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I covered enough criminal and civil cases in the lower and higher courts in my early career to learn the meaning of the phrase “circumstantial evidence.” When different pieces of circumstantial evidence corroborate the conclusions drawn from any single strand, just one or two weaves of direct fact can tie it all together and put a conviction beyond doubt. With that in mind, read this analysis of the PIC’s pattern of seemingly impetuous loans of billions to multiple corporate entities highly unlikely to grow or even safeguard the pensions of millions of civil servants. Veteran journalist, Ed Herbst, asks a single highly pertinent question; “what happened to due diligence?” He then lists a litany of dismally-poor PIC investments, which when taken together, point to outright nepotism, arrogance and a blithe disregard for the rules of financial custodianship. The Mpati Commission into the dealings of the PIC will soon deliver its report to President Cyril Ramaphosa. Metaphorically it contains a rare combination of meteorological phenomena; all circumstantially intense. In other words a perfect storm. Watch those implicated dash for shelter. – Chris Bateman
Where was the due diligence?
By Ed Herbst*
This is a high-risk, high-price investment in a declining industry – not the kind of thing one normally spends pensioners’ money on. We will be eager to hear from the GEPF how this fits in with their strict mandate. – Anton Harber 20/6/2013
Over the last ten years, newspaper circulation has declined by 49%, and the majority of media houses seem to have no idea how to roll out successful hybrid subscription models that have worked elsewhere in the world. Meanwhile Independent Media, one of the country’s largest media groups, has had the integrity of its news products severely compromised by its owner’s interference in editorial policy, as well as its inability to pay back a questionably acquired loan of over R1bn to SA’s Public Investment Corporation. The company has undergone several rounds of retrenchments, with a consequent decline in editorial standards. – Reuters Institute Digital News Report 2019
In mid-2013 Anton Harber questioned the Public Investment Corporation (PIC) rationale of investing supposedly sacrosanct pension fund money in a ‘declining industry’.
As the Mpati commission of inquiry into PIC corruption resumes proceedings, Reuters validates Harber’s concerns in its latest report which reveals that newspaper sales in South Africa have declined by 49% in the last decade.
This raises an obvious question when the former CEO of the PIC, Dr Dan Matjila, is called to testify.
What due diligence investigation was undertaken prior to this loan – which Iqbal Survé is refusing to repay – being made?
The question is important because for two decades the ANC’s deployed cadres have battened on pension funds – ask the Transnet pensioners, they’ll tell you.
In fact, Luthuli House saw fit to promote Enoch Godongwana after he had displayed the required expertise in this regard.
It is thus to the credit of President Cyril Ramaphosa that he established the Mpati commission and all the evidence so far indicates that like Eskom and SAA and PRASA and the SABC – the list goes on – the PIC has been turned into a trough for the politically-connected and the friends of senior executives.
As to the question of due diligence, all the evidence so far at the Mpati commission indicates that it was regarded, in the words of Michael Hulley, as a ‘Western paradigm’.
Friendship rather than due diligence was, it seems, the critical factor in getting wads of cash.
There are two telling comments in this regard in a Moneyweb report on the commission hearings:
When Maponya was asked by Standard Bank’s special senior counsel Ian Sinton how he was chosen to acquire the stake out of the millions of South African’s his response was “it was due to his relationship with Dr Matjila”.
and businessman and PIC beneficiary, Lawrence Mulaudzi told the commission that:
“… you never wanted to be ostracised by Dr Matjila. It was known in the investment space that his influence was significant”.
What I found most disturbing in the context of due diligence was the evidence tendered at the Mpati commission that Matjila had signed the still-born Sagarmatha deal on 13 December 2017 despite the following concerns already being public knowledge by then:
- the possibility of insider trading in the Leisurenet implosion as highlighted by Peter Flack;
- the acknowledgment by Survé at an insolvency inquiry in 2006 that he had allowed his friend and business associate Brett Kebble to launder almost a million rand through his personal bank account so that – as the ANC acknowledged at the time – Kebble could use his stolen money to buy political influence with the governing party;
- the disclosure in 2011 by the Mail & Guardian that Survé’s Premier Fishing company had, for a year, paid R8,655-a-month for around-the-clock private security at the private Polokwane residence of International Relations Minister Maite Nkoana-Mashabane which, for obvious reasons, she did not declare to parliament. To me, this had a Bosasa-type whiff about it;
- the concerns expressed in December 2013 by Thuli Madonsela in her ‘Docked Vessels’ report;
- the disclosure on Politicsweb in December 2015 by James Myburgh that Iqbal Survé was making no attempt to repay the R1bn PIC loan and that interest was mounting.
The extent to which a due diligence ethos was absent at the PIC during the CEO tenure of Dan Matjila was the revelation to May this year that it was unable to find evidence relating to a R3bn investment.
Here’s the relevant quote from a Business Day editorial:
Even by the standards of the blatant criminality and disregard for corporate governance that’s been exposed in the various commissions, this will take some beating.
“We have been requesting information from the PIC, but to date, we have received no documentation or minutes authorising the investment of $270m,” Lubbe told the commission on Monday.
This was in relation to R3bn that the PIC invested in 2014 to support the listing of Camac Energy, later renamed Erin Energy, a little-known oil company founded by Nigerian businessman Kase Lawal. What is known about Lawal is that he was an associate of former president Jacob Zuma, and even accompanied the latter when he received an honorary degree from a university in Texas, US.
Equally disturbing was the evidence uncovered by amaBhungane that, in return for a PIC investment of billions, ‘our brother in Tshwane’ expected the ANC to be tithed through donations to its fund-raising dinners:
But for the CEO of the PIC to actively solicit donations for the ANC from his clients was going one step further. “We have bought a table accommodating ten delegates for R400,000 with Sakhumnotho,” Mulaudzi assured him. “We still have a seat if there’s someone who wishes to join us.”
“Thanks broer,” Matjila replied.
In six weeks the commission must hand its conclusions to President Cyril Ramaphosa and, for me, a favourable portent was Judge Mpati saying that Ayo Technologies senior executive Abdul Malick Salie should not suffer any adverse consequences for telling the truth.
Salie’s testimony, that Survé was directly implicated in inflating the AYO valuation, confirmed the evidence of his colleague Naahied Gamieldien and his former colleagues Kevin Hardy and Siphiwe Nodwele.
The readers of Survé’s newspapers have yet to be informed that he has reneged on repaying the original R1bn PIC loan which he used the seize control of the former Argus Group newspapers and the tenor of the Sekunjalo reporting is somewhat different from the coverage being afforded the Mpati commission by other newspapers and broadcast stations.
Here are some of the headlines:
- PIC to waste pensioner’s money in AYO pursuit
- PIC inquiry appears to show a lopsided emphasis
- AYO refutes claims that its financials were amended
- I don’t take sides, Iqbal Survé tells #PIC Inquiry
- PIC’s investment strategy ‘racist’ – Dr Survé
Roelf Meyer firmly believes that President Cyril Ramaphosa can get the country back on track and, based on the evidence tendered before the Mpati commission so far, I’ll buy that.
- Ed Herbst is a veteran journalist who these days writes in his own capacity.
Cyril Ramaphosa: The Audio Biography
Listen to the story of Cyril Ramaphosa's rise to presidential power, narrated by our very own Alec Hogg.