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Did the PIC inquiry acquit itself well?

2020-03-25 22:46

An oft-repeated nugget of wisdom, “Unto whom much is given, much will be required”, finds resonance within the report of the Judicial Commission of Inquiry into allegations of impropriety at the Public Investment Corporation (PIC) released to the public last week.

Billions in government employees’ pension fund money managed by the PIC were advanced in the form of investments in or loans towards projects with the primary goal being to protect and enhance the value of pensioners’ savings.

However, for over a decade, the PIC was used as a private kitty for the politically connected and as a tool to advance personal interests of those in charge.

Sadly, misdirection and textbook sophistry leave a sour taste on one of the most consequential commissions of inquiry since the advent of our constitutional democracy.

Let me explain.

President Cyril Ramaphosa established the commission following UDM leader Bantu Holomisa’s allegations of malfeasance at the PIC – Africa’s largest fund manager.

The commission, chaired by retired former president of the Supreme Court of Appeal of South Africa Justice Lex Mpati, released its much-anticipated report last week amidst the global outbreak of the Covid-19 coronavirus.

Mpati, Marcus and Lediga faced a mammoth task as evinced by the commission’s wide terms of reference that spanned over 3 pages.

A softly spoken eminent jurist, armed with a deceptively sharp mind, Mpati rarely interrupted proceedings at the inquiry.

Most of the probing was left to his able assistants, former Reserve Bank governor Gill Marcus and private equity investment guru Emmanuel Lediga.

Mpati, Marcus and Lediga faced a mammoth task as evinced by the commission’s wide terms of reference that spanned over 3 pages.

They were tasked with enquiring into, making findings, reporting and making recommendations on, inter alia, the following:

• Whether any alleged impropriety regarding investment decisions by the PIC in media reports in 2017 and 2018 contravened any legislation, PIC policy or contractual obligations and resulted in any undue benefit for any PIC director, employee, any associate or family member of any PIC director or employee at the time;

• Whether any findings of impropriety following the investigation in terms of above paragraph resulted from ineffective governance and/or functioning by the PIC Board; and

• Whether any PIC director or employee used his or her position or privileges or confidential information for personal gain or to improperly benefit another person.

The above line of enquiry arose out of serious allegations of impropriety made by Holomisa against Harith Fund Manager, its CEO Tshepo Mahloele and non-executive chairperson Jabu Moleketi.

A pool of investors consisting of blue chip financial companies Absa, Metropolitan, Old Mutual, Stanlib and SSNIT, on the one hand, and AfDB, DBSA, EPPF, GEPF, on the other hand, raised the capital needed to establish Pan African Infrastructure Development Fund (PAIDF-I).

Holomisa had alleged that Mahloele and Moleketi had used their previous positions at the PIC to enrich themselves, an allegation both vehemently denied and for which Holomisa faces legal action.

Assuming Mahloele’s hiring didn’t follow normal recruitment processes as is the norm with government positions, it is important to note that Harith is not a state-owned company and therefore isn’t subject to any public service recruitment prescripts.

Crucially, Mahloele’s appointment would have required concurrence and sanctioning by other PAIDF-1 investors.

It would therefore have required a perfect alignment of ingenuity and sleight of hand, on the part of Mahloele, and gullibility on the part of the blue chip fund investees for Mahloele to improperly install himself into a position he didn’t deserve nor was unqualified for.

In his testimony before the commission, Holomisa posited: “One of the most difficult tasks regarding dealing with the type of corruption that is alleged to have happened at the PIC is the sophisticated nature of the transactions. Corruption can come in two forms, legal and illegal corruption. Legal corruption occurs when the elite build a legal framework that protects corruption or manipulate [an] existing legal framework without necessarily breaking the law”.

Legal corruption? What legal oxymoron!

It boggles the mind that this legal mumbo jumbo crept into an esteemed jurist’s final report.

But then again, twit happens!

