Dan Matjila, former chief executive of the Public Investment Corporation, has said the asset manager was concerned with governance at Steinhoff, but no prudent investor would be able to pick up irregularities at the retail group.

Matjila gave evidence before the PIC commission of inquiry on Tuesday. The commission, chaired by Justice Lex Mpati, is investigating allegations of wrongdoing at the PIC, which oversees R2trn in state funds.

Before the collapse of the Steinhoff share price in late 2017, related to accounting irregularities, the PIC had increased its shareholding in the retail group.

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Despite losses to Steinhoff's share value, by more than 90%, the PIC's exposure to Steinhoff represented less than 1% of the PIC's assets under management.

"It was one in over 300 securities in the PIC portfolio, so the loss was thoroughly cushioned," Matjila said. A single stock could not collapse the entire portfolio which is well diversified, he explained.

The PIC's portfolio can survive one or two of these disasters - but if it were to happen on a bigger scale, it would have a "dire impact" on the portfolio, Matjila added.

Subsequently the PIC wrote to Steinhoff requesting that board chairperson Christo Wiese step down, and for two non-executive directors to be appointed on the board, among other interventions.

Where are the auditors?

Matjila questioned where the auditors were when the malfeasance was carried out, as investors like the PIC rely on their audit reports when making "prudent" investment decisions.

For this reason the PIC also recommended to the Independent Regulatory Board for Auditors that the policy of mandatory audit rotation be enforced as it prevents the same auditor from serving a company for more than 10 years.

Although there are objections to the cost of rotations, Matjila has argued that the collapse in market value is far more costly than changing auditors.

The inquiry resumes at 09:30 on Wednesday, Matjila is expected to provide evidence on VBS Mutual Bank and other investments.