In 2015, the Public Investment Corporation (PIC) agreed to fund an empowerment consortium that wanted to buy a 22.95% stake in the oil company Total. The consortium was made up of two groups: Kilimanjaro Capital, consisting of politically connected dealmakers from Johannesburg, and Sakhumnotho, an obscure investment company.

The deal itself made sense. Tosaco had delivered impressive returns for its previous BEE shareholders and the PIC’s loan would deliver a 13.47% return to pensioners.

But everything else about the deal was problematic: from allegations of a forced merger of the two empowerment groups, to the R100-million blown on “transaction costs”, the politically exposed shareholders and the donations solicited for the ANC and a young entrepreneur.

Reason 1: The deal was full of politically-exposed persons – but Dr Dan did not notice.

One of the reasons I started investigating the Tosaco transaction in 2016 was that one of its beneficiaries was Sizwe Shezi, a trustee of two of then-president Jacob Zuma’s trusts.

Shezi was allegedly a key player: according to Lawrence Mulaudzi, Kilimanjaro’s dealmaker-in-chief, it was Shezi who was given the job of approaching the PIC for funding back in 2015.

“[T]he director that we tasked to set up that meeting with the PIC was Sizwe Shezi. How he did it, how he got access there, I don’t know,” Mulaudzi told the Mpati Commission, which is investigating malfeasance at the PIC.

Shezi was not a director, but he was a significant shareholder who would ultimately end up with a R122.4-million cut. Share registers show that the stake held by Shezi’s Theman Investments was doubled shortly before the deal was finalised – the kind of red flag that should have prompted questions about his role.

But former PIC boss “Dr Dan” Matjila told the commission last week that he was completely unaware of Shezi’s role in the deal:

“In my language we say ‘Otla mpya, mme mong yone otla iponagatsa’ which loosely translated means: ‘If you hit a dog very hard the owner will come out’. But I didn’t have to do that hard. Some time after the successful Tosaco bid I became formally aware of the involvement of Mr Shezi.”

On Monday, Shezi countered in a letter to the commission: “I watched in shock as Dr Matjila related his concerns about my involvement in Kilimanjaro… My shock and surprise stems from the fact that at the very onset of the Tosaco transaction I personally met with Mr Matjila to introduce Mr Lawrence Mulaudzi and the Tosaco transaction to the PIC. The meeting took place at the PIC head office in Garsfontein on 21 May 2015. Dr Matjila, therefore, knew of my involvement even before the Tosaco transaction started being processed by the PIC…”

At this point, Matjila pivoted, testifying at the commission: “I agree that he [Shezi] did introduce Mr Mulaudzi… But the fact that he had an indirect interest was never disclosed … all we could access is direct interest from information that is provided to us, which information didn’t include his name… It’s very common for people to introduce other potential client[s] of the PIC to the PIC, and they will disappear from the scene and we wouldn’t know any sort of arrangement that they have … from this introduction…”

Even if we overlook this obvious red flag, the question remains: how was Shezi missed during the PIC’s due diligence process?

Kilimanjaro was a newly-registered company with no other assets, according to Competition Commission filings, so any due diligence should have looked at the individual shareholders and their ability to repay the PIC if the deal went belly-up. This was confirmed by Shezi and backed up by a letter authored by the PIC in June 2015 which confirmed that the due diligence on the Tosaco deal would look at the “cohesiveness of other BEE shareholders in the consortium”.

The Kilimanjaro Capital share is held via Kilimanjaro Oil, which is understood to be a 100% owned subsidiary. All the PIC had to do to establish who owned Kilimanjaro and its 72% shareholder Shira Holdings (another newly-activated shelf company) was to ask for the companies’ share registers, which anyone is entitled to do in terms of the Companies Act. When I requested these in 2016, Mulaudzi provided them in record time – the documents clearly identify Theman Investments, of which Shezi is both a director and shareholder.

Instead Matjila told the commission that he only became concerned about the presence of politically-connected shareholders when Mulaudzi brought a second deal to the PIC that “was very much similar to [Kilimanjaro] but with extra PEPs [politically-exposed persons]”. The politically-connected names that he said concerned him were Shezi, ANC Limpopo treasurer Danny Msiza, Ronnie Mamoepa (spokesperson to then-deputy president Cyril Ramaphosa) and Titus Mafolo (advisor to former president Thabo Mbeki).

