On the eve of the much anticipated Cabinet reshuffle, sacked Finance Minister Pravin Gordhan embarked on efforts aimed at weakening the incoming deputy finance minister. Fully aware that he and his deputy, Mcebisi Jonas would not survive the axe, Gordhan penned a memo to Jonas, former Deputy Finance Minister and Chairperson of the Board of the Public Investment Corporation (PIC). Established in 1911, the Public Investment Corporation (SOC) Limited is one of the largest investment managers in Africa today, managing assets of over R1.857-trillion and still growing.
The PIC, a registered financial services provider, is wholly owned by the South African Government, with the Minister of Finance as shareholder representative. In his memo (click here: PIC-MOI-Memo), which Weekly Xpose is in possession of, Gordhan called for highly significant and urgent amendments to the PIC’s memorandum of incorporation (MOI).
This instruction came just ahead of the much anticipated Cabinet reshuffle which on Thursday evening saw the replacement of the Finance Minister, Gordhan, along with his deputy Jonas. Tensions between President Zuma and Gordhan were heightened this week after an aborted international investor roadshow in which both Gordhan and Jonas were accused of mobilising foreign funders against Zuma.
Gordhan’s memo was sent to Jonas on the 24 March 2017, calling for the amendments of several sub-clauses of the existing Public Investment Corporation’s MOI (click here: PIC-MOI-Memo), which appears to be an attempt to dilute the powers of an incoming Deputy Minister of Finance over the PIC purse, and entrench the hold of current incumbent board members.
While the memo is disguised as an attempt to enhance the organisation’s corporate governance compliance, in terms of the King IV Report on Governance, which is widely held as the benchmark in best practice governance in South Africa, it is said by our sources that this is a clear attempt to effectively hijack and hamper the power and influence of any new Deputy Minister whose portfolio will automatically include the stewardship of PIC as the Chairperson of its Board.
The amendments, which are not in line with the King Report Guidelines, would see the Chief Executive Officer and Chief Financial Officer serve as ex-officio directors of the company. Our sources, who spoke on condition of anonymity, suggested to us that it is clear that the amendments in this memo show that the minister seeks to extend the term of the current board to a total of nine years and strengthen the independent non-executive director and Deputy Chairperson of PIC, Roshan Morar, who is seen as Gordhan’s runner so that the minister remains in control of PIC even after his sacking.
In effect such amendments would see key allies of Gordhan ensure their stronghold over the organisation, potentially curtailing the locus of influence a new Deputy Minister could yield over the organisation and distribution of funds.
The timing of the letter, as well as the request for an urgent shareholder meeting by Gordhan within two days from the date of letter, has caused considerable concern among key PIC executives who view this as a serious transgression of corporate governance. Well-placed sources within the organisation have told Weekly Xpose that a risk workshop was sabotaged by Morar and board members forced to rubber-stamp Gordhan’s amendments. This board meeting is said to have been chaired by Morar without notice of the meeting to the board members, or any agenda, on 29 March 2017. Our sources have said that because the board meeting was not properly constituted, all resolutions taken at this meeting are null and void.
Morar is a chartered accountant, who also chairs the PIC Investment Committee, Private Equity, Priority Sector and Small Business Enterprises Fund Investment Panel. He is said to yield considerable influence over the organisation, and is now guilty of violating good governance rules by trying to bulldoze Board approval for this change in the MOI. Morar is said to be acting on the direct instructions of Gordhan. There are concerns too about the close relationship of Morar to Treasury, after he was awarded a lucrative tender (SCMU 12-15/16-0008) from the Eastern Cape Treasury in 2015.
According to our well-placed source, Gordhan also verbally instructed the CEO of PIC and the organisation’s legal council to alter the MOI to ensure that when the new Deputy Minister comes in he does not chair the PIC Board. Our sources say the former Finance Minister was desperate to effect these changes before he was sacked not only for control but also to protect his interests and any other corruption that might be uncovered by the incoming ministry and/or board.
Asked for a comment, CEO Daniel Matjila said the document Weekly Xpose was in possession of “is a highly confidential internal document”. He refused to comment further. Morar told us over the phone to send him an email and cc Matjila. This was done, yet no comment was forthcoming. Weekly Xpose also reached out to Gordhan, through his spokesperson, but unfortunately no comment was received.
Below are the questions that were sent to Gordhan and Morar: