Pretoria – The South African Teachers’ Union (Satu) is
worried that public servants’ pension contributions are being invested to
achieve political objectives rather than get optimum returns.
This follows a statement last week by the Public Investment
Corporation (PIC) – which handles the investment of pension fund contributions
– that the continued existence of cement manufacturer AfriSam, in which it
invested a total of R6bn in 2008, is being threatened by high indebtedness.
The PIC and Worldwide Africa Investments (WAI), under the
chairmanship of Phuthuma Nhleko, the former MTN chief executive, are engaged in
a court battle with two other shareholders, black empowerment group Bunker
Hills Investments and the Swiss cement group Holcim, about the conversion of
AfriSam’s debt into equity. The PIC currently has a 20% stake and R4.7bn worth
of preferential shares. AfriSam owes WAI R3.7bn.
The two creditors' plans to convert the preferential shares
and debt into equity would increase the PIC’s stake to more than 90%, AfriSam
chief executive Dr Stephan Olivier told Sake24 last week.
That is the major objection being raised by Bunker Hills –
which currently owns 37% of AfriSam, and Holcim which owns 15% – that their
interests are likely to evaporate.
Bunker Hills previously obtained a temporary court order to
prevent the conversion which had apparently been contractually agreed to. The
case returns to court for a final order at the end of the month.
Meanwhile AfriSam has to settle R11bn worth of debt – which
it is attempting to restructure – early next year. This is not the first time
since 2006 that its debt is being restructured.
Satu is worried about the apparent exposure of the PIC
investments and has asked whether the investment decision at the time was taken
on pure motives.
The initial 2006 transaction was extremely politically
charged. At that stage it was the biggest BEE deal yet seen.
When the deal was announced, analysts asked whether the sale
of Holcim’s 85% stake to empowerment partners had not been an excuse by the
Swiss company to disinvest, because it did not see its way to work with black
partners without having control. President Thabo Mbeki responded furiously. He
praised Holcim because it was prepared to do more than the minimum for empowerment.
Analysts considered the transaction expensive and asked where the money would
come from.
In 2007 the deal was initially concluded with offshore
funding. Few details were released other than that Holcim had provided bridging
finance.
In July 2008 AfriSam announced the PIC investment when the
economy was overheated and cement was selling like hot cakes.
The investment was made at a time when the PIC was exerting
strong pressure over companies in which it was a shareholder, such as Barloworld,
in order to accelerate BEE.
It was preceded by the Telkom empowerment deal, which was
also facilitated by the PIC and from which people close to Mbeki derived
benefit.
Satu chief executive Chris Klopper said the union would
officially send questions regarding the AfriSam investment to the trustees of
the pension fund trustees. These questions were: What was the motivation for
the investment? What yield was expected? Had any valuation being done to
determine whether the company's management was capable of producing the
expected return?
Klopper said he doubted whether the necessary due diligences
had been done. He said Satu had long been concerned about the AfriSam
investment. It would be wrong for political considerations to play a role when
investing pension fund monies. The trustees under whose jurisdiction the funds
fell should see to it that members' interests were the only consideration.
Sake24’s attempts to get an interview with the PIC have been
unsuccessful.
The government pension fund has undertaken to respond to
questions on the issue this week.
- Sake24
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