Dear Mr President

The Public Investment Corporation: Harith/Lebashe conflicts of interest and terms of reference of the forensic audit

I refer to the United Democratic Movement’s (UDM) letters addressed to your office, as well as the one that we wrote to finance minister Nhlanhla Nene, all regarding the alleged corruption and conflict of interest of various companies/individuals and their relationships with the Public Investment Corporation (PIC).

We noted that minister Nene has instructed the PIC board, of which Dr Dan Matjila is a de facto member as Chief Executive Officer, to institute a forensic investigation into the management of the PIC and several its investments.

Mr President, it is good to know that some progress has been made and that the UDM has been taken seriously in agitating for government to investigate the matters raised in our various letters.

Sir, in our correspondence to minister Nene, we gave the below information that pertains to the
Pan-African Infrastructure Development Fund (PAIDF) that provides a stunning picture of the amounts of money involved in these investment, of which the bulk of the Government Employees Pension Fund (GEPF) is invested.

PAIDF phase 1 (the amounts stated in United States dollars)
*GEPF 250 million
Absa 125 million
DBSA 100 million
Old Mutual 50 million
African Development Bank 50 million
Stanlib 30 million
Mer 10 million
SSNTL 10 million
Eskom 5 million
Total 630 million
PAIDF phase 2 (the amounts stated in United States dollars)
*GEPF 350 million
African Development Bank 25 million
DBSA 15 million
Botswana Development Bank 10 million
Total 400 million

*   Note that GEPF invested $250 million multiplied by, let us say, an exchange rate R13.50, it equals R3,375 billion. The second time GEPF invested $350 million multiplied by, the same exchange rate, it equals R4,725 billion. An overall total of R8,1 billion or more if using the current exchange rate.

Some of the matters which will hopefully be forensically investigated are, but not limited to, the below classical examples of an apparent conflicts of interest of the various actors:

  1. In 2006 National Treasury approved the establishment of Harith General Partners (‘Harith’) with 100% seed capital from the PIC. We know the PIC now owns 30% of Harith, but it gives rise to other questions i.e. who sold the remaining 70% of the shares to whom, and for how much?
  1. Harith was established with public funds (pensioners’ funds) and continue to receive the majority of its investment from GEPF. Its CEO, Mr Tshepo Mahloele, has a full-time job and responsibility to deliver outcomes for pensioners. How has he been able to juggle this ball with his own private business interests?
  1. The Lebashe Investment Group (‘Lebashe’) EOH BEE deal states that Lebashe, which is run by Mr Mahloele, former deputy minister of finance Mr Jabu Moleketi and Mr Warren Wheatley, has interests in Capitec, 4 Africa Exchange and Aluwani Capital, among other investments. Lebashe said at the end of November 2017 that its asset position stood in excess of R3,5 billion.
  1. The fact that the announcement of the Lebashe BEE deal with EOH was made by Mr Mahloele himself goes to show that he is running his private company, Lebashe, full time. In essence Harith competes for his time. It also presents an apparent conflict of interest and, it terms of King 4, it is not evident that this practice gives confidence in the Harith shareholders (which includes the PIC) that his behaviour and practice enables the separation of roles and appropriate declarations to achieve good governance outcomes.
  1. Having established that Lebashe, a private company, is operating on the same premises as Harith at 1 Chislehurston, 34 Impala Road, Sandton, 2196. This is a tangible example of conflict of interest that should be investigated.
  1. Harith Chairman: Mr Jabu Moleketi is in business with Mr Mahloele; this is not ethical and presents an overwhelming basis to prove conflict of interest.
  1. In media statements, radio interviews (Radio 702) claims were made about Harith’s performance: GEPF investment in PAIDF 1, after 10 years, what are the results? Progress evidence is required to demonstrate that the CEO and the chairman with their private business relations are not impacting negatively the pension fund (GEPF from its direct investments, and the PIC as the 30% shareholder in Harith).

The UDM’s input into the terms of reference (TOR) of the investigation i.e. the commission should:

  • Establish if there are/were any impropriety on the approval of unlisted transactions (deals).
  • Investigate the delegations of transactions (deals) approved by the CEO and EXCO.
  • Investigate related party interests between CEO and EXCO members and those that benefited from the funding from PIC.
  • Investigate transactions (deals) that benefits/ed employees or former employees of PIC.
  • Investigate asset allocation to asset managers and the differentiated treatment between traditionally white institutions and black asset managers and how black companies have benefited.
  • Investigate the mandate approval process for assets allocated to asset managers and relationship with EXCO members.
  • Investigate two corporate finance advisors (Sao Capital and Kurhisani), under the control of Nana Sao and Kingdom Mugadza respectively, who have achieved unusual success rate with the PIC. The process of appointing advisors should also be investigated.
  • Investigate the victimization of staff.

I wish to also bring under your attention that the TOR should not only cover the several companies we referred to in our correspondence, but also the companies and transactions of other companies mentioned in the media (in particular City Press, Sunday Time and the Business Day).

The UDM also suggests that the investigation should be comprised of forensic auditors, the Hawks, the financial intelligence services, as well as a representative of Interpol as some of these fishy transactions cross South African borders.

Sir, this whole situation seems to be a classical example of conflict of interest and institutionalised corruption and a trend that has more frequently come to the fore. Government must be seen to nib these kinds of deals in the bud and stand firm against corrupt individuals who loot state resources.

Yours sincerely

Mr Bantu Holomisa, MP

President of the United Democratic Movement