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Survé tried to score PIC billions

Apr 15 2018 06:00
Dewald Van Rensburg

The Public Investment Corporation (PIC) was investing in Sagarmatha Technologies, the fantastically overvalued new venture by media mogul Iqbal Survé, and documents from December show the state-owned asset manager was concerned about keeping that investment separate from a similar deal with another one of Survé’s companies, Ayo Technology Solutions.

However, this week the PIC decided not to go ahead with any investment in Sagarmatha.

In December, the PIC paid R4.3 billion for 29% of Ayo, based on nothing more than optimistic forecasts and plans for unnamed acquisitions that echo tech start-up Sagarmatha’s business plan.

The PIC has refused to confirm or deny that it was the mystery investor that planned to give Sagarmatha the minimum of R3 billion it wanted before listing on the JSE this week. Documents in City Press’ possession, however, indicate that the PIC was investing something in Sagarmatha.

Minutes from a meeting held on December 20, during which the PIC decided to invest in Ayo, record that this first deal must be separate from “Project Iris or Sagarmatha”. No details were given of the extent of the investment, but the entire Sagarmatha listing plan hinged on a R3 billion injection from somewhere.

Sagarmatha’s JSE listing was cancelled this week due to the stock exchange raising the “technicality” that Sagarmatha failed to provide its historical financial statements to the Companies and Intellectual Property Commission – and failed to provide its latest financials to the JSE by this past Monday. The company denies both charges, but said it would no longer pursue the JSE listing.

“The company results were not released late,” said company spokesperson Kaz Henderson. However, the JSE said the results were due on Monday, but were released on Tuesday. Henderson answered the rest of City Press’ questions by saying: “Kindly refer to the prelisting statement.”

Apart from being a seemingly terrible investment into a loss-making bundle of media companies, a PIC investment in Sagarmatha would mean giving money to a company that would have Independent Media group, which already owes the PIC hundreds of millions of rands, as its major asset.

The PIC would essentially be paying off the debt that Survé’s Sekunjalo consortium had borrowed from it in 2012 to buy Independent Media.

The plan to list and collect a mountain of cash is most likely related to the imminent repayment deadlines for loans related to the takeover of Independent. Sekunjalo Independent owes its Chinese co-investor Interacom R909 million, the PIC R663 million and the Southern African Clothing and Textile Workers Union R244 million.

It has to repay 50% of all these amounts in August, which means about R900 million is due in a few months’ time.


Sagarmatha has received an enormous amount of effusive coverage from the Sekunjalo-controlled newspapers, which have dubbed it Africa’s first “unicorn”, a US investment term referring to start-up companies valued at $1 billion or more.

However, based on the prelisting statement it published two weeks ago, the company had little going for it.

Sagarmatha is 73% owned by Survé’s family company Sekunjalo Investment Holdings. The company mostly consists of the African News Agency (ANA), the wire service created in the wake of the demise of SAPA in 2015. Its main asset is the remainder of the astonishing R357 million cash that the China Africa Fund paid for 5% of ANA in 2015.

Sagarmatha registered a loss of R40 million last year and is steadily eating through the Chinese money. Its financial statements also reveal that it has lent R115 million to Sekunjalo, its own parent company, over the past two years. It also lent R25 million to Independent. This seems to have been the major use of its cash from the Chinese investors in ANA. Asked if Sagarmatha was providing Sekunjalo with cash to carry the losses of Independent, Henderson said it wasn’t.

The plan was to sell new shares for R7.5 billion in a private placement this week and list on the JSE. Sagarmatha would then simultaneously buy the 55% of Independent that is currently controlled by Sekunjalo. This would have diluted Sekunjalo’s stake in Sagarmatha to 60%.

Independent Media is one of South Africa’s largest media companies and the publisher of popular daily newspapers such as The Star, the Pretoria News and the Cape Times. It is also a financial millstone around its owners’ neck.

By December 2016, the company had accumulated losses of R617 million. Despite being insolvent, the company’s financial statements treat it as a “going concern” only because Sekunjalo, which is Survé, “will provide financial support as and when required”. Sekunjalo was essentially covering the growing losses as they arose. The effect of the planned listing and share sale would have been to relieve Sekunjalo of this burden.

Despite this inauspicious base, Sagarmatha was going to sell shares at a price that values it at R49.7 billion – about 100 times its book value of R1.1 billion. The company claims it had offers for R4 billion that were not from the PIC.

The Black Business Council (BBC) this week lambasted the “anti-transformation” forces that scuppered the listing. The BBC, which is insolvent, was going to receive shares in Sagarmatha allegedly worth R240 million. The BBC’s general secretary George Sebulela did not respond to questions.


City Press reported last month how the PIC had invested R4.3 billion in Ayo Technology Solutions, in which Survé’s Sekunjalo had a 61% stake. It listed on the JSE in December. The two deals are eerily similar – the price the PIC paid for Ayo seems massively inflated, and based entirely on growth forecasts and an unnamed acquisition that PIC staff flagged as “very optimistic”.

Of the R4.3 billion the PIC paid for Ayo shares:

  • R1 billion went to parent company African Equity Empowerment Investments (AEEI), which is majority owned by Survé, to buy out its 30% stake in the local operations of British Telecom;
  • Another R80 million went to AEEI to pay off an intercompany loan;
  • Another R57.7 million in “placement fees” went to a wholly-owned subsidiary of AEEI, despite the entire placement being underwritten by the PIC; and
  • A recurring management fee of R7 million per year will go to AEEI, adjusted for inflation.

Unsurprisingly, AEEI’s share price shot up 20% on the day of the Ayo listing to reflect the cash bonanza. As with the Ayo listing in December, the Sagarmatha listing would’ve been a sizeable boost for Survé through more than the obvious channels.

Apart from releasing Sekunjalo of the Independent debt and losses, it was going to be Survé’s own investment management company, 3 Laws Capital, that was to get the placement fees of about R52.5 million. Survé owns 85% of 3 Laws Capital and indirectly owned 61% of the company that got the placement fees in the Ayo deal.

The PIC disputed City Press’ article, saying that the investment in Ayo was subject to all the normal due diligence. Giving R4.3 billion to a black-owned company with uncertain prospects was no different from most private equity deals, said PIC spokesperson Deon Botha.

However, by the end of last month, Ayo had still not given the PIC a key protection it had asked for in December – an option protecting its R4.3 billion investment. This followed the PIC’s own assessment that it may be paying too much for its Ayo shares.

Like Sagarmatha, Ayo’s strangely high valuation was based on a pipeline of unnamed future acquisitions.

The PIC said that supporting the listing of black-owned companies on the JSE was within its mandate.

“Recently, we have supported other similar transactions such as RH Bophelo, Africa Energy Partners, Sea Harvest and African Rainbow Capital,” said Botha.

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sagarmatha  |  pic  |  iqbal surve  |  media


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