PIC-backed firm ‘leaves community in crisis’
• The Bakubung invested more than R500m • PIC probes its own investment in firm
A North West community that has invested more than R500m in a private equity firm set up by two Americans and backed by the state-owned Public Investment Corporation (PIC), says it is no longer receiving any income from the deal and cannot provide basic services to its people.
The fate of the Bakubung Ba Ratheo traditional community, based in Ledig in the North West, is the latest twist in the PIC’s illfated decision to invest R1.4bn — which it also stands to lose — with the Musa Group.
The PIC, which manages R2trillion in government employee pensions, has launched a forensic probe into its own transaction with Musa and how the latter has been using the loan proceeds. The PIC did the deal with the private equity firm about eight years after the community invested with Musa.
The community said it was now in a precarious financial position and can no longer afford to provide services like water as the income from investments made and managed on its behalf by the Musa Group has dried up.
The community said in court papers that the “monthly dividends” received from the investments had funded a wide range of undertakings managed by the Bakubung Community Development Corporation (BCDC), which extended to infrastructure, a public works programme, and bursaries for deserving students.
The community invested about R527m with Musa in 2007. A spokesperson for BCDC declined to give details on the nature of the investments.
When asked what investments Musa had made on behalf of the Bakubung, Musa Group CEO Will Jimerson told Business Day the mandates were “private and confidential”.
In relation to the allegation that income from the investments had become “sporadic” over the past few years and then has ceased during April and May, Jimerson said the distributions were “in accordance with the investment mandate in timing and amounts”.
“I’m not clear why there is an interpretation on your part that there is a ‘deteriorating situation’
as it relates to the investment portfolio. Musa has generated substantial distributions to BCDC over the life of the investment,” Jimerson said.
The community’s representatives said they had been unable to get in touch with Musa since the lockdown began.
“Despite attempts to engage with Musa Capital [during the course of April and May], there has been no response,” Mary Diale, chairperson of the BCDC, says in her affidavit.
Jimerson said meetings had been impossible since the Covid-19 lockdown started.
“As a matter of course, Musa has implemented procedures to engage with clients and address queries within the constraints of the current lockdown protocols,”
Jimerson said.
Musa is an investment management company started by two US businessmen, Jimerson and Antoine Johnson, the CEO of subsidiary Musa Capital.
The Unemployment Insurance Fund (UIF) and Compensation Fund took a 30% stake in the company in 2015 at the direction of the PIC, which gave it a right to board representation.
The PIC also lent Musa Group R450m in September 2015, acting on behalf of its clients, which include the Government Employees Pension Fund (GEPF).
The fund, whose principal executive officer Abel Sithole was last week confirmed as the PIC’s next CEO, has already written off R368m in relation to the deal, according to its 2019 annual report. By December 2019, when the PIC applied to have the group liquidated, Musa owed R1.42bn.
The PIC’s investment was not reviewed or investigated by the judicial commission of inquiry established by President Cyril Ramaphosa in 2018, and no findings were made when the president released the commission’s lengthy report earlier in 2020. This calls into question what else the commission may have missed, despite asking for, and receiving, multiple extensions to perform its work.
The PIC confirmed, in response to questions from Business Day this week, that it had requested a forensic investigation into the dealings of the investment management group, but would not provide any further details. “Any legal opinion or investigation that the PIC or its board obtains or commissions, on any aspect related to the PIC mandate or its operations, is legally privileged and confidential,” said Deon Botha, head of corporate affairs at the PIC.
Meanwhile, the liquidation is going ahead with the appointed liquidators having already assumed their duties, according to the PIC.
“The next step in this liquidation process is the first creditors’ meeting. The PIC is advised that the liquidators are awaiting the Master’s Office to provide a date for scheduling of the creditors meeting,” Botha said.
R1.4bn the amount the PIC invested in the Musa Group, which it also stands to lose