Yet each of these politically-connected people featured in the Tosaco deal, either directly or through stakes held by their wives’ companies. (Msiza, who would reappear in the PIC-funded VBS scandal, “disposed” of his R49-million stake shortly before the deal was finalised. Read what he told me in 2016 here.)

Shezi objected in his recent letter to the PIC to being defined as a politically-exposed person. Matjila countered: “He’s well-known to have run the former president’s trusts and is very much linked to that office. That makes him a politically-exposed person in terms of the definition.”

If Matjila is telling the truth that the PIC had no idea who they were dealing with in the Tosaco deal – and that is a big “if” – then the PIC had much bigger problems.

Dr Dan credibility score: 2/10 (implausible)

Reason 2: Dr Dan is accused of forcing a merger

One of the central allegations is that Matjila strong-armed Kilimanjaro – which initially planned to bid for the Total stake on its own – to enter into a merger with competing bidder Sakhumnotho.

Sakhumnotho to date has been a beneficiary of at least five deals with the PIC. Matjila appears to have a close relationship with Sakhumnotho’s chairman, Sipho Mseleku, although the latter previously denied that this gave him special access to PIC funds.

Kilimanjaro’s Mulaudzi told the commission everything was on track with their bid until – just days before the deadline – he discovered that the PIC was entertaining funding a request from a rival bidder, Sakhumnotho, despite the fact that PIC had signed a binding engagement letter with Kilimanjaro which Mulaudzi interpreted to mean their group had exclusivity.

“I then requested a meeting with Dr Matjila to clear this confusion… He then told me that in order for him to proceed with issuing final approval I needed to urgently meet with Mr Sipho Mseleku of Sakhumnotho as the other interested party. He also told me that Mr Mseleku’s company must merge with our company to form one consortium and that we had to give Mr Mseleku 50% of the transaction and the fees that we would ultimately receive when the deal is approved.”

“[I]t was very difficult for us as the directors of Kilimanjaro to accept… But I had no option as you know we are in business, we had to say let’s share the cake of this transaction… ‘cause half of loaf it’s better than no bread,” Mulaudzi said.

Both Matjila and Sakhumnotho’s Mseleku deny that Matjila forced Kilimanjaro to split the deal, but the commissioners have been visibly sceptical of their version of events.

Mseleku told the commission that he met Mulaudzi after he followed Matjila, uninvited, into a boardroom at the PIC because he was “curious” to see who the other bidder was on the Tosaco deal.

Matjila echoed this story during his testimony, adding that he told Mseleku and Mulaudzi he could not offer either the binding letter of support – which they desperately needed in order to submit a bid – while there were still multiple bidders in the running, and then left the two businessmen alone in the room.

“I never mentioned [a merger] but in my mind it was there,” Matjila said.

By the end of the day the new Kilimanjaro Sakhumnotho consortium had announced the merger in letters to the PIC and the sellers – an improbably tight time frame considering that Mulaudzi and Matjila both testified that some of the other Kilimanjaro partners were vehemently opposed to the merger.

“You may not have said to them, ‘I expect you to join forces,’ but you made it absolutely clear to him. But you also allowed somebody just to follow you into another meeting, I mean I’m astonished,” commissioner Gill Marcus told Matjila.

Last week, evidence leader Isaac Monnahela produced an email showing that early in the negotiation process, Matjila had told a colleague: “There is another BEE that wants to buy into Total. We may have to persuade them to work together.” The question is why.

Dr Dan credibility score: 3/10 (Too many unanswered questions.)

Reason 3: There are questions about the due diligence

One of the questions raised at the commission was whether Sakhumnotho had gone through the same due diligence process that Kilimanjaro had been subjected to.

Although Matjila initially sidestepped the question – saying that he assumed his team had done a due diligence – he finally conceded last week that the PIC did not conduct a due diligence on Sakhumnotho, despite the company’s half-share making it the intended beneficiary of roughly R900-million of pensioners’ money through its investment.

According to documents filed with the Competition Commission, Mpilo Oil & Gas, the company that would ultimately carry Sakhumnotho’s half, “ha[s] no other business operations outside this transaction”.

