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PIC executives purged as more deals questioned

Apr 29 2018 06:00
Dewald van Rensburg

The Public Investment Corporation (PIC) has fired its executive head of risk for “incompetence” and suspended other senior officials, seemingly in relation to media leaks and allegations against CEO Dan Matjila.

At the same time, more apparently ill-conceived PIC deals are coming to light – costing the corporation’s clients billions of rands.

The PIC is the continent’s largest asset manager and invests the pension savings of South African government employees.

City Press has learnt that the PIC’s head of risk was fired last week, after having been placed on suspension in March.

The charge against him was incompetence, a senior source in the PIC told City Press.

According to the source, he had, among other things, produced sub-par paperwork and did not foresee the implosion of VBS Mutual Bank, in which the PIC is a shareholder.

City Press has been reliably informed that PIC company secretary Bongani Mathebula, executive head for IT Vuyokazi Menye, and one other senior person in the IT department have also been suspended.

None of the executives were willing to speak to City Press. The heads of risk and IT and Mathebula were all targets of an internal “information security” investigation, personally led by Matjila, last year.

At least three more top PIC executives were also targeted in the investigation that seemingly relates to a breach in the corporation’s email system.

City Press has seen a letter, signed by Matjila in October last year, asking email management company Mimecast’s Cape Town office to make available the email servers of the six executives.

“PIC is in the process of conducting an information security forensic investigation as commissioned by our board of directors,” Matjila wrote.

He asks for the email servers of the six executives for the period July 1 to October 20 2017.

The timing of this investigation seems related to a widely reported story at the time about the PIC providing R21 million in funding to a company linked to a woman said to be Matjila’s girlfriend.

Matjila’s allies have portrayed this as a crude “fake news” attack on a key state institution by the forces of state capture around former president Jacob Zuma and the Gupta family.

In September last year, the PIC board accepted Matjila’s explanations about the deal and then tasked him with investigating the source of the allegations against himself.

DRAMA

The senior PIC source told City Press that the email servers of top executives were retrieved to find the source of the alleged hoax emails containing allegations against Matjila and PIC chief financial officer Matshepo More.

Among these allegations was the one about the R21 million given to Matjila’s alleged girlfriend’s company, said the source.

Apparently, someone with access to the PIC’s global address list was circulating these allegations through the organisation from a “kiosk in Joburg”.

There have been dramatic internal ructions at the corporation with allegations of corruption and counter-allegations of state capture.

Depending on who you ask, the PIC is either under siege from the forces of state capture who want to get rid of Matjila, or Matjila has become a dictator running the corporation like his personal fiefdom and unduly favouring a particular network of borrowers.

Matjila is both the CEO and chief investment officer of the PIC, which makes him an incredibly powerful figure, not only in the corporation, but in the South African capital market.

The PIC, on behalf of civil servants, owns more than a 10th of the equities listed on the JSE. In addition to this, it commands a large unlisted portfolio that is increasingly being scrutinised.

The source in the PIC claimed that talk about getting rid of Matjila started in government circles immediately after Zuma appointed Malusi Gigaba as finance minister in a Cabinet reshuffle last year.

Treasury oversees the PIC, which manages almost R2 trillion for the Government Employees’ Pension Fund and a number of smaller public sector clients. It is the only state institution with access to more money than highly compromised state-owned firms such as Eskom and Transnet, which have been infamously infiltrated by allies of the Gupta family.

The PIC and Matjila have, however, faced a barrage of criticism this year for a number of multibillion-rand investment decisions.

A multibillion-rand bet on a speculative new listed technology services company controlled by billionaire Iqbal Survé has already cost state pensioners almost R2 billion in four months.

HOW TO BLOW R1.8 BILLION

The PIC has already lost R1.8 billion of the R4.3 billion it ploughed into Ayo Technology Solutions in December.

Had the deal been carried out with additional protections that PIC officials suggested at the time, this loss could have been significantly limited.

City Press revealed in March how the PIC fully underwrote a private placement by Ayo, which is controlled by Survé.

This was despite warnings from PIC staff that Ayo had “very optimistic” ideas about its own prospects.

After intense media scrutiny, the PIC abandoned plans to invest a similar amount in another Survé venture of questionable value, called Sagarmatha Technologies, earlier this month.

City Press reported how members of the PIC’s own investment committee believed the Ayo shares were overpriced and demanded that the corporation get protection against a possible collapse in the share price.

This was meant to take the form of a put option – a contract that would guarantee that the PIC could sell its Ayo shares at a predetermined price.

That price would not be the full R43 it paid for each Ayo share, but it would set a floor that limits how much money can be lost.

Despite this being part of the conditions of the deal, the PIC told City Press at the end of March that the put option was not yet in place.

PIC spokesperson Deon Botha, however, told City Press at the time that the put option would be concluded and was imminent.

The PIC has not answered subsequent requests for clarity on the matter.

Ayo shares this week crashed 40% to R25 each, meaning the PIC has lost R1.8 billion on the deal, unless the share price recovers.

Ayo shares have been very illiquid, meaning they only trade in small volumes and very infrequently.

Only about R12 million in trades have taken place since December, on a company allegedly worth almost R15 billion.

Investigative journalism group amaBhungane this week revealed further losses on a PIC investment in a Nigerian oil venture that was incredibly risky, but benefited a friend of Zuma, US-Nigerian Kase Lukman Lawal.

That R4 billion investment in Erin Energy, formerly known as Camac Energy, might be worth nothing now after Nigerian police shut down the company’s operations, amaBhungane reported.

The PIC has already lost R1.8 billion of the R4.3 billion it ploughed into Ayo Technology Solutions in December.

Had the deal been carried out with additional protections that PIC officials suggested at the time, this loss could have been significantly limited.

City Press revealed in March how the PIC fully underwrote a private placement by Ayo, which is controlled by Survé. This was despite warnings from PIC staff that Ayo had “very optimistic” ideas about its own prospects.

After intense media scrutiny, the PIC abandoned plans to invest a similar amount in another Survé venture of questionable value, called Sagarmatha Technologies, earlier this month.

City Press reported how members of the PIC’s own investment committee believed the Ayo shares were overpriced and demanded that the corporation get protection against a possible collapse in the share price. This was meant to take the form of a put option – a contract that would guarantee that the PIC could sell its Ayo shares at a predetermined price.

That price would not be the full R43 it paid for each Ayo share, but it would set a floor that limits how much money can be lost.

Despite this being part of the conditions of the deal, the PIC told City Press at the end of March that the put option was not yet in place.

PIC spokesperson Deon Botha, however, told City Press at the time that the put option would be concluded and was imminent.

The PIC has not answered subsequent requests for clarity on the matter.

Ayo shares this week crashed 40% to R25 each, meaning the PIC has lost R1.8 billion on the deal, unless the share price recovers.

Ayo shares have been very illiquid, meaning they only trade in small volumes and very infrequently.

Only about R12 million in trades have taken place since December, on a company allegedly worth almost R15 billion.

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pic  |  dan matjila  |  investment
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