The Public Investment Corporation (PIC) failed to act on findings made by its internal audit team of due diligence failings on the Ayo Technology Solutions transaction. The team first raised concerns as part of a general audit of listed transactions five months earlier in May 2018.
This is according to testimony given on Wednesday by the internal audit head Lufuno Nemagovhani at the judicial commission of inquiry into allegations of impropriety at the PIC, chaired by Justice Lex Mpati.
On Tuesday, the PIC placed its head of listed investment Fidelis Madavo and assistant portfolio manager Victor Seanie on immediate suspension after a preliminary audit report found that there had been clear contraventions of governance and approval processes.
Madavo received his letter of suspension a mere hour and a half before he appeared before the commission. He has distanced himself from Ayo the transaction saying he was not directly involved and was out of the country when it was finalised.
Evidence leader advocate Jannie Lubbe slammed the state asset manager for running a parallel investigation which encroached on the terms of reference of the commission.
However, in a statement the PIC said the board had given instructions that an investigation was instituted into the roles played by individual employees in the transaction after they appeared before the standing committee of public accounts (Scopa) in parliament where questions around the transaction arose.
Nemagovhani said that in May 2018 Ayo was part of a sample of transactions that had been chosen on for a routine review of the listed company audit process.
“The finding in this audit query was that the transaction [Ayo Technology Solutions] was not ratified,” said Nemagovhani.
He told the commission that the internal audit found that Ayo Technology Solutions’ initial public offering share subscription form was signed on December 14 2017 and confirmed with the listing agent before the transaction was approved by the portfolio management committee meeting which took place on December 20 2017. This approval process was in reverse order to what it should have been.
“Is that in breach of the policies of the PIC?” asked Lubbe. “It is,” Nemagovhani responded.
The PIC — which controls over R2-trillion in state worker pensions and other assets — invested R4.3-billion in Ayo Technology Solutions which was said to be overvalued. Ayo is majority owned by independent media owner, Dr Iqbal Surve’s Sekunjalo Investments.
Nemagovhani said the issues indicated in the transaction were discussed with the relevant management of the department and tabled before the audit and risk committee and the investment committee. The committees consist mainly of non-executive board members and the chief executive who was Dan Matjila at the time and then chief financial officer Matshepo More who is currently acting as CEO.
Nemagovhani said as far as he is aware nothing was done about the issues identified in the Ayo transaction in May until the acting CEO More received an instruction from the chairperson of the board, deputy finance minister Mondli Gungubele, who raised concerns about the issues that were discussed at Scopa.
When Gungubele demanded to know what steps were taken by the PIC on the issue and what action was taken against the individuals involved, a renewed investigation was ordered in December 2018, about five months after the initial report.
“This was not a new issue, it was just to now drill deeper into the root causes and the role players. What transpired here? Where did the system start failing? Because something failed in order for this to occur,” said Nemagovhani.
Nemagovhani presented the 94-page preliminary report to PIC management on Monday.