Yet Matjila told the commission it was unnecessary to conduct a due diligence because Sakhumnotho had previously benefited from PIC-funded deals: “[W]e know Sakhumnotho, we have reports already about them so there was no need for additional due diligence as we had fresh reports that we compile on a quarterly basis around them.”

While it is true that Sakhumnotho’s Mseleku had by then already been the beneficiary of two PIC-funded deals – a BEE transaction with Northam Platinum and an option to acquire shares in Togo-headquartered Ecobank – share registers obtained by amaBhungane show that the PIC dealt with separate legal entities in each transaction.

Mseleku’s stake in Northam Platinum, for instance, was held through Mpilo Platinum, which in turn is owned by Mpilo Resources, which in turn is owned by Sakhumnotho Mining. Mseleku’s Ecobank option, on the other hand, was housed in Mpilo Financial Services whose owners include Sakhumnotho Financial Services and the Nelson Mandela Foundation.

Matjila told the commission that at the time the PIC had a R500-million exposure to Sakhumnotho through a property deal “if my memory serves me well”. It did not. The Sakhumnotho Property deal did not happen until early 2017.

And while most of the Sakhumnotho companies eventually lead back to Mseleku’s family trust, as well as The Global Business Roundtable (a non-profit) and the Global Fund for Jesus Investment Corporation (which funds a religious charity), the PIC’s apparent failure to conduct this basic research again raises questions about how careful the PIC was with its clients’ money.

Dr Dan credibility score: 3/10 (Too many unanswered questions.)

Reason 4: R100m was blown on ‘transaction fees’

Back in 2016, a source told me that Tosaco had received an extra R100-million from the PIC. I had the signed contracts showing that the Kilimanjaro Sakhumnotho Consortium paid R1.7-billion for the shares minus certain transaction costs that were paid by the outgoing shareholders. But at the time, the PIC refused to disclose the size of the loan granted to Tosaco.

Nine months later though, the PIC revealed its unlisted investments to Parliament and it became apparent that the PIC had given the consortium R1.8-billion.

So where was the extra R100-million?

When I asked PIC whether the R1.8-billion was “solely for the purchase of shares from Tosaco”, spokesperson Sekgoela Sekgoela initially said yes. When I responded that I knew that only R1.7-billion had been used to buy shares, the PIC backtracked.

It took three days for the PIC to come back to me with a response, but from leaked WhatsApp messages we now have an idea of what was said behind closed doors.

Matjila told the commission he only learnt about the R100-million when the media started asking questions. The text message he sent to Mulaudzi two days after receiving amaBhungane’s questions, however, raised new questions.

“Broer, did you give the journalist the share certificate for Tosaco?” Matjila asked Mulaudzi on 16 March 2017.

“Afternoon Dr, We didn’t give them share certificates. We gave them share register only and that was last year. I think her concern is that why we only paid R1.7-billion whereas we got funding approval of R1.8-billion. What happened [to the] R100-million. I said R50-million went to transactional advisers and R50m went to recapitalise the company and we have already paid it back to PIC through first dividends received. I also briefed Sekgoela,” Mulaudzi replied.

The following day, the PIC told us that the extra R100-million was spent on “costs associated with the transaction” but refused to provide any details about who received the payments or why.

When Matjila was asked about these fees at the commission last week he conceded they were “over the top”. But there was no mention of R50-million being spent to recapitalise the company.

“[T]he reason why they had to pay R100-million is because the two [advisers for Kilimanjaro and Sakumnotho respectively] have claimed that they did separate works of almost the same kind of costs and therefore they needed to be paid the same fees,” Matjila told the commission, purporting to relay what he had been told by the PIC deal team.

The problem with the PIC handing an extra R100-million to the Kilimanjaro Sakhumnotho Consortium was that the PIC had already agreed to fund 100% of the R1.7-billion purchase price – something which commercial banks would rarely do.

Added to this, the cost of the deal had already risen rapidly. In June 2015, The PIC had committed to provide R1.4-billion in funding for a 25% stake of Total. But by August 2015, the size of the stake had shrunk to 22.95% while the price had risen to R1.7-billion.

Adding an extra R100-million to the loan raises questions about whether the PIC had adequate cover for its loan.

