On the eve of the much anticipated Cabinet reshuffle, sacked Finance Minister Pravin Gordhan embarked on efforts aimed at weakening the incoming deputy finance minister. Fully aware that he and his deputy, Mcebisi Jonas would not survive the axe, Gordhan penned a memo to Jonas, former Deputy Finance Minister and Chairperson of the Board of the Public Investment Corporation (PIC). 

Established in 1911, the Public Investment Corporation (SOC) Limited is one of the largest investment managers in Africa today, managing assets of over R1.857-trillion and still growing.

The PIC, a registered financial services provider, is wholly owned by the South African Government, with the Minister of Finance as shareholder representative. In his memo (click here: PIC-MOI-Memo), which Weekly Xpose is in possession of, Gordhan called for highly significant and urgent amendments to the PIC’s memorandum of incorporation (MOI).

This instruction came just ahead of the much anticipated Cabinet reshuffle which on Thursday evening saw the replacement of the Finance Minister, Gordhan, along with his deputy Jonas. Tensions between President Zuma and Gordhan were heightened this week after an aborted international investor roadshow in which both Gordhan and Jonas were accused of mobilising foreign funders against Zuma.

Gordhan’s memo was sent to Jonas on the 24 March 2017, calling for the amendments of several sub-clauses of the existing Public Investment Corporation’s MOI (click here: PIC-MOI-Memo), which appears to be an attempt to dilute the powers of an incoming Deputy Minister of Finance over the PIC purse, and entrench the hold of current incumbent board members.

While the memo is disguised as an attempt to enhance the organisation’s corporate governance compliance, in terms of the King IV Report on Governance, which is widely held as the benchmark in best practice governance in South Africa, it is said by our sources that this is a clear attempt to effectively hijack and hamper the power and influence of any new Deputy Minister whose portfolio will automatically include the stewardship of PIC as the Chairperson of its Board.
The amendments, which are not in line with the King Report Guidelines, would see the Chief Executive Officer and Chief Financial Officer serve as ex-officio directors of the company. Our sources, who spoke on condition of anonymity, suggested to us that it is clear that the amendments in this memo show that the minister seeks to extend the term of the current board to a total of nine years and strengthen the independent non-executive director and Deputy Chairperson of PIC, Roshan Morar, who is seen as Gordhan’s runner so that the minister remains in control of PIC even after his sacking.

In effect such amendments would see key allies of Gordhan ensure their stronghold over the organisation, potentially curtailing the locus of influence a new Deputy Minister could yield over the organisation and distribution of funds.
The timing of the letter, as well as the request for an urgent shareholder meeting by Gordhan within two days from the date of letter, has caused considerable concern among key PIC executives who view this as a serious transgression of corporate governance. Well-placed sources within the organisation have told Weekly Xpose that  a risk workshop was sabotaged by Morar and board members forced to rubber-stamp Gordhan’s amendments. This board meeting is said to have been chaired by Morar without notice of the meeting to the board members, or any agenda, on 29 March 2017. Our sources have said that because the board meeting was not properly constituted, all resolutions taken at this meeting are null and void.

Morar is a chartered accountant, who also chairs the PIC Investment Committee, Private Equity, Priority Sector and Small Business Enterprises Fund Investment Panel. He is said to yield considerable influence over the organisation, and is now guilty of violating good governance rules by trying to bulldoze Board approval for this change in the MOI. Morar is said to be acting on the direct instructions of Gordhan. There are concerns too about the close relationship of Morar to Treasury, after he was awarded a lucrative tender (SCMU 12-15/16-0008) from the Eastern Cape Treasury in 2015.
According to our well-placed source, Gordhan also verbally instructed the CEO of PIC and the organisation’s legal council to alter the MOI to ensure that when the new Deputy Minister comes in he does not chair the PIC Board. Our sources say the former Finance Minister was desperate to effect these changes before he was sacked not only for control but also to protect his interests and any other corruption that might be uncovered by the incoming ministry and/or board.
Asked for a comment, CEO Daniel Matjila said the document Weekly Xpose was in possession of “is a highly confidential internal document”. He refused to comment further. Morar told us over the phone to send him an email and cc Matjila. This was done, yet no comment was forthcoming. Weekly Xpose also reached out to Gordhan, through his spokesperson, but unfortunately no comment was received.
Below are the questions that were sent to Gordhan and Morar:
To Morar:
1. Can you confirm the authenticity of the memo?
2. There are claims that on Wednesday March 29 March you turned a meeting of risk management into a board meeting of the PIC without a notice for such a board meeting with an appropriate agenda. Is this true?
3. The claims go further to state that you chaired this improperly constituted board meeting yourself, and forced members to approve the amendments to the MOI to extend the board’s term of office as instructed by the Minister of Finance. Is this true?
4. If  true, what was so urgent about this particular memo that you had to break corporate governance rules and rush through the amendments?
5. There is a further claim that all resolutions taken in “improperly” constituted board meeting are illegal. What is your response to this?
6. There are allegations of massive corruption at PIC and claims that there is a need for an audit of all contacts approved in the past 5 years and who benefited from those contracts. Would you support this?
7. In November of 2016 you appeared before Parliamentary Portfolio MPs asked if you are going to resign over R1,6bn SANRAIL (Of which you were board chair) in irregular spending under your watch. Should we expect the same questions relating to your tenure at PIC?
8. There are further allegations that you were awarded a tender for your private business (tender number SCMU12-15/16-0008) by the Eastern Cape Treasury department, which is a division of National Treasury. Is this not conflict of interest and did you declare your interest before the contract was awarded?
9. You are the deputy chair of PIC and also the chairperson of all strategic funds at PIC, namely Investment Committee, Private Sector Equity, Priority Sector, Small and Medium Enterprises. Do you think your role in various positions including that in the PIC enhance the radical socio-economic transformation strategy outlined by President Jacob Zuma in his state of the nation address and that of the Finance Minister days later in his budget speech?
10. There are claims Minister Pravin Gordhan seeks to change the MOI and extend the term of the board by 9 years because you are the minister and deputy minister’s front-man and runner and therefore want to keep you there to protect their influence and control over the PIC. Your comment?
11. There were reports in 2014 that you and the CEO of Bidvest Brian Joffe were forced recommendations to the board of Adcock Ingram, it also reported that PIC and Bidvest together own 55.5% of Adcock Ingram and Bidvest and PIC wrote identical letters to Adcock Ingram  – does this relationship with Bidvest, yourself and the Minister of Finance being linked to Bidvest, support the claims that you are indeed a front-man for the minister? Your comments.
To Gordhan:
1. Can you confirm the authenticity of this memo?
2. What led to the sudden ammendments as stipulated in the three bullet points on the memo? There are claims that the changes were effected by a “looming” Cabinet reshuffle. What are the Minister’s comments on this?
3. Are the amendments to the MOI an attempt to keep the current board members, led by Roshan Morar, for a period of up to 9 years, therefore maintaining control of the PIC?
4. What necessitated the changes?
5. If a Cabinet reshuffling indeed happens, are these moves aimed at curtailing the powers of a new minister and deputy?
6. There is a claim that Roshan Morara, who held  key directorships in Sanral and PIC, is protecting your interests. Can we have your response to that?
7. There are claims you called the CEO and the Head of Legal and said the amendments to the MOI must be completed as a matter of urgency. Is this true? And if so, what is the urgency?
8. How is it that you still have Morar as deputy chairperson of the PIC and as chair of different strategic bodies, yet he was exposed by Parliament to be found wanting on the R1.6bn Sanral mess?
9. Are you part of a so-called cabal of ANC ministers who will resign if you are reshuffled?