PIC distances itself from ZAR X suspension over non-compliance
THE Public Investment Corporation (PIC) is distancing itself from being the stumbling block that led to the suspension of alternative stock exchange ZAR X.
In a statement yesterday, the PIC, which holds a 24.14 percent stake on behalf of the Government Employees Pension Fund (GEPF), said there are no protracted internal issues and governance processes within the PIC.
“The PIC subjects investment proposals, including reinvestment proposals, to a thorough investment process for the benefit of clients on whose behalf it invests,” it said.
This followed the Financial Sector Conduct Authority (FSCA) this week suspending the exchange licence of ZAR X, for its non-compliance with the Financial Markets Act (FMA) and FMA regulations relating to an exchange’s liquidity and capital adequacy requirements.
The suspension remains effective until either ZAR X rectifies its non-compliance with capital adequacy requirements to the satisfaction of the FSCA and the Prudential Authority, or the FSCA makes a final decision on the cancellation of its exchange licence.
ZAR X co-founder and chief executive Etienne Nel noted with concern the decision by the FSCA to suspend ZAR X’s exchange licence and has lodged an appeal against the decision.
The PIC said it had noted an unfortunate misrepresentation that the transaction, with a foreign-based investor “has been stalled due to an inability by ZAR X’s largest shareholder, the PIC, to grant formal approval of the transaction due to protracted internal issues and governance processes.”
The statement further states that “the transaction would be concluded by August 20, 2021, which would have pre-empted the need for the suspension”, laying the blame squarely on the PIC.
“Whilst it is not in the PIC’s character to publicly debate its relationship dynamics with investee companies, it is necessary to state that the PIC has demonstrated its support for ZAR X and has gone the extra mile to ensure that it succeeds.
“In this regard, the PIC points to the following facts, which ZAR X has omitted from its statement. These are that the PIC participated in the company’s two previous rights issues after its initial investment as a show of confidence in the ZAR X platform. The PIC has continued to engage with the company on its turnaround strategy, including cost containment measures which took a protracted period of time to be implemented,” the PIC said.
While the PIC’s support for ZAR X has remained unwavering, it has had to do so on a risk-adjusted basis for the benefit of the clients on whose behalf it invests. South Africa’s financial markets regulator has suspended the licence of ZAR X, a move that has temporarily barred share trading by investors and company listings at the alternative stock exchange that was the first launched in the country in 2017.
Nel explained that in December 2020, ZAR X concluded a significant equity transaction with a foreign-based investor to acquire a controlling interest in the exchange.
“The transaction has since stalled due to an inability by our largest shareholder, the PIC, to grant formal approval of the transaction due to protracted internal issues and governance processes.”