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WRAP: PIC’s dreams for VBS bank ‘went up in smoke’ says Matjila

2019-07-17 09:23

Ex-PIC boss Dan Matjila has said the state asset manager's reputation was severely damaged due to the fallout surrounding the collapse of the VBS Mutual Bank.

PRETORIA, SOUTH AFRICA - JULY 8: Former Public Inv
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Last Updated at 14:46
17 Jul 12:20

The day's proceedings have wrapped up. The commission has adjourned until Monday, 22 July at 09:30. 

The inquiry's chair, Justice Lex Mpati, notes that assistant commissioner Gill Marcus will not be present on Monday due to a prior commitment. 


17 Jul 12:18

Matjila now says that the actions of Magula and Nesane were "plain dishonesty" rather than a conflict of interest. 


17 Jul 12:16

Matjila notes that Simphiwe Mayisela, the former PIC IT security head, has been on record as saying he has passed information on to the police. 

Mayisela previously testified before the commission about the case he opened in 2017 in the wake of anonymous allegations of corruption against Matjila circulated by email.

"We have no idea what the police are doing with that information," he said. 

He notes that Bongani Mathebula, the PIC's suspended company secretary, underwent a disciplinary hearing for allegedly leaking information. 


17 Jul 12:11

Assistant commissioner Victor Seanie segways from VBS bank to the leaking of information. 

He asks Matjila who at the state-run asset manager were the main leakers of information. 


17 Jul 12:08

Speaking of how the PIC decides who to nominate as directors to companies it invests in, Matjila says he would have thought that PIC employees - his colleagues - would understand their role. 

He said a consideration would be to not nominate PIC employees to the boards of companies. 

 

17 Jul 12:04
Matjila says that after he was "shown the door" in 2018 he can't say whether the PIC has attempted to clawback money from Magula and Nesane. 

17 Jul 12:03

Speaking of Vele Investments, Matjila says: "We didn't have enough time to do an investigation to understand how they were operating."

He says the asset manager thought Vele would have been okayed by authorities. 

"I don't have a big understanding of who they are," he says. 


17 Jul 11:59

Matjila says he was shocked to hear that the PIC's losses were larger than imagined when VBS Mutual Bank collapsed. 

He originally thought the losses were R108m but later was made aware of another R350m in losses. 

"It is an issue of fraud more than anything else".

He said when he left the asset manager in late 2018 he was putting together the terms of reference to probe the losses. 

He said no one saw the collapse of the bank coming. 


17 Jul 11:55
Matjila said the training was done in practice, but he is not sure whether this became official policy. 

17 Jul 11:54

Matjila, in response, says the PIC invests in many companies but is "not in the business of running companies".

He says the "best' the asset manager can do is nominate people to boards to act in line with the interests of the PIC. 

He says the PIC has a policy to not nominate people to boards without giving them prior training.

The training was offered by an independent service provider to induct nominees on the duties and responsibilities of directors, says Matjila. 



17 Jul 11:49
Assistant commissioner Gill Markus asks Matjila about the process of appointing nominee directors to the boards of companies the PIC has invested in. 

17 Jul 11:38
Matjila says the PIC and the regulator were deliberately kept in the "dark" there was no way they could have foreseen VBS's demise. 

17 Jul 11:36

17 Jul 11:35

Matjila says Nesane and Magula were promoted because they were doing good work and at the time they were reporting on VBS.

The biggest problem came when Vele came into the picture. 


17 Jul 11:34

When asked if the demise of VBS was due to a lack of reporting from the Magula and Nesane to the PIC of material issues.

Matjila says the VBS board and Magula and Nesane were colluding not to keep the PIC and the regulator informed of what was happening at VBS.

They had to make sure the bank was in good shape and in compliance with the regulator, Matjila says.


17 Jul 11:31

Having PIC representation on investee companies is part of "wealth creation" and driving the PIC strategy of achieving long term sustainability and good governance.



17 Jul 11:29

Magula and Nesane were not executives at the time of their deployment to VBS.

They were both seniors, and later promoted to executives. 


17 Jul 11:27

There was a social impact attached to VBS Mutual's activity.

The reputational risk associated with a "small investment" was accounted for in the cost - he points out VBS would play a major role in the economy.


17 Jul 11:27
Matjila says the bigger picture was to grow VBS into something significant and so the PIC deployed its best to drive the strategy. 

17 Jul 11:26

Matjila says the PIC nominated directors - Magula and Nesane were meant to protect the interest of the PIC at VBS.

They were meant to drive "good behaviour" and "responsibility".

Matjila sais he assumed "honesty and integrity" would apply to anyone the PIC placed on the board.


17 Jul 11:21
Matjila asks where the regulator was when VBS fell through the net.

17 Jul 11:20

The investment committee of the PIC turned down an application to put more money into VBS, two days before it was placed into curatorship.

At the time allegations against Matjila surfaced, one of the implicated PIC executives and VBS director Paul Magula was undergoing a disciplinary hearing at the PIC because of poor performance including failing to protect the PIC investment in VBS.

"I strongly suspect he was a participant in an effort to discredit me by leaking transaction information to the media - in particular Lancaster and Ayo - to elicit public sympathy in his disciplinary process."


17 Jul 11:17
The allegations are from two people heavily implicated in the malfeasance in VBS.

17 Jul 11:17

Matjila says he welcomes any investigation into the "sorry saga".


17 Jul 11:13

"Being linked in a personal matter to the debacle [VBS] has to be the lowest of the low in allegations about my leadership at the PIC," says Matjila.

