Another head rolls at the PIC over the VBS Bank scandal

In a statement on Friday, the Public Investment Corporation (PIC) said it had informed its board of directors that morning that its executive head for legal counsel, governance and compliance, Ernest Nesane, had resigned with immediate effect.

Head of corporate affairs Deon Botha explained that when Nasane had testified before the forensic investigation into VBS Mutual Bank earlier in the week, the PIC became aware of serious allegations of impropriety against him. He had served as one of two PIC-delegated directors on the board of VBS until it was placed under curatorship by the Reserve Bank in March.

The other PIC-delegated director on the VBS Board, Paul Magula – the PIC’s former executive head of risk management, was already dismissed from the PIC earlier this year.

“As company directors and PIC executives, both Nesane and Magula were entrusted with duty of care to ensure that the institution and its business practices apply the highest standards of ethics and good corporate governance,” said Botha.

“The PIC instituted a disciplinary enquiry against Mr Magula in relation to the performance of his duties.  He was subjected to a disciplinary hearing, which was presided over by an independent senior counsel and, after being found guilty on all charges proffered against him, Magula was summarily dismissed for poor performance.

“The PIC is concerned about the developments that have come to light since the commencement of the VBS enquiry and more so that two of its former employees have been implicated of impropriety in their personal capacity.”

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The PIC, a state-owned entity with more than R1.928 trillion of assets under management, is Africa’s largest asset manager. It holds large stakes in several South African companies, and is one of the entities through which government implements broad-based black economic empowerment. It is also responsible for investing the Government Employees’ Pension Fund (GEPF).

Its investments in VBS are now under threat after allegations of massive fraud at the mutual bank.

“The PIC is concerned about the evidence that has been put before the VBS enquiry to date, which points to impropriety on the side of these two former PIC executives and has resolved to appoint a forensic investigation to probe all transactions in relation to its investment in VBS Mutual Bank. The PIC is a shareholder in VBS, holding approximately 25% of the company’s equity,” added Botha.

The statement said the scope of the PIC’s own investigation, including its terms of reference and timelines would be made known once the forensic investigator had been appointed.

Botha added that they were aware of allegations now aired in the media that were made in an affidavit by VBS’s curator that “an unnamed PIC executive allegedly received a R5 million bribe to facilitate payment of R350 million towards VBS”, although they questioned the timeline of the allegation.

“According to the PIC’s investment records a revolving credit facility amounting to R350 million for VBS was approved in 2015 by the Priority Sector, Small and Medium Enterprise Fund Investment Panel, a sub-committee of the PIC’s Investment Committee.

“This was almost two years before the alleged bribe, cited in the curator’s affidavit, would have been paid to an unnamed PIC executive. The PIC fully cooperates with the SARB, the curator, and the forensic investigation instituted by the curator, into VBS.

“The PIC supports any appropriate action against those responsible for the demise of VBS and those involved in any corrupt practices, including the demand for, the payment of, or accepting of bribes.  The PIC expect of its employees to act with integrity and in an ethical manner,” said Botha.

“Should there be any proof that a PIC employee has received such a bribe, the PIC will immediately institute the appropriate disciplinary proceedings and report the matter to law enforcement authorities.

“The PIC hopes that the forensic investigation will assist in determining if any, or to what extent, PIC officials were involved in the demise of VBS bank. The PIC will not tolerate any form of wrongdoing among its employees and related parties, which could potentially undermine the PIC’s objective and legal mandate of generating positive returns for its clients.”

Botha concluded that the PIC remained committed to working with the appointed curator, Sizwe NtsalubaGobodo, and all other stakeholders, and “supported every effort by the SARB to restore VBS to a position where it can trade again on a commercial basis in terms of its banking licence”.