THE ABSA ENIGMA

Financial Mail - - FEATURE /RESILIENT INVESTIGATIONS - War­ren Thompson thomp­sonw@busi­nesslive.co.za

IThe PIC, Corona­tion, Al­lan Gray and Pru­den­tial want an in­de­pen­dent probe into al­leged wrong­do­ing at Re­silient — but why is Absa As­set Man­age­ment row­ing its own boat? n a cu­ri­ous turn of events, it has emerged that Absa As­set Man­age­ment re­fused to co-sign a let­ter sent by top as­set man­agers to the Re­silient prop­erty group de­mand­ing a proper probe into al­le­ga­tions of mis­con­duct.

Sig­nif­i­cantly, Absa was one of the only large share­hold­ers of the four Re­silient com­pa­nies — Re­silient, Fortress, Nepi Rock­cas­tle and Green­bay (see page 42) — that re­fused to be a sig­na­tory.

The let­ter, sent on Au­gust 23, says that due to a “per­ceived lack of in­de­pen­dence and in­suf­fi­cient scope in the in­ves­ti­ga­tions com­mis­sioned by Re­silient”, there needs to be a new “full, trans­par­ent and in­de­pen­dent foren­sic in­ves­ti­ga­tion of all al­le­ga­tions”.

The fund man­agers who wrote to Re­silient say this is the only way to ad­dress the “cur­rent neg­a­tive per­cep­tion” around the Re­silient com­pa­nies. Over the past year, Re­silient’s share price has fallen 54%, Fortress “B” has fallen 58%, Nepi has lost 27% and Green­bay 34%.

The Re­silient group has been ac­cused of ma­nip­u­lat­ing the price of its shares through sub­sidiaries and its own BEE ve­hi­cles, fund­ing the growth in div­i­dends through ar­ti­fi­cial means, and sell­ing prop­er­ties to re­lated par­ties at the ex­pense of share­hold­ers.

The let­ter was signed by a who’s who of in­vest­ment man­agers in­clud­ing Corona­tion, Al­lan Gray and Pru­den­tial.

Sig­na­to­ries in­cluded man­agers which had lit­tle if any share­hold­ing in Re­silient.

Among them, and per­haps car­ry­ing the most weight, was the Pub­lic In­vest­ment Corp, which is the sin­gle largest share­holder in all four com­pa­nies, ac­cord­ing to Bloomberg.

Absa As­set Man­age­ment, through its hugely suc­cess­ful Absa Prop­erty Eq­uity Fund run by Fayyaz Mot­tiar, has been a con­sis­tent share­holder in the Re­silient group.

It is some­what sur­pris­ing that Absa should de­cline to join its peers.

The head of Absa As­set Man­age­ment, Ann Leep­ile, tells the FM the com­pany did not dis­agree with the con­tents of the let­ter and would wel­come any fur­ther ac­tion to in­ves­ti­gate al­le­ga­tions against the Re­silient Group. It had

al­ready con­ducted its own thor­ough in­ves­ti­ga­tion and did not feel an­other one was war­ranted.

“We en­gaged the ser­vices of an in­de­pen­dent au­di­tor to en­sure in­de­pen­dence in our views on the Re­silient Group,” says Leep­ile. “The in­ves­ti­ga­tion was based on pub­licly avail­able in­for­ma­tion, in­clud­ing the report on find­ings of the in­de­pen­dent re­view into the Re­silient Group, led by Shauket Fakie, and engagements with the man­age­ment team of the Re­silient Group.”

Leep­ile says Absa’s find­ings will re­main con­fi­den­tial but do not pre­clude it from in­vest­ing in the group. This sug­gests Absa has dis­cov­ered noth­ing suf­fi­ciently un­to­ward to be wor­ried about.

Ul­ti­mately though, Absa be­lieves it is the reg­u­la­tory au­thor­i­ties that should pro­vide con­clu­sive judg­ment on the mat­ter. “Our view is that the FSCA [Fi­nan­cial Sec­tor Con­duct Au­thor­ity] and the JSE have the ap­pro­pri­ate and in­tru­sive pow­ers to ac­cess more in­for­ma­tion than can be ac­cessed by any in­vestor or stake­holder in the Re­silient Group. The out­come of the in­ves­ti­ga­tions by the FSCA and the JSE will guide any fur­ther steps we may take re­gard­ing our in­ter­ests and those of our clients in Re­silient,” says Leep­ile.

This con­trasts with the pub­lic view of at least one of the sig­na­to­ries, Old Mu­tual In­vest­ment Group (Omigsa). Rob Lewen­son, head of environmental, so­cial & gov­er­nance en­gage­ment prac­tice at Omigsa, be­lieves lack of dis­clo­sure by the com­pa­nies pre­vents a con­clu­sive opin­ion on the find­ings of in­ves­ti­ga­tions like Fakie’s. “From our point of view, we are look­ing for more trans­parency and dis­clo­sure. The cur­rent sit­u­a­tion has led to more un­cer­tainty and there is a de­gree of frus­tra­tion on be­half of in­vestors of sim­ply not know­ing,” says Lewen­son.

“We are not ques­tion­ing Mr Fakie’s abil­ity, but what we don’t have is a clear set of in­for­ma­tion nor any in­put from the reg­u­la­tors at this point ei­ther. So we think full dis­clo­sure around the scope and find­ings of any foren­sic in­ves­ti­ga­tion would im­prove this, and this would go a long way for us to draw com­fort from the find­ings.”

Lewen­son says he wants “to en­sure that there is not any­thing else we could be blind­sided on”.

123Rf/an­driy Popov

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