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LIVE: Falling oil prices resulted in Erin Energy’s bankruptcy – Matjila



LIVE: Falling oil prices resulted in Erin Energy’s bankruptcy – Matjila

Fin24 team

2019-07-22 09:25

Former PIC CEO Dan Matjila will continue his testimony before the commission of inquiry, providing evidence on various investments the asset manager has made.


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Matjila says that when the JSE appeared before the commission it had approved the Camac listing. The fact that the current liabilities exceeded current assets is just a cashflow issue, it did not mean it was insolvent.

This is why the JSE approved the pre-listing statement.

Lediga asks if it can be said Camac had a liquidity issue, Matjila agrees that Camac had a “short-term liquidity issue.”

Monnahela asks if Erin Energy filed for bankruptcy because it did not recover.

Matjila says Erin Energy had to deal with the falling oil price.

“Erin Energy didn’t recover because the oil price fell out of bed. Their revenues depended on the oil price.”

Matjila said the commission will have a challenge by making him answer questions about technical details which have nothing to do with him but rather people “way below” him.

He advises the commission to get technical people to come through to answer questions.

Commissioner Lex Mpati says that is fine, but he should answer what he can.

Matjila respond: “Can the commissioner understand I was the CEO not somebody dealing with technical, finer details.”

The commissioners assure Matjila he does not have to answer technical questions which he cannot.

Matjila says he does not deal with the finer details of contracts.

“My colleagues tell me this is what the service provider is going to do, and recommend they go ahead and procure the services. I sign off on that. They have to monitor performance according to the contract. They can only report to me so-and-so is not complying if they require my intervention,” Matjila says.

“I would not know the finer details of this contract because I am advised by people under me who have the technical expertise and know-how to advise me.

“Can you imagine running a R2trn fund where I have to look at each detail of every little correspondence or contract that comes through the PIC? That is humanly impossible,” Matjila said.

He asserts that he is supported by others with their technical expertise I whether legal or technical) and who make recommendations to him. If it is something beyond their authority – they pass it onto him or they can deal with it in terms of their delegation.

Matjila says he cannot answer technical questions about the contract (Erin Energy). 

Matjila fills in the blanks of what transpired the two since Camac was listed on the JSE.

Matjila says after the listing, the oil price started to fall – shortly after the deal was concluded.

One of the conditions was that six months after disbursement, Erin Energy was to increase oil production.

“Unfortunately they ran into technical problems in Sept/Oct of 2014. The rig experienced technical problems to the point the contract had to be cancelled.”

The rig had to be removed in January 2015 and a new rig had to be brought to complete the work.

They had to ask the PIC for a waiver on the put option. The drilling was under Camac’s control at the time – not in Erin’s control. They wanted to delay the put until the new rig came online by another six months, Matjila explains.

The new rig came in in May, but the oil price had fallen sharply.

“There was just a downward, slippery slope on the oil price.” 

There was a lag in operations too, the company approached the PIC for a guarantee of $100m, to be used to borrow from the banks to do more drilling.

February 2014, the board was updated on the progress of the investment.

The rationale for investing in Camac’s oil production was set to increase, and the PIC would surely have board representation and representation on the audit risk committee.

The JSE was important to the PIC to subject the asset to local requirements, he says.

A JSE-approved pre-listing statement would be issued.

Erin Energy

Matjila provides background on the investment in Camac Energy (which became Erin Energy). The investment was $270m via the listing of Camac on the JSE.

PIC would own 30% of Camac energy and shares, and would have a board seat and a presence on the audit and risk committee. The transaction dates back to September 2013, Matjila was chief investment officer at the PIC at the time.

Camac Energy entered into an asset allocation agreement with Allied Energy.

Karan Beef

Lubbe asks Matjila about the Karan Beef transaction, whereby certain people supposedly benefited.

The commission has almost completed its probe in the proposed investment. He says that it is found the PIC had done nothing wrong. he points out the GEPF may have lost appetite for the investment.

With a family business – it appears that when the previous owner leaves, the business might collapse. This could be a concern of the GEPF.

Matjila says this is an allegation of James Nogu – and that his allegations cannot be tested.

“I am glad to hear nothing was found in the Karan beef.”

James Nogu has cost a lot of us – I am here today, we are here today because James Nogu is making allegations. He still has not been found.

Matjila says sometimes we want to control companies- which raises issues of risk for example the company can go down if the founder leaves.

Matjila says it is about what role the founder will play at the company and if he is determined to make sure it does not fall apart, that the right structures (governance) are put in place, the right board and right management, and if the company will be run better than before.

We did the transaction, the founder wanted to exit completely, but we wanted his advice. He was willing to assist the PIC, but with small exposure serving as an employee and not a significant shareholder. We were comfortable, I am not sure what makes GEPF uncomfortable with the situation. 

Lediga asks about the poor corporate governance.

But Lediga says from Maponya’s CV it appears he had experience in farming. Lediga asks what went wring at Daybreak?

Matjila responds: “It boils down to general governance, the process of running a company and understanding the role of the CEO versus the board, what the CEO is hired to do, what is within their delegated authority.

Matjila says Maponya made significant changes without the approval of the board- “That is why we had to step in to prevent potential losses to our investment.”

Lubbe points out Maponya was also involved in the SA Home Loans transaction – who did not have respect for good corporate governance.

“The technical insolvency of this entity and what seems to be poor leadership – was that picked up in the due diligence?” Lubbe asks.

To this Matjila responds it was not picked up in due diligence at that stage.

Lubbe asks about Maponya firing the whole top executive structure of Daybreak when he took over.

Matjila confirms this happened and resulted in the worsening of Daybreak Farms.

However Matjila says the PIC managed to turnaround the company with its intervention.

Daybreak Farms

Matjila starts off with evidence on Daybreak Farms, he says the investment was made to drive economic transformation in the agri sector and stimulate economic activity in the surrounding areas.

It as led by Mr Maponya, Matjila said Maponya had “very little respect for governance”. The farm took strain and faced near collapse.

Maponya was removed and Tinus de Jong (of the PIC) was put in place to stabilise the farm, as the PIC searched for a suitable replacement for Maponya.

The PIC took over the affairs of the farm to protect its interest.

Maponya’s replacement has helped to turnaround Daybreak Farms which is now profitable and making significant contributions to the poultry industry.

ICYMI: Ex-PIC head Matjila denies R5m bribe, says he would welcome investigation

Dan Matjila, the former CEO of state-run asset manager the Public Investment Corporation, has denied receiving a R5m bribe in April 2017 for facilitating further funding for VBS Mutual Bank.

Matjila was testifying before the judicial commission of inquiry into the PIC for the third day running on Wednesday. The commission is investigating allegations of wrongdoing at the PIC, which manages R2.2trn in investments on behalf of public servants.

“I resolutely stand by my previous statement to the press in which I stated I emphatically reject any suggestion that I may have received R5m to facilitate further funding for VBS Mutual Bank,” said Matjila.

He added he would welcome an investigation into the matter. 

The SA Reserve Bank placed the mutual bank under curatorship in March 2018, when it had two PIC nominee directors on its board.

Allegations of a R5m bribe are included in an investigator’s report detailing the collapse of the bank. “The Great Bank Heist” by advocate Terry Motau and Werksmans was handed over to the Reserve Bank in September 2018, five months after the bank was placed under curatorship. The allegation was made by Phophi Mukhodobwane, the bank’s former general head of treasury and capital management.

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