Dan Matjila’s conduct was ‘wholly improper’, inquiry finds

12 Mar 2020

The final report by a commission of inquiry into the PIC found that Dan Matjila acted ‘dishonestly and without integrity’, contravening section 8A(a) of the Financial Advisory and Intermediary Services Act. Breaches of this act mean that Matjila might face a monetary fine of up to R1m or imprisonment for up to 10 years.

Dr Dan Matjila, the former CEO of the Public Investment Corporation (PIC) who has repeatedly denied that he was a powerful force at the state-owned asset manager when he led it for five years, has been implicated in several controversial investments that the PIC shouldn’t have concluded in the first place.

Report of the PIC Commission

The final report by a commission of inquiry into the PIC, which was released by President Cyril Ramaphosa on Thursday 12 March, found that Matjila abused his office and influence to conclude various investments that have since soured and weakened the asset manager’s governance structures.

Matjila, who resigned from the PIC in November 2018, ignored Business Maverick’s request for comment on Thursday night. Throughout his testimony at the PIC inquiry in 2019, Matjila rejected suggestions that he was influential, saying he didn’t have the power to unilaterally approve investment decisions.

Among the controversial investment decisions that Matjila is implicated in are companies controlled by businessman Iqbal Survé, including Sekunjalo Investment Holdings, which was created in 2013 for the purpose of acquiring Independent Media, which owns a range of publications including The Star and Cape Argus, from its Irish parent, Independent News & Media. Sekunjalo Investment Holdings controls Sekunjalo Independent Media (SIM), which in turn owns 55% of Independent Media.

The PIC initially invested R237.5-million to acquire a 25% stake in Independent Media. Through a range of debt facilities, the PIC extended another R721-million to Sekunjalo, loans which have not been repaid. The PIC has since launched formal court proceedings to liquidate SIM in a bid to recover its money.

The inquiry report found that the PIC’s investment in Sekunjalo “showed a marked disregard for PIC policy and standard operating procedures”. The report continued: “Proper governance was absent or poor, and risk identification processes were downplayed by looking for risk mitigants to make sure the deals were approved.” This is because the PIC’s biggest client, the GEPF, did not support the investment in Sekunjalo, saying it was an investment in a sector that “had a bleak future”.

Other Survé entities

Other Survé-linked entities that Matjila has been implicated in are AYO Technology (a JSE-listed technology firm) and Sagarmatha Technologies, which failed to list on the JSE in 2017. Several witnesses at the PIC inquiry hearings, which began in January 2019 and ran until August 2019, testified that Matjila was a close friend of Survé, which heavily influenced the state-owned asset manager’s decision to invest in AYO and other Survé entities.

The inquiry, which was chaired by retired judge Lex Mpati, found that the “close relationship” between Matjila and Survé created “top-down pressures”, which prompted the PIC’s deal team to approve investment decisions.

The deal team is tasked with probing the merits of investment opportunities that are presented to the PIC, which is the largest asset manager in Africa, managing R1.8-trillion worth of government employee pension savings on behalf of the Government Employees Pension Fund (GEPF).

Matjila also had influence over the PIC board, with the report finding that the board was “a rubber stamp for the decisions driven by Dr Matjila”, even in instances when it expressed concern about particular investments.

About Matjila’s character, the inquiry report was damning, saying: “There was both impropriety and ineffective governance in a number of investments. This was compounded by the dishonesty of and material non-disclosure by Dr Matjila, both during his evidence at the Commission and in decision-making processes regarding various transactions.”

This finding is so serious that the inquiry recommended the PIC report Matjila to the relevant authorities for contravening provisions of the Financial Advisory and Intermediary Services (FAIS) Act. The FAIS Act protects consumers of financial/investment products and services. By acting “dishonestly and without integrity”, the report said Matjila had contravened section 8A(a) of the Act. Breaches of this section means that Matjila might face a monetary fine not exceeding R1-million or imprisonment for up to 10 years.

AYO, Sagarmatha and Lancaster

The almost 1,000-page report details several instances where Matjila compromised the PIC’s governance processes. The report found that Matjila deliberately excluded the PIC’s deals and investment team on the asset manager’s investment in AYO, Sagarmatha and a loan it extended to Lancaster Group, a black economic empowerment investment vehicle, to buy Steinhoff shares.

On AYO, the report found that ahead of the company’s listing on the JSE on 21 December 2017, Matjila and his erstwhile colleague, Lebogang Molebatsi, signed a subscription form on 14 December 2017, paving the way for the PIC to buy AYO shares.

The PIC was the only investor to buy AYO shares, subscribing for shares at a price of R43 per share, resulting in the PIC shelling out R4.3-billion for the investment. At Thursday’s JSE close, AYO shares were worth R2.38 per share. The inquiry report found that the PIC’s investment in AYO was “hastily” approved and Matjila didn’t inform a committee meeting, tasked with due diligence on investments, on 20 December 2017 that a subscription form had been signed.

On Sagarmatha, the inquiry report found that in late 2017, the company offered the PIC an option to subscribe for shares worth between R3-billion and R7.5-billion ahead of its JSE debut. The price for the Sagarmatha shares was pitched at R39.62 per share by the company. However, the PIC deal team valued the shares at R7.06 per share. The report found that Matjila, who was not a member of the deal team, was actively involved in the transaction and wanted the PIC to subscribe for Sagarmatha shares at R39.62 per share or a higher price.

“Dr Matjila had already signed the share swap agreement and irrevocably bound the PIC to a share price of R39.62 prior to Sagarmatha being valued by the deal team.” The PIC ditched its investment after the JSE disapproved Sagarmatha’s listing.

The PIC lent R9.4-billion to a Lancaster vehicle, called Lancaster 101, in September 2016 to buy 2.75% of Steinhoff’s ordinary shares. Lancaster Group is owned by Jayendra Naidoo, a businessman who was a trade unionist with links to Cosatu. But the investment has soured since Steinhoff shares collapsed by more than 80% after the furniture retailer admitted to accounting fraud in December 2017.

The initial funding request was R10.4-billion but this was reduced so that the investment would fall within Matjila’s delegation of authority (DOA) and wouldn’t require approval by PIC investment committees or the board.

“The commission finds that the conduct of Dr Matjila in reducing the amount so that it falls within his DoA was wholly improper. This might be taken to indicate collusion between Dr Matjila and Lancaster.” BM

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