PIC, Sekunjalo, SIM — more clarity please
Aclose reading of the Public Investment Corporation’s (PIC) statement responding to Iqbal Survé’s demand for an immediate (within 24 hours) retraction of its public statement about considering the liquidation of Sekunjalo looks like a bit of a climbdown, but only a little, given the proliferation of the Sekunjalo name in the Independent Media saga.
The liquidation threat was made in response to questions at a parliamentary hearing. MPs wanted to know what the PIC planned to do about the return of a R1.27bn investment in Sekunjalo, which got control of Independent Media in 2013. Not an unreasonable query, given lack of disclosure about the funding of a politically sensitive asset.
The problem is, as Survé said, PIC money didn’t go to Sekunjalo (Investment Holdings) but to Sekunjalo Independent Media (SIM), a completely separate legal entity. Some of it also went directly to Independent Media.
The PIC apparently said it would consider liquidation of Sekunjalo in its efforts to secure the return of its money.
While the indiscriminate use of the word Sekunjalo may have been useful to Survé in the past
giving the impression that he was substantially the largest shareholder in Independent Media this use of it did not suit Survé at all.
Responding to Survé’s demand for a retraction, the PIC did not address the “Sekunjalo” liquidation threat but only its plans to get back some of the R4.23bn it poured into Sekunjalo venture Ayo. It remains unclear how vigorously the PIC intends to pursue the claims against SIM and what the implications will be for the Independent Group, which is 55% held by SIM.
The planned Sagarmatha listing would have delayed the day of reckoning, allowing the PIC to exchange its investment in unlisted SIM/Independent Media for shares in Sagarmatha.
With any luck there will now be a court case that will provide some clarity.
Few companies on the JSE or any other bourse are lucky enough to have a key funder write off a huge loan. Namibian investment company Trustco said in October it was no longer burdened with repaying, or servicing interest on, a recent R1bn loan to it by founder, CEO and majority shareholder Quinton van Rooyen. He recently put some of his shares on the market to raise funds to make the loan to Trustco.
One way to look at this bizarre development is to argue that Van Rooyen is so confident that Trustco, especially its soonto-be-listed resources arm, will make such stunning returns that a R1bn write off is a small sacrifice for longer-term gains.
Van Rooyen will not be short of Trustco scrip, remembering he is owed a sizeable paper settlement of R3.6bn for vendoring in his own diamond exploration assets into the group.
What’s more, his magnanimous write off will provide a huge but artificial boost to Trustco profit, and especially the fledgling resource segment where the loan was used.
A more pertinent question: was Trustco, where profit has not yielded commensurate cash flows in recent years, really in a position to repay and service such a big loan. Two looming critical issues: marked improvement in Trustco’s cash conversion rate in its next results; and how much fresh capital is raised from outside by the resource segment’s initial public offering.