Two explosive forensic reports have revealed how the Public Investment Corporation (PIC), which is responsible for about R1.8-trillion of government pension and social security funds, is – under the stewardship of its chief executive officer Dr Dan Matjila – in crisis. Weekly Xposé is in possession of two damning reports which have for years been kept under wraps because of their embarrassing findings against key executives at the PIC, including Matjila.
The first report, titled: Governance Review compiled by auditing firm KPMG in 2012 when Matjila was the institution’s chief investment officer, highlights a number of governance and structural issues which “confound clear fiduciary decision making authority and reflect a highly fragmented and a dysfunctional system”. The second forensic report was compiled by Gobodo and Investigative Accounting and was released in August 2015. It shows how under Matjila the PIC was defrauded by its staffers, who not only got away with their crime, but are allegedly enjoying Matjila’s protection.
Amongst the key findings of the KPMG report is “lack of clear authority and accountability and inconsistencies in operational dysfunctions as well as lack of a galvanizing sense of mission among leadership”. The report attributes lack of accountability to misalignment of interests between executive leadership and the principals. Chillingly, the report found that under Matjila as chief investment officer, the PIC management demonstrated “the absence of an overall investment strategy to guide the work of investment managers in fixed income dealings”.
“We found that there was a need for an investment policy that speaks to roles, delegations and decision-making in the investment process which determines how investments ought to be made,” the report says. The report also highlighted low functionality by investment teams at the PIC. “Much energy and attention in the past year has been on getting as many deals as possible to push the quantity line and meet numerical outputs irrespective of the return benchmarks set by clients in their investment mandates. The danger with such an approach is that it compromises quality and results in an exponential rise in the number of bad deals,” says the report.
The Gobodo report deals with allegations of irregularities in its the PIC’s R75m investment in SacOil, in which the Moseneke family are the controlling shareholders with the PIC owning just over 40% of the company. The report also warns of systemic weaknesses that possibly led to fraud as well as the possible trading in SacOil shares on the basis of price-sensitive information. The report found the R75m investment into Sacoil, masterminded by PIC’s Fidelis Madavo, not to be supported by quantitative analysis or researched information.
Weekly Xposé can reveal that despite the report finding that PIC suffered losses to the tune of millions in this investment, Madavo enjoy’s Matjila’s protection and is still a manager at the PIC. This is despite Madavu playing a role that led to insider trading. Weekly Xposé has also learnt that Matjila has ignored several of the report’s recommendations, one of which was to consider criminal charges against implicated PIC staffers. Weekly Xposé sent a list of questions to Matjila, who responded through PIC’s senior corporate governance specialist, Deon Botha, who said the KPMG report was commissioned before Dr DanielMatjila’s appointment as chief executive officer.
“When Dr Matjila was appointed as CEO, he began a process of developing a revised mission, vision and investment strategy for the PIC. Part of this was a thorough review of the PIC’s organisational and governance structures which lead to, inter alia, changes in the organogram.” Added Botha: “Amongst other changes, the position of Chief Investment Officer was split into four positions, namely: Executive Heads for Listed Investments, Property Investments, Developmental Investments and Private Equity. This was done to ensure alignment with appropriate technical skills and expertise, specific to each asset class, as the PIC when compared to the private sector in essence comprises of five different asset managers.”
Botha said “the PIC is audited by the Auditor-General and as is clearly stated in its annual reports, the Auditor-General has never found anything untoward with regards to the operational management or investments at the PIC”. Responding to the Gobodo report Botha said the matter was sub judice as it has been referred to the Public Protector. “Following the submission of the findings by Gobodo, the PIC undertook all internal processes as guided by its investment and human resources policies to address the recommendations contained in the report. The PIC management and board are satisfied with the outcomes of the disciplinary process that was instituted.” Botha said the PIC considered the matter closed.
Weekly Xposé also sent questions to Deputy Finance Minister Sfiso Buthelezi who is also PIC board chairperson, who said he only had his first board meeting on Monday. Buthelezi promised a response once he had been briefed and had seen the two reports. – email@example.com