Questions have also been raised about how the R100-million was spent. While we know that some of it went to transaction advisers, UDM leader Bantu Holomisa, for instance, has asked Ramaphosa and the commission to investigate rumours that some of the money was diverted to companies fronting for politicians and fixers.

Dr Dan credibility score: 4/10 (Still stinks.)

Reason 5: A senior PIC official was seemingly cut into the deal

In May, amaBhungane published an investigation based on hundreds of leaked WhatsApp messages exchanged between Mulaudzi, his associates (including EFF deputy president Floyd Shivambu) and officials at the PIC.

One of those officials was the PIC’s then-head of risk, Paul Magula.

Among the WhatsApp messages was one sent by Magula to Mulaudzi in December 2016. It contained the bank account details for a company called Investar Connect.

Although Investar Connect Holdings is ostensibly run by Mulaudzi’s accountant, Lot Magosha, the company was named in advocate Terry Motau’s report into the collapse of VBS Mutual Bank as one of the fronts used by Magula to receive what appeared to be kickbacks from the bank’s shareholders.

Share registers, obtained by amaBhungane in terms of the Companies Act, show that Investar Connect also appears as a minority shareholder in both of Mulaudzi’s PIC-funded deals – one of them Tosaco – and received shares worth roughly R24-million at the time.

Last week, Matjila told the commission that he was approached in June 2017 by Mulaudzi’s wife, Mamodupi Mohlala-Mulaudzi, with suspicions that her husband had a corrupt relationship with Magula.

“She basically told me that Mr Paul Magula visits them a lot more often and she believes that there may be [an] exchange of favours in this relationship,” Matjila testified. A subsequent investigation commissioned by the PIC concluded that “he must’ve been giving Mr Magula money”.

Although there is no indication that Matjila benefited from Magula’s arrangement with Mulaudzi, it raises serious questions about governance at the PIC during Matjila’s tenure.

Dr Dan credibility score: 7/10 (Questions remain about PIC governance.)

Reason 6: Quid pro quo – funding for funding

One of the most damning details about the Tosaco deal is what Matjila allegedly expected in return.

In 2016, Matjila was summoned to a meeting at OR Tambo International Airport by then-minister of state security David Mahlobo.

“The minister called me. I mean, I will not disrespect the minister and not go… I see him as one of the stakeholders in the PIC. Whether he is in … state security or whatever portfolio they hold,” Matjila told the commission.

Instead of discussing matters of state security, Mahlobo introduced the PIC boss to two young entrepreneurs and asked if he could assist them to get funding from the PIC.

“Dr Matjila, would you agree with me that it is totally improper and unethical for a Minister of State to call the CEO of the PIC to an airport to deal with a matter like this?” advocate Jannie Lubbe, one of the evidence leaders, asked Matjila last week.

“I don’t agree,” Matjila replied. “I’ve met Ministers not only at the airport; some at their places for convenience.”

When Lubbe asked whether other ministers had called the PIC boss to come to their homes to talk about PIC funding for deals, Matjila replied: “Commissioner, they talk about various things.”

When the PIC could not fund the two young women, Matjila referred them to Mulaudzi as potential enterprise development partners.

“And when they couldn’t help in time I then asked Mr Mulaudzi if he can … help them in saving their business that was running into trouble,” Matjila told the commission.

The favour Matjila requested was R330,000 to pay off debts that they had incurred. “I just said, ‘Are you able to help them?’ And I left it there so it was within his right to say no,” Matjila said.

But according to Mulaudzi he felt he had no choice but to pay: “[I]t was only natural for me to comply with his request, as I have been funded by the PIC in my business ventures,” he told the commission.

A few months later, Matjila forwarded a request to Mulaudzi from then-ANC treasurer Zweli Mkhize to fund the ANC’s January 8 gala dinner. From leaked WhatsApp messages we know that Mulaudzi assured Matjila that he and Mseleku had already agreed to buy a R400,000 table for the event.

“They could have said no, they had a choice it was not an instruction,” Matjila told the commission last week.

Dr Dan credibility score: 4/10 (Still stinks.) DM

The amaBhungane Centre for Investigative Journalism, an independent non-profit, produced this story. Like it? Be an amaB Supporter to help us do more. Sign up for our newsletter and WhatsApp alerts to get more.