from around the continent collaborated, which led to the establishment of the PAIDF (led by South Africa) and the African Finance Corporation (led by Nigeria). 

He testifies that the two funds were meant to be a single fund but there was disagreement between SA and Nigeria about where to locate the headquarters. 

Matjila says he doesn't see a problem with having representatives of labour appointed to the board of the PIC. 

He says these appointments should follow the correct requirements. 

"If it is the best qualified [person] ... then I wouldn't have a problem with it," he says. 

Trade union federation Cosatu, for one, wants to have representation on the board of the state-run asset manager. 

Matjila says that, if the GEPF has a problem with investment decisions taken by the PIC, its first port of call should be the Financial Sector Conduct Authority.

He says there is continuous interaction between management of the PIC and management of its clients. 

Matjila says that, in 2005, after being appointed CIO he worked on a strategy to implement investment mandates from his clients. 

The PIC's largest client is the Government Employees Pension Fund.  

Matjila says the chairperson of the board - which until now has always been the deputy minister of finance, does (usually) not get involved in investment decision and does not sit on the investment committee.  

Only listed investments of above R10bn need to get board signoff from the full board. For unlisted investments this was R2bn, says Matjila. 

Matjila now gives his understanding of the division of authority between the PIC's board and its management. 

He says in his understanding the board was responsible for governance. It delegated authority to executive management to run the day-to-day operations of the organisation. 

He says the only time that non-executive directors would get involved in operational matters were in the investment committee and its subsidiaries. 

The board also has its own committees, such as audit and risk committees. 

The commission has resumed after a break. It will now consult laws governing the PIC to get an exact definition of the differing authorities between the PIC's board and its management. 

The chairperson of the commission, Justice Lex Mpati, says the commission only received Matjila's final 227-page statement on Friday. 

He says this was received without annexures. The annexures were sent electronically over the weekend. 

Not all annexures have been received yet.

"It is unacceptable that we see in newspapers this morning what Dr Matjila's statement is going to be," says Mpati 

He says the commission will not inquire about the leak, however. 

The commission is now asking Matjila about what type of board the PIC has - a governing board, a management board or an oversight board. 

Matjila says the board is not an executive board and are not "at the coal face' of the organisation. 

He says the CEO of the corporation - a role he had until he resigned in November 2018 - should be 'given space to put together the team" that will help him or her run the organisation. 

He says it is "good to consult" with the board, but the board should let the CEO chose his or her team by delegating power to management. 

The chair asks Matjila whether the board can fire or suspend executives.

He replies he will have to check the act, but in his understading, the finance minister in consultation with the board elects the CEO, who in turn names the chief information officer. 

The commission is now taking a break. On resumption, they will consult the act in question. 

Matjila is now asked about his relationship with Brian Molefe when he [Matjila] was appointed the PIC's first chief investment officer in 2005. 

"I would say I knew him well," says Matjila. He noted they were both previously in the same "investment space" - Molefe at Treasury and Matjila at Stanlib. 

The commission is now asking Matjila to what extent the PIC's positive returns around 2005 were due to a bull market, and to what extent these were due to clever investment decision by the PIC.

In a bull market share prices are rising. 

Matjila says it was a combination of both a rising market and canny investment decisions. 

Matjila notes the PIC was corporatised in 2005 after the passing of the Public Investment Corporation Act 23 of 2004.

To corporatise means to convert a wholly state-run company into an independent company.

The corporation became a schedule 3b national government business enterprises, according to the Public Finance Management Act, and as such was and is still owned by the state. 

Matjila says that the deputy minister of finance, who is in practice named as the chair of the asset manager's board, should not be involved in investment decisions. 

Assistant commissioner, Gill Marcus, notes that 46% of the Isibany Fund is either in distress or on watch. 

She notes the fund is supposed to have positive returns. 

He says he will touch on the fund's poor performance later on, but notes it has been caught in a "structuring trap'. 

He says the fund has invested in excess of R100bn. 

As Matjila continues with his testimony Bantu Holomisa, the leader of the UMD, has published an open letter stating that "information that has been provided to me by a whistle-blower regarding an alleged forensic review report dated 15 April 2019 as commissioned by the PIC board from Nexus Forensic Services regarding a VBS Mutual Bank investment transaction".

Holomisa alleges that, according to the report, Matjila received a loan from VBS Mutual Bank.

Fin24 has not seen a copy of the alleged report. 

Holomisa has in the past published a number of open letters alleging corruption at the state asset manager. He has also given testimony at the commission. 

He notes that in 2003 he was still "100%" an employee of Stanlib, acting as a type of service provider. 

He says this was not unusual at the time. 

He officially joined the PIC and signed a contract in 2005. 

Asked about what "secondment" meant, Matjila says he was told that Molefe approached Stanlib and "asked if they could help".

He joined the PIC in August 2003.  

At that time he was paid by Stanlib and then the PIC would reimburse Stanlib. 

"You could argue I was probably handpicked". 

After working in asset management at Anglo American and Stanlib, Matjila said was "seconded" to the PIC in August 2003 at the request of Brian Molefe to work in risk management. 

He says his first job was to implement a risk management framework created by Deloitte. 

He says he knew Molefe from university and "the market," and  Molefe had a good relationship with StanLib. 

Matjila says he welcomes the establishment of the inquiry, adds he is prudent with both his and other people's money. 

He is now taking the inquiry through his CV. He has a PhD in mathematics from Wits University in mathematics, which he recieved in 1994. 

Matjila starts off his testimony reading from a statement. Both sides have now decided on what statement to use. 

Matjila says he has "major contribution to make". 

He says his testimony will be "completely frank". 

Lubbe says the commission has not received a complete final bundle of annexures from Matjila. He adds it is a matter of concern that Matjila's statement has been leaked to the media. 

"There are quotes from the statement in the press," he says. 

Matjila set to testify 

Daniel Matjila, the ousted chief executive officer of the Public Investment Corporation, is expected to say his opposition to funding the rescue of clothing retailer Edcon ahead of national elections was one of the reasons he was dismissed.

Matjila is scheduled to begin testimony to the commission of inquiry into the affairs of the Public Investment Corporation on Monday.  It will include his assertion that the rescue of Edcon, which supports 140 000 jobs through direct employment and its supply chains, didn’t meet the investment criteria of the PIC's clients, according to his prepared statement.