AS IT HAPPENED: Matjila opens up about his 'reign of terror'

Lubbe asks Matjila if he has been made to feel uncomfortable by the commission - as has been reported in media.

Matjila responds that he has felt comfortable but there are instances regarding his power - as it has implications for what he can and can't respond to.

Beyond that, he never felt uncomfortable in the commission. 

When asked by Lediga if he feels the commission treats him fairly, Matjila responds that he thinks the questions are fair. "The only problem was the power thing, but it does not mean the commission must say I am powerless," he says with a chuckle.

Lediga says the key thing for the commission is to get the truth - "We are not after the man, we are after the truth," Lediga says.

Matjila: There will always be bad investments

There won't always be good investment decisions, former PIC boss Dan Matjila has said.

Matjila made his eighth appearance before the commission of inquiry into the continent's largest asset manager on Monday. The commission, led by Judge Lex Mpati, is investigating allegations of wrongdoing at the PIC, which manages R2trn in state funds.

Before the lunch break Matjila discussed the PIC's investments in Daybreak farms and Erin Energy.

The PIC managed to improve circumstances at Daybreak Farm by making leadership changes and addressing governance challenges. However, the Erin Energy investment at the outset was doomed, as operational challenges were exacerbated by the falling oil price, the commission heard.

Speaking specifically about the failure of Erin Energy, which eventually filed for bankruptcy in 2018, Matjila said: "You cannot get everything right in investments. There will always be bad ones, as long as you learn from bad ones so that you do not repeat them again. There will be new bad ones for some other reasons - that's investment."

Matjila said that due to having a diversified portfolio, its clients – notably the Government Employees Pension Fund (GEPF) – can withstand losses.

Assistant commissioner Emmanuel Lediga asked Matjila if he thought Erin Energy would have survived if the oil price had remained at $100 per barrel. Matjila responded that it would have helped the company, but that there were other technical deficiencies that had to be addressed.

Matjila says the investigation was limited to giving investigators super admin rights, collecting information and then the rights were taken away when they got the necessary information for analysis.

There was no other kind of spying involved, as has been alleged.

Matjila says that he does not believe allegations made come from a whistleblower, because they are malicious.

"I don't think they can be called whistleblowers, or be given the status of whistleblowing.

"It is just someone being malicious and just throwing as much mud as possible, hoping something will stick in the process."

Matjila says he was disappointed with what happened at the PIC

People like Magula were promoted out of nowhere, he was young. "I was trying to create a young team, that will probably be there for 15 years when I am gone, who will probably do better than I did.

"'That is the nature of the asset management, you need people who will be there for longer, trustworthy and always acting in the best interests of the organisation. 

"I was extremely disappointed when I saw all this happening around me, with my colleagues I had trusted so much," Matjila says.

Matjila said some colleagues proposed lie detector tests of exco, to determine the leaks.

But he chose to get external service providers to conduct the investigation in an "elegant" and "dignified" way.

Lediga asks Matjila why no one asked him about allegations of employing his son.

Matjila says it is all part of a campaign against him. These allegations go to the newspapers first.

"It is a strategy to just damage, damage and damage."

Matjila says that people should be given positions according to their strength.

Play according to their strength and not simply put them in positions, setting them up for failure.

PIC is an investment business and legal and risk are important elements.

There can only be one head of the department at a time. He asserts that the process is fair.

Lubbe asks if he is are Lebada had been appointed to the risk department and seniors in the department were overlooked.

Matjila says he is aware of Lebada's promotion. He assumes there must have been a process- that there were adverts and everyone was allowed to apply.

Lubbe asks if it is not a major HR problem to promote a junior in one department over someone who is already senior in the other department.

Matjila says if the process is transparent and he comes out best- that's the process.

Lubbe asks why having a risk department dominated by the Venda ethnic group.

Matjila says it is a risk, because there must be diversity in every department.

No steps were taken to correct this as he did not have time as he had to deal with Nogu's allegations. 

Lubbe starts with cross-examination.

Matjila says he cannot recall giving anyone in the IT department super admin rights.

Maisela then opened a case of corruption against Matjila.

He says the harassment continued. He got texts and emails from a James Nogu who would expose corruption at the PIC.

Matjila says he thinks Maisela was very much involved in the campaign against him, based on Maisela's evidence before the PIC commission. 

Nothing could be further from the truth - these were steps to protect the PIC and the confidentiality of its clients.

I had no intention to spy on employees.

The scope of the investigation was narrowed to departments where the leaks most likely would have happened - such as the risk department, the legal department among others.

The departments did not all like it. Some responded professionally, while others responded immaturely.

He described it to a journalist of Business Day, who then dubbed it "reign of terror".

Matjila said he had a strong feeling that people within the PIC were behind allegations against him.

Matjila says he asked Maisela to help secure a case number, which he boasted he could get.

The police at Brooklyn station did not open the case because the document of the PIC was not classified as confidential.

Matjila could not understand why they could not get a case number. 

Matjila said he asked the head of information and tech to investigate why there are so many information leakages, like the Tosaco and Ascendis deals which ended up in the email.

The source of the leakages was clearly an inside job.

The anonymous phone calls he got about allegations are also clearly from the inside of the PIC.

"I was very concerned about the vulnerability of the PIC IT platform. There was a clear and obvious risk to R2trn in client assets. There was a likelihood that potential clients for finance would be deterred from approaching the PIC for funding if the confidentially of their applications is not secured," he said.

Not much progress was made by the team in detecting the source of the leaks or sources of anonymous emails.