A preface to the report’s section dealing with the question: “Whether any PIC director or employee used his or her position or privileges, or confidential information for personal gain or to improperly benefit another person” uses Harith Fund Manager as a case study.

“When going through the story of Harith, these words resonate. The layering of legal entities (state-owned corporations, pension funds, banks, companies and trusts and partnerships etc), when applied by financiers and corporate structure experts, can make finding the substance, and not form, of a transaction or series of transactions complex and quite perplexing. These layers also give the players in such a formation the ability to use ‘plausible deniability’ most effectively, as looking through all the conduits is challenging and time consuming,” states the report.

It is common cause that Mpati, with the concurrence of his assistants, did not reach a finding that supported Holomisa’s claims that the nature of Harith’s structure and transactions were “complex” or underhanded.

Allegations of corruption levelled by several witnesses against Kholofelo Maponya, chairman of Matome Maponya Investment Holdings which benefited improperly from the PIC, were damning and worrisome.

Owing to the suspiciously close relationship between Matjila and Maponya, massive PIC funds were made available to Maponya.

The PIC was thus exposed to risks associated with a single counterparty to the detriment of many South Africans who need funding.

Notwithstanding, a key tenet of fundamental justice or equity is the legal principle of audi alteram partem.

This is a Latin phrase meaning “let the other side be heard as well”.

It is the principle that no person should be judged without a fair hearing in which each party is given the opportunity to respond to the evidence against them.

It is extremely bizarre that Maponya was never granted an opportunity to testify despite reports of him having asked the commission to do so.

This seems to be a huge blot on the commission.

As for the vexing issue of “cooling-off” period for public servants, the report came woefully short.

Lest we forget, a litany of former financial ministers and Reserve Bank governors stand accused of using their respective (former) institutions to secure plum, handsome rewards post their departure from government positions.

It is increasingly difficult to dismiss assertions that we operate in a dual moral universe whereby certain individuals are targeted for political expediency while others reap the “rich rewards” of the power of their political connectedness.

Most pundits were not surprised that no findings of malfeasance were reached against Harith, Lebashe and their respective directors.

The vacuous nature of allegations made against them by Holomisa were exposed for what they were.

The commission’s finding that Harith’s conduct was “driven by financial reward to its employees and management, and not by returns to the GEPF” seems manifestly absurd and to not be supported by facts.

Meanwhile, the commission’s recommendation that “the GEPF and the PIC should jointly appoint an independent investigator” in order to “determine that all monies due to both parties have been paid and properly accounted for”, as well as to “determine whether any monies due to overcharging or any other malpractice should be recovered” is nothing short of judicial lynching and targeting of Harith.

We should caution against the perils of allowing judicial processes to be weaponised for political expediency.

It would be remiss for such any inquiry on “excessive pricing” by Harith to not include all other players in the private equity industry.

To do otherwise would be reminiscent of the Sobukwe clause which, on “its face value seemed to grant broadly applicable powers, but was intended to authorise the arbitrary extension of Sobukwe’s imprisonment”.

Targeting Harith may, on face value, seem to grant broadly applicable investigative powers on “excessive pricing” in the private equity space when in fact these only serve to authorise the arbitrary extension of Harith’s judicial lynching.

For what it’s worth, we must embrace the unintended utilitarian value of Holomisa’s allegations that precipitated the inquiry.

But if you still remember that opening nugget of wisdom, you should know what it means – everyone is held responsible for what they have, and do.

We should caution against the perils of allowing judicial processes to be weaponised for political expediency.

Much is required of those unto whom public funds, no less hard-earned pensioners’ life savings, are entrusted.

Equally, fidelity and conscientiousness is demanded of those tasked with a solemn duty to shine a light on malfeasance.

The lingering question remains: Did the commission acquit itself consistent with the sweeping powers, massive funding and exceptional talent at its disposal?

You be the judge.


Khaas is founder and convenor of Public Interest SA, and president of the SA SMME Forum. Follow him on Twitter @tebogokhaas

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March 29 2020