The Commission of Inquiry into the Public Investment Corporation (PIC) may have kicked off slowly, but it is steadily gathering momentum – competing for attention alongside the Zondo commission of inquiry into state capture. At the PIC major revelations have already brought to light, with many more to come that will shock the business community and the nation. The PIC manages government pension and other assets worth over R2-trillion, making it the biggest and most important investor in South Africa.

Appointed by President Cyril Ramaphosa in October 2018, the commission seeks to investigate “allegations of impropriety following reports of poor governance and precarious investment processes,” according to SA Gov News. Former President of the Supreme Court of Appeal, Justice Lex Mpati, has been appointed as Commissioner, assisted by former Deputy Minister of Finance Gill Marcus and businessman Emmanuel Lediga.

A statement released by the commission states that the aim of the hearings is to hear from key employees to give the commission an overview of the applicable legislation, policies and various units of the PIC so as to lay the groundwork for later engagements.

The commission is currently dealing with substantial irregularities implicating AYO Technology Solutions. The alleged dodgy investment was exposed by Lufuno Nemagovhani, head of internal audits at the PIC, during the commission. Nemagovhani detailed how as much as R4.3 billion acquisition of shares in AYO Technology Solutions was approved without following the necessary processes and agreed that due process had been breached. “I have never seen anything like this before…It was signed off before the delegated committee could approve [it],” said Nemagovhani.

But there were some PIC executives who claimed there was no foul play. Roy Rajdha, executive head of impact investment and Sholto Dolamo, head of research and project development stated under oath that they witnessed no legal breaches or contravention of legislation or policy within the PIC. Yet, the very next day, Tuesday 22 January, the executive head of listed investments, Fidelis Madavo, was suspended before he could even testify, along with assistant portfolio manager, Victor Seanie, following an internal PIC investigation.

The PIC said in a statement released on the same day that a preliminary report on the investigation was submitted to the board which reflected “a blatant flouting of governance and approval processes of the PIC” in which employees were involved. Although the PIC was slammed by the evidence leader for the commission, Advocate Jannie Lubbe, for running a parallel investigation, suspended Madavo continued with his testimony.

PIC staff had testified that Dr Dan Matjila had brought the AYO deal to the PIC himself. However, on the third day Nemagovhani revealed that the PIC signed and approved the investment without any due diligence being performed.

The PIC subscribed for 100% placement of that R4.3 billion, but Nemagovhani said that those shares are failing and initially valued at an estimated R43 a share, it is worth about R3 today.

His testimony was cut short during the Commission because Namagovhani was not prepared to be questioned further on the matter.

What was not said in his testimony, however, was disclosed in a meeting between the Standing Committee on Public Accounts (SCOPA), Chairperson of the PIC Mondli Gungubele, as well as the directors and executive teams of the PIC held in December last year.

Back then it emerged that the PIC believed the AYO investment would be “a good catalytic investment”, according to the Parliamentary Monitoring Group (PMG) minutes. However, an investigation by the head of internal audit found “That [this] was a major failure internally and it seemed that no one had been held accountable.”

“[M]ajor deficiencies, not the least of which was that R4.3 billion had been moved before the transaction had been approved and before the put option was signed,” according to the PMG meeting summary.

At the time SCOPA further expressed their concern about the AYO investment saying it gave the impression that “certain people were benefitting and only if someone was known to the PIC, could one benefit.”

“VBS had come to the PIC asking for a loan”

The AYO investment was the only deal of this nature that was broadly discussed, however, the commission is required to submit an interim report to Ramaphosa by 15 February 2019 and there are other dodgy deals, already in the public sphere, that are still to be considered.

The commission has asked the PIC for details of its loan to Lancaster 101 – Steinhoff International’s BEE partner led by Jayendra Naidoo, as well as information regarding the VBS Mutual Bank scandal.

In July 2018 details emerged in the City Press of how Vhavenda King Toni Mphephu Ramabulana; Tshifhiwa Matodzi, the bank’s former chairperson and Vele Investments founder; and former Vele chief executive Robert Madzonga allegedly stole hundreds of millions of rands belonging to depositors to finance their lifestyles.

An affidavit by VBS curator, Anoosh Rooplal, revealed that “fake deposits” and bribes were paid to politicians and “senior official” of the PIC and the Public Rail Agency of SA (Prasa). In return for the bribes they would “deposit public money in the bank”.

If the PMG meeting minutes are anything to go by, the commission is in for a shocking reveal. The PIC has two members on the board of VBS – the executive head of risk, Paul Magula, and the executive head of legal, Ernest Nesane – who both did not report any fictitious transactions back to the PIC.

The PMG minutes report that the acting CEO of the PIC, Matshepo More “believed that the rot had been too deep”.

“The regular reports said everything was good and the business was growing and it was the advancement of a black bank, which had been the reason for investing in VBS,” the minutes read.

“Just before the fall, VBS had come to the PIC asking for a loan. When the PIC started investigating, there was something in the numbers that did not add up and the stories had not made sense. For example, one day there was R20 million in the bank management account and the next day, it was R2 million,” the minutes go on. “At that point the PIC had started to feel uncomfortable and VBS had not been given funding.”

As a result, one person was dismissed and another resigned, they were both prohibited from working in financial institutions and criminal charges were explored.

Another dodgy deal that the commission will explore is between the PIC and former Finance Minister, Nhlanhla Nene’s son, Siyabonga Nene. The deal left Nene in the firing line of accusations of nepotism. It was also alleged that Nene Jnr’s business partner, Amir Mirza, received $1.7 million in return for presenting an investment opportunity to the PIC – a deal which the Guptas allegedly tried to get in on, according to a City Press article.

No doubt, in the upcoming weeks of the Commission we will hear more about these investments, and how the PIC lacked any policy dealing with inter-related parties. Specifically, the fogginess surrounding the PIC’s investment with Lancaster will also hopefully be cleared up by upcoming witnesses called to testify.

While Ramaphosa has taken bold steps with the many commissions of inquiry underway, issues of governance and abuse at state expense have been thrown up. With the upcoming elections, strenuous clean-up attempts are to be made if voters are to put their trust in government.