The team identified the internet kiosk in Sandton where some of the emails come from.

The PIC would need a case number to subpoena the kiosk for more information.

There was also another allegation of nepotism - that Matjila employed his son in the risk department.

Mr Katlego Lebada, was recruited through the PIC's strategic partnership with Fordham University in NY.

He is qualified in financial risk management and strong in credit risk. He had a masters in investment management.

Matjila said he was surprised Magula did not use him in credit risk, but rather market risk.

He learnt this has to do with the allegation Lebada is his son - "he is not my son," Matjila said.

Matjila says another allegation concerning his son that he is not employed by Dr Iqbal Surve is not true either.

Matjila says his son visited the head of the IT companies of Dr Surve to see what development is about- he is not employed by Dr Surve or any of his companies.

Matjila says there were many nonsensical allegations mailed to journaliusts and media.

One was that he used his position to get his son employed at the PIC.

There was a gentleman who shared his surname, but was not a relative, that managed the canteen at the PIC. He was not an employer of the PIC, but the company contracted by the PIC to supply catering services.

"This is the level of maliciousness that compelled me to institute robust internal allegations."

Matjila says that the PIC was on the bad end of press coverage after it emerged the police were investigating allegations of corruption by him a CEO.

The allegations relate to the channelling of funds to a girlfriend- Pretty Louw.

Matjila says Advocate Geoff Budlender placed his innocence beyond any doubt.

'Reign of terror'

Matjila will now discuss allegations of his 'reign of terror'.

Mpati asks Matjila why he did not accept an offer to travel first class.

Matjila says James Nogu would have written about it, before laughing.

You need to understand the rating of the bank can deteriorate while you are an investor there.

When it deteriorates you need to decide if you bail out or remain and try support the bank to get off the ground.

Banks require shareholders that are strong.

The law says you can't own more than 15% of the bank if you do not have the right balance sheet.

Matjila says he does not think the PIC lost money in the investment.

As a long term investor- we had seen the improvement in the balance sheet.

"We are not alone. We are with very reputable shareholders," he said.

Matjila says he thought the bank had met minimum reporting guidelines, otherwise there would be issues with regulators.

The regulators should have picked it up and dealt with it.

The PIC took comfort in that Nedbank was also taking a stake with Ecobank.

They had a strong technical, corporate agreement.

They gave us comfort that the bank was run properly

The IFC was another investor - with a lot of experience- which also comforted PIC. There were strong shareholders in it.

But the economic climate and challenges of growth and fixing acquisitions for an aggressive growth strategy created serious headwinds.

Matjila says there could have been benchmarking- but you would end up not investing, there needs to be an element of risk-taking if you can manage it.

PIC put $250m to test the waters, and something significant to get a board seat. The last thing you should not do is commit and not get a seat at a table.

Lediga asks if the PIC did enough due diligence of Ecobank, because it appears there were many problems.

Matjila says there were governance problems, but the biggest problem was Ecobank Nigeria. once it bought Oceanic Bank, that's where the biggest headache came.

Another challenge was the changing of CEOs- the old one retired and a new one took over.

Ecobank was too aggressive in its growth strategy. it moved from a few countries to 33 countries in no time. That put a lot of pressure on it to manage new affiliates and subsidiaries in different countries and currencies.

The process of cleaning up took a bit of time. 

The share price underperformed for various reasons.

How Nigeria was financing certain instrument put in there and margin loans were put in place to prop up the share price, the integration of Oceanic bank required capital, and the underperformance of the Kenyan affiliate affected the bank.

Being present in 33 countries was challenging- the cost of capital in being present in these countries (some of which were small) was much higher than the return on equity. restructuring had to happen - a cleanup - for the bank to produce profits.

By the time I left the bank, it was gearing up to be more profitable, says Matjila.

The litigation launched by the CEO was settled by the bank in an amicable way, says Matjila.

There was a push from regulators to have the board change and that the major shareholders had to restructure the board to be representative of the main regions in which Ecobank is present.

The governance challenges culminated in the new CEO leaving the bank.

Matjila says there were "lots of friends" on the Ecobank board.

he says he found challenges when he joined the board - regulators flagged conflicts of interests within the board.

"There was a lot of things that were not kosher, which were discovered after I joined the board. That was the start of the fight to fix the governance, and to get a board with lots of independent directors," Matjila said.

Some of the boards had members who had come from banks which went under. In SA- regulators do not allow that.

A few days before closing the transaction - we learnt Ecobank bought Oceanic Bank.

At the time a lot of banks in Nigeria were going under, as a result of the fall in the oil price.

Ecobank became a significantly sized bank in the Nigerian economy.

The process of integrating it into Ecobank was a minefield- which is where the problems of the bank emanated from.

But we were convinced it was good for the bank to grow, it would eventually clean its balance sheet. It took a while to do that. Things only got right in the past year- it has broken even. But it is has been a difficult perod. 

Matjila says the PIC invested in Ecobank in 2012, an amount of $250m was invested.

This is 8 US cents per share- giving it 19% shareholding in the bank. This was before Nedbank invested in Ecobank.

Lubbe asks about litigation Matjila was involved in with a former Ecobank CEO.

Matjila says there were a lot of governance challenges with the Ecobank board at the time- the challenges required involvement of regulators.

The board as cleaned up and a new board was put in place.

The CEO was removed, and so the CEO launched litigation against the board, of which Matjila was part,

Matjila says the PIC never paid any monies with regard to the litigation.

Lubbe confirms all directors' fees he earned in his capacity as PIC representative on the Ecobank board was paid to the PIC.