"As someone who has placed integrity above all other values - the mere suggestion that I would accept a bribe is abhorrent to me, and deeply upsetting to my wife and children," he adds. 

 

17 Jul 11:11

Allegations that Matjila received R5m in cash by facilitating further funding for VBS.


17 Jul 11:10

The PIC's reputation was 'severely damaged following the VBS fallout, especially because the PIC appointed its directors to safeguard it.


17 Jul 11:08

"I believe this should have been a shareholder matter or our nominee directors should have informed us to alert us to the big change in shareholding," says Matjila.

He says he learnt of the change after regulatory approval.


17 Jul 11:07

When Vele Investment became the majority shareholder of VBS, the PIC vision for VBS "went up in smoke".

The process of acquisition of Vele's majority stake in VBS was kept secret in the PIC.


17 Jul 11:06

The PIC deployed two directors with Venda roots to champion the goal of growing VBS into a regional banks servicing the rural population of Limpopo.

The executives were paul Magula and Ernst Nesane.


17 Jul 11:04

The PIC received requests to acquire its stake in VBS from companies and individuals.

But the PIC was not a willing seller- VBS was viewed as a strategic asset.


17 Jul 11:03

VBS Mutual Bank

Matjila will now discuss VBS Mutual Bank.

The GEPF inherited VBS Mutual Bank from the amalgamation of the civil servant pension fund of the Transkei, Ciskei and other similar funds of the central govt of 1994.

The exposure to VBS was R10m, invested in a perpetual bond, inherited from the funds.


17 Jul 11:01

In cross-examination Matjila says he believed SA Home Loans was willing to pay MMI. He only learnt through testimonies before the commission that SA Home Loans was not willing to pay.


17 Jul 10:48

When asked about the SA Home Loans request for R10bn - Matjila says there has always been a problem with SA Home Loans.

Unions the PIC met with were unhappy with SA Home Loans products and were sceptical - they have said they do not want anSA Home Loans "type" solution.

The unions want a government-led housing solution for members of the GEPF, which is why the government employees housing scheme was started. This is how the matter came to the PIC to spearhead the solution for GEPF members.

"There has been noise around this thing, unhappiness with SA Home Loans."


17 Jul 10:40
Matjila says when Maponya requested fees it caused tension in the company.

17 Jul 10:34
Matjila says the most important learning is how the PIC corresponds with companies when it comes to material matters - suggests keeping records of meetings.

17 Jul 10:32

Matjila says retrospectively the PIC was probably ambitious on the "jockey" it was backing for a housing financing solution for the GEPF. "We obviously did not have the right person to back."

Governance should also be looked at.

SA Home Loans has done well - and proves probably the PIC should focus on more established organisations to deliver on this kind of products.

Matjila said it is unfortunate that these developments harmed the very ambition of trying to drive black entrepreneurship and supporting transformation. But the idea should not be dumped- it is important. Perhaps there should be checks and balances to ensure the right entrepreneurs are supported.


17 Jul 10:18

Matjila said there are heresay allegations that Matjila greed to the payment of fees to Maponya, in relation to the second line of credit to SA Home Loans.

"I categorically deny that I had discussed or agree to an origination fee to anyone or payable to any person in relation to SA Home Loans application for a second line of credit.

"I am very upset that I have been reported to law enforcement agencies on trumped up charges."


17 Jul 10:15
Matjila was prepared to present the proposal to the standing committee of finance, but he was removed from the PIC before this could happen.

17 Jul 10:14

Matjila said to SA Home Loans that the R10bn loan could not be granted until the housing finance product mandated by Parliament had been finalised.


17 Jul 10:13

Matjila says he led the effort to create this product for members of the GEPF.


17 Jul 10:12

At the time a new PIC bill was being debated by parliament's standing committee of finance.

The PIC and other bodies and groups were invited to make presentations to Parliament.

The unions demanded a housing finance arrangement for GEPF members.

The PIC was tasked to design a housing finance product for GEPF members.


17 Jul 10:11

Matjila says ultimately MMI was not paid a fee - the matter is subject to litigation.

The PIC then received an application of a second line of credit by SA Home Loans for R10bn in late 2017.


17 Jul 10:10

17 Jul 10:09

17 Jul 10:09

The letter was circulated among SA Home Loans shareholders, including Standard bank.

Standard Bank then arranged to meet with the PIC in May 2016 to discuss the matter.

In the meeting it was revealed that it is wrong for SA Home Loans to pay MMI any fee as there was no contract between them

And even if work was done- such work did not justify a R45m fee.


17 Jul 10:07
SA Home Loans circulated a letter ceding the fee to MMI, provided that SA Home Loans payback the fee to PIC  

17 Jul 10:05

Despite SA Home Loans willingness to pay MMI, it could not pay MMI outright as it would impact negatively on its equity and would unlikely be approved by shareholders.

It could not pay MMI out of the R9bn loan. 

various payment structures were explored, and the PIC would cede its right to payment of fees in terms of the Master Loan, on condition that the SA Home Loans would pay back the PIC at a later point. 


17 Jul 10:03
The fee was a hefty R45m and SA Home Loans would need to get sufficient board support – with a board resolution approving the payment.

17 Jul 10:01

Maponya wanted to get paid from the PIC, sending text messages for payment.

Matjila informed him the PIC was not obligated to pay MMI- as SA Home Loans had agreed to settle fees from MMI. 


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