FORMER Public Investment Corporation (PIC) chief executive Dan Matjila told the PIC Commission of Inquiry that it was finally a matter for the Minister of Finance to appoint the person who would head the PIC. Oupa Mokoena African News Agency (ANA)
Foermer Public Investment Corporation (PIC) chief executive Dr Dan Matjila said yesterday it was mere tradition that the Deputy Minister of Finance was appointed as the chairperson of the investment corporation. This was not prescribed anywhere, and the power to appoint lay with the Minister of Finance, who could appoint virtually anyone and not necessarily the deputy minister.

Appearing for the first time before the PIC commission of inquiry led by Judge Lex Mpati, which is due to finish its hearings this month, Matjila said the appointment of the Deputy Minister of Finance as the chairperson of the PIC was a tradition that started in post-apartheid South Africa, but was not a proscribed or gazetted requirement.

“From what I know, there is nowhere where that matter is raised, or a reason given why they did not formalise that one.

“What I know is that the Minister (of Finance) has the powers to appoint a chairperson. He could appoint anybody. It appears as tradition that they chose the deputy (minister of finance), but it does not mean the deputy should always be the chairperson. The authority lies with the minister,” Matjila said.

Matjila stated his concerns about the rationale for the chairperson’s involvement in investments, because the PIC is the major investor in the bonds of state-owned companies and hence there would be a conflict of interest if the chairperson (who is also the Deputy Minister of Finance and therefore represents the state) were to be involved in decisions to invest in the very enterprises that fall under the purview of the finance ministry.

The deputy minister is the second in command of the National Treasury, a government department that is responsible for the finances of the nation and a custodian of the Public Finance Management Act.

When Matjila joined the PIC the PIC closed the 2003 financial year with R308.7billion in assets under management. Trevor Manuel was the Minister of Finance and Mandisi Mpahlwa served as his deputy. Mpahlwa took over from Gill Marcus, who was the Deputy Minister of Finance from 1996 to 1999.

“It became a tradition in the post-apartheid period that the Deputy Minister of Finance became the chairperson of the PIC. This tradition is still in practice today,” said Matjila.

He alerted that the minister may appoint any person to serve as the chairperson of the PIC.

“The key clients or depositors of the PIC were the GEPF (Government Employees Pension Fund), the Department of Labour funds - the Workmen’s Compensation Fund, the Unemployment Insurance Fund, the Skills Fund - the Department of Justice Guardian’s Fund, and other public sector funds.”

Matjila stated that “there were no formal mandates from depositors. The Public Investment Commissioners Act gave commissioners full discretion on the asset allocation on the monies deposited into the PIC. Only the GEPF had an exposure to other asset classes such as equities and properties. All other clients’ assets were invested in fixed income securities.”

Matjila defended the state-owned asset manager’s investments in unlisted portfolios through its development fund Isibaya, saying there was nothing in the law untoward about this.

The Isibaya Fund is a developmental investment fund managed by the PIC to invest in projects that will have a positive social impact on ordinary people.

Isibaya’s portfolio accounts for investments valued at nearly R45bn.

Matjila said the commissioners had full discretion, derived from the PIC Act, on the asset allocation of the monies deposited into the state-owned entity with about R2trillion in assets under management - including from the fund manager’s biggest client, the GEPF.

He said the Isibaya portfolio was established in 1995 following the amendment of the PIC Act in 1992, allowing the commissioners to allocate 3.5percent of the GEPF’s assets under its management to socially responsible investments - mainly to focus on financing black economic transactions.

“This is important to bear in mind when considering the allegations that the PIC’s investment in unlisted portfolios amounted to a conflict of interest and doing business with friends and colleagues and the assertion that the investment in unlisted portfolios should have been suspended with immediate effect,” Matjila said.

Matjila made it very clear when he emphasised: “The point is, the amendment to the PIC Act specifically authorised investment into socially responsible investments which are black economic empowerment transactions.”