SUMMARY: Unpacking the PIC inquiry report

The Public Investment Corporation’s long-awaited report into wrongdoing is finally out. One of the findings in the report finds that Former PIC CEO Dan Matjila abused his power of office. The commission investigated several issues at the state-owned asset manager and submitted its findings to the President in December. Im joined by Reuben Maleka from the Public Servants Association of SA. Courtesy #DStv403

JOHANNESBURG - President Cyril Ramaphosa has released the report into misconduct at the Public Investment Commission (PIC) after two extensions of the deadline. 

The report finds there has been substantial impropriety at the asset manager as well as an abuse of power by former CEO Dr Dan Matjila.

The report states, “the Commission largely attributes improprieties to the PIC Senior Management for failure to manage decision-making in a professional and honest manner, and failure to abide by due processes and relevant prescripts.
“The Commission shows that the impropriety was worsened by the fact that the PIC Board was not functioning well, and Board involvement in investment decisions compromised their ability to exercise oversight over the PIC."

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The Commission highlights widespread disregard of PIC policies and processes on the transactions by PIC Management and certain Board members.

The report recommends a review of the involvement of employees and non-executive Board members in investee companies and recommended a series of reviews for the work done by the organisation.

The results of the reviews are planned to conclude by June 2020.

The report shows a massive loss of funds for the institution to be urgently recovered. The Inquiry stated that the PIC has not shown the urgency to salvage whatever money it can recover.
They stated the PIC must recover all the monies utilised in irregular transactions or unlawfully paid out.

Developments in the recovery of lost funds will be overseen by National Treasury within a recommended timeframe of six months.

READ: Report of inquiry into PIC finally released

The report said there are a large number of assets that are being incorrectly managed and are subsequently in distress.

The commission recommended a stronger mechanism be implemented to deal with assets in distress and recover what funds can be recovered.

The Commission made recommendations that include criminal prosecution, actions by the National Treasury, and the new PIC board.

It has been forwarded to the National Prosecuting Authority as well the other regulatory bodies who have been asked to take action.
The president said, “the Commission implicates a number of individuals in wrongdoing. The Commission gave relevant persons the opportunity to be heard at the hearings it held. Any follow-up investigations, based on the recommendations made, will follow due process and therefore give them further opportunity to be heard before any steps are taken against them.”

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The report has also found that it is highly likely that some sections of the FAIS Act have been contravened.

The Commission suggests that parties or former parties could have contravened laws dealing with issues such as corruption and bribery, protected disclosures, electronic interceptions and sections of the Companies Act.

Criminal matters will be referred to the relevant authorities.

eNCA reporter Heidi Giokos breaks down some of the details in the PIC report. Courtesy of #DStv403

The report states another issue looming large, fees paid by the PIC on transactions that appear excessive, undeserved, and without proper invoicing.

The Commission has recommended that numerous payments should be further investigated and any malfeasance that may have arisen to be penalised.

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The report further recommended that the work and appointment of advisors to investees for potential transactions also requires review, including a review of all advisor contracts over the past 5 years.
Specific transactions are highlighted in the report for further investigation and review, including reporting matters to the relevant authorities.

The Commission made recommendations on the PIC's internal corporate governance, saying it needs urgent improvement.
The Inquiry strongly recommended that the delegations of authority be comprehensively reviewed.
Significantly, the Commission found that the Board has been improperly involved in operational and investment decisions and did not limit itself to an oversight role.

The Commission has also recommended far-reaching changes in the PIC’s operating model. It says the model is no longer fit-for-purpose and needs restructuring.
The operating model, which developed organically over the years, is too centralised and no longer fit for a R2-trillion asset manager and not in keeping with international best practice.
The new organisational design will be undertaken by the PIC and its Board of Directors with oversight from the National Treasury.
Recommended changes include revising the way in which Board meetings are recorded and decisions are taken at Board level.

The Commission addressed the spate of leaks of internal, confidential information.
Confidential investment and operating information were leaked to the public, mainly by a person with the name of “James Nogu”.

READ: Matshepo More accuses inquiry of evidence tampering

This threw the PIC into turmoil, and resulted in serious reputational harm to the corporation and precipitated major changes to its executive ranks and the Board.

The Commission recommended that whistle-blower policies need to be in line with the Protected Disclosure Act.

They found gaps in technology in the organisation that enabled leakage of confidential information and recommended the PIC strengthens its systems.

In response to widespread reports in the media about the victimisation and dismissal of employees by top management and extensive testimonies, the Commission recommended the Board investigate further and bring disciplinary action against executives who victimised employees.

 The Commission expressly stated that greater transparency, fairness and inclusiveness with regard to salaries, grading, performance criteria and balanced scorecard assessment were required.

It is recommended that an independent professional body be commissioned to review the regrading process and its outcomes, to be appointed by the Board and to finalise its report by end April 2020.
The Commission investigated the allegations related to political interference in the PIC.

They found in some instances, the policies of the organisation were completely ignored by PIC employees and recommended a policy review.

Improprieties and questionable investment decisions means the PIC has in some instances, not acted in compliance with the Financial Advisory and Intermediary Services Act. 

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The Commission found that the relationship between the GEPF and the PIC is strained and that efforts should be made by both parties to restore trust and a good working relationship.

Ramaphosa said in conclusion, “I trust that the implementation of the actions above and the detailed steps set out in the Report shall put the PIC in a much stronger position to face the future and be an institution we can all be proud of.
“Given the substantial work accomplished, I would like, once more, to thank those who participated in this important work of the Commission, including the Commissioners, the Secretary, staff and the relevant government departments.
“This also includes the City of Tshwane for the venue and security services provided. We would also like to thank those who came forward to offer their testimonies and thus immensely enhanced the work of the Commission.
“Finally the media is thanked for keeping our people informed on a regular basis.”