Financial advisers 'surprised' by inclusion in PIC report, deny receiving R44 million payment | Fin24

Financial advisers 'surprised' by inclusion in PIC report, deny receiving R44 million payment

Mar 14 2020 11:54
Jan Cronje

Financial advisers Kleoss Capital and Keletso M Squared say they were 'surprised' to read their names in the recently released final report of the commission of inquiry into the Public Investment Corporation, adding they "strongly refute allegations and inferences of impropriety".

President Cyril Ramaphosa released the 995-page report into allegations of impropriety at the state-owned asset manager on Thursday, some three months after it was submitted to him.

The commission, chaired by Justice Lex Mpati, concluded eight months of public hearings into the PIC in August 2019. The corporation manages over R2.1 trillion in assets on behalf of the Government Employees Pension Fund and other state funds.

The report notes that Kleoss, a private equity firm, and Koketso Mabe of Keletso M Squared (Pty) Ltd were in August 2017 appointed joint financial advisers to the PIC in relation to a potential investment by the fund into struggling retailer Edcon Holdings. Their joint appointment letter included a 1.5% success fee of the total amount raised by the PIC and co-investors, with a clause stipulating that the fee must be paid whether the asset manager "may have completed the transaction with the assistance of no advisers or advisers other than the Joint Financial Advisers”.

"The terms of the above agreement significantly disadvantage the PIC, to put it mildly," states the report.

The PIC invested R2.7bn in the retailer in early 2019, which is credited with saving thousands of jobs.

In October 2019, once the commission had wrapped up its public hearings, the joint advisers presented an invoice to the PIC claiming R44 661 975 as payment, according to the report. 

The report recommends that the asset manager review the Edcon transaction and "determine whether the joint advisers executed the mandate they were engaged to fulfil, or were utilised in any way". It also proposes that the corporation consider legal options to recoup any payments made to the advisers.

We weren't paid 

But in a statement on Friday, Hale Matsipa, co-founder and Managing Director of Kleoss, said the joint advisers were surprised to see their names mentioned in the report, as they had not been approached by the commission to provide evidence and had not been paid. 

Had the company been given a chance to present evidence, Matsipa said it would shown that it did, in fact, provide advisory work. 

He added: "It is notable that towards the end of the mandate the PIC concluded the Edcon recapitalisation on its own, presumably having used some or all of the advisors work.

According to the joint statement, no payment of R44 million was received from the PIC.

"While the Joint advisors are fully in support of any attempts to ensure the proper use of public funds, they take great exception to the way the PIC report casts aspersions on their reputation – particularly as they were never given the opportunity to present their side of the story," the statement reads. 



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