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PIC interim chair moves to save what is seen as SA's 'sovereign fund'

Oct 20 2019 10:39
Sibongile Khumalo

The reputation of the Public Investment Corporation, which recently faced an inquiry into its affairs, can still be repaired, its interim chairperson Reuel Khoza has said, as the asset manager strives to chart a new path amid sideline tussles to protect its diverse investments.

Khoza, a veteran business leader who was in July tapped to steer the board of Africa's largest money manager, believes that the allegations of governance failures detailed in the recent commission of inquiry into the PIC cast a spotlight on the importance of having adequate checks and balances in state-owned entities.

“There is no gainsaying that the reputation of the PIC has not been damaged, but not irreparably,” he said in an interview with Fin24. He said that since taking over, the interim board has been immersed in stabilising the operational affairs of the company, which include filling key executive positions such as that of CEO, chief operating officer and chief risk officer.

The recruitment process for the positions will soon get underway. The PIC has been without a permanent CEO since Dan Matjila's resignation in November

Matjila and the previous board, which was directed to quit, had been ensnared in allegations of wrongdoing, including questions over some investments entered into under their watch.

Khoza likened the asset manager, which manages around R2.1trn on behalf of government employees, to a "sovereign fund" – saying it would require a CEO with a highest level of competency and ethical conduct.

"I don't think you could fault Matjila much on competency, even though you can question some of the decisions he took, something which has to do with ethical conduct."

"Things fell apart, leading to the appointment of the inquiry…that has to do with ethical conduct," he said.

The Mpati Commission of Inquiry, which was appointed by President Cyril Ramaphosa to probe allegations of impropriety at the PIC, is due to release its report by the end of October.

Khoza said the new board, which consists of diverse corporate leaders such former Absa CEO Maria Ramos, has since taking over probed the organisational structure of the corporation in order to improve operations and identified areas that require strengthening.

"We have acted with urgency and corrected a few things, including splitting of the position of CEO and chief investment officer, which were collapsed into one. That was a major anomaly," said Khoza.

"The past few years had been damaging, in a sense that the PIC is almost like a Sovereign Fund...so there has been reputational risks in a very substantial measure that we've had to repair."

Unprecedented Sekunjalo spat

While the board works to achieve stability, a war of words has erupted between the company and Sekunjalo, an investment holding company led by prominent businessman Iqbal Survé, whose companies have received investment from the PIC.

One major investment was R4.3bn in IT group AYO Technologies ahead of its listing in 2017. According to some evidence presented before the Mpati Inquiry, it was concluded without following due process. 

Matters came to a head last week, after a top PIC executive told a Parliamentary inquiry that the corporation was considering an application to liquidate Sekunjalo over the non-repayment of a 2013 loan to a company called Sekunjalo Independent Media, a special purpose vehicle set up to buy out Independent Media from its Irish owners. 

Survé, meanwhile, has threatened to sue the PIC, and has denied that Sekunjalo owes the asset manager anything. The corporation is also involved in a separate lawsuit against AYO. 

Khoza described the acrimonious accusations between an investor and investee as "uncommon" and "unprecedented". 

 "Whatever happens, if somebody has been deceptive and borrowed money under false pretences, that smacks of corruption and we are not going to countenance losing money," said Khoza.

He emphasised that the PIC, which has also suffered major losses in its R9.35bn investment in Steinhoff, would do anything to recover funds on behalf of pensioners. The Pretoria-based corporation is part of a global class action seeking to recover funds from the former retail giant.

Old Mutual vs Moyo battle

The ongoing legal wrangle between Old Mutual and its fired CEO, Peter Moyo, has presented another challenge for the PIC, which owns a 16.9% stake in the JSE-listed firm.

As one of the investors in Old Mutual,  the PIC wants the dispute to be settled out of court, in order to stem financial losses and save the company further reputational damage. 

Khoza revealed that there have been extensive engagements between Moyo's legal team and the Old Mutual board, in a bid to find common ground.

He stated that the discomfort around the R250m damage claim could even be negotiated. "Nothing is etched in stone, chances are that the other party could consider different terms without going public with details of the deal."

While the fight to salvage investment from non-performing entities, there had been talk that the PIC, with its vast financial muscle, could be roped in to rescue some of the ailing state-owned entities. He said the PIC had been approached with an intention of extending funding to Eskom.

"I understand that when it comes to Eskom, all hands should be on deck, but a decision to help Eskom is not one that should be taken lightly... we would need to be circumspect and consider commercial benefits."

The PIC holds around R90bn in Eskom bonds. Khoza mentioned that throwing money in Eskom at its current state would mean "throwing good money after bad money."

While the board goes about its duties, the findings of the Mpati Inquiry is likely to shed more light on the extent of governance failures at the institution, and offer recommendations on action to be taken against those implicated in wrongdoing.

pic  |  old mutual  |  peter moyo  |  dan matjila  |  reuel khoza
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