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PIC’s Matjila discusses Eskom debt-for-equity swap: PIC update

PIC previously proposed to Eskom to swap some debt for equity in exchange for board and committee representation, Matjila says.

Daniel Matjila, the former head of South Africa’s Public Investment Corp., appears for a fourth day at an inquiry into whether the fund, which oversees about $150 billion of assets, deviated from its mission to safeguard the pensions of more than 1.2 million South African state workers.

The inquiry has heard from about 70 witnesses — several of whom flagged Matjila as having played a key role in approving questionable deals. He’s denied any wrongdoing.

Read: Matjila: ‘I am prudent with other people’s money’

Matjila – a victim of state capture?

Here are the latest developments, updated throughout the day. 

Key developments

  • Matjila has said he was removed so that politically connected people could influence the fund’s investment decisions

  • Matjila is accused by a politician of borrowing R2.5 million ($176 000) from failed South African lender VBS Mutual Bank. Evidence leader Jannie Lubbe says a lifestyle audit shows no evidence that Matjila took out an irregular loan, and the ex-CEO has also denied the allegation

  • Finance Minister Tito Mboweni increased PIC’s independence by ending the tradition of appointing his deputy as chairman while announcing a 14-strong interim board Wednesday

High fees (11:25 am)

Inquiry Commissioner Gill Marcus says PIC’s advisory fees are high and asks Matjila if there are ways to address that. He agrees and suggests fees should be linked to performance.

Eskom proposal (10:35 am)

Matjila says the PIC had in the past proposed to state electricity utility Eskom to swap some debt for equity in exchange for board and committee representation.

PIC Supports Eskom (10:01 am)

Matjila says that of the about R90 billion ($6.45 billion) of Eskom bonds bought on behalf of its clients, R20 billion isn’t government guaranteed. Marcus asked if the PIC had talks with Eskom or relevant ministers about governance issues at the power utility. Matjila said the PIC did talk to Eskom management and provided them with conditions for further PIC investments.

Discretionary mandate (9:53 am)

The PIC has a discretionary mandate for how it invests, but with parameters, Matjila says. For unlisted investments of more than R2 billion, the PIC must approach the Government Employees Pension Fund for approval. When Matjila left in November, he said listed investments had no such conditions.

Good shape (9:37 am)

Matjila says the PIC was “in good shape when I left.” Marcus asks what Matjila means by that, because his testimony points to conflicts between functional issues and political motivations at the fund manager. Matjila responds that while the PIC is not without its problems, it has outperformed benchmarks.

Highlights from Wednesday

  • After two board member resigned around mid-2018 and their positions weren’t filled, Matjila said PIC Chairman and then-deputy finance minister Mondli Gungubele was able to use his casting vote to secure any decision wanted. “It was indeed a difficult time for me,” Matjila said.
  • Matjila said it has “become very clear to me that at least part of the reason that I had to be removed was to ensure that the Edcon deal takes place ahead of elections.” He said the PIC was being used as “a bailout bank.”
  • Matjila said that as turmoil increased at the PIC, some operational processes may have been overlooked. 

© 2019 Bloomberg L.P.

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