‘DR DAN’ AND THE DEALMAKERS
The contrast in sophistication could not be more stark. On the one hand, government ministers enjoying the largesse of the Bosasa group in the form of frozen chickens, braai packs and booze, according to testimony at the Zondo commission of inquiry into state capture. On the other hand, evidence at the PIC commission of inquiry suggests a group of business people in good standing with former Public Investment Corp (PIC) CEO Dan Matjila was awarded multibillion-rand deals on terms so favourable they would give bankers nightmares.
The inquiry, chaired by retired judge Lex Mpati, has over the past months heard extensive testimony from executives at the state-owned asset manager about the apparent “sweetheart” deals between a select group of dealmakers and Matjila — and certain common features have emerged.
For starters, they all appear to involve a small group of business people who tapped the PIC to obtain huge stakes in private and public companies. This group, including Jayendra Naidoo (Steinhoff and Steinhoff Africa Retail), Iqbal
Survé (Independent Media, Ayo, Sagarmatha), Kholofelo Maponya (SA Home Loans and Daybreak Farms), Sipho Mseleku (Total SA and Northam Platinum) and Lawrence Mulaudzi (Total SA and others), repeatedly accessed funds from the state-owned investment manager.
Survé’s case appears particularly galling. When the PIC in December 2017 invested R4.3bn in Ayo Technologies — a company Survé indirectly controls — the loan his consortium owed the PIC for the earlier acquisition of Independent Media had not been serviced (it has since been written off). Yet the PIC gave no consideration to this earlier deal when it came to approving the investment in Ayo — an approval that turned out to be irregular.
A second commonality has been the apparently flimsy — even nonexistent — diversity of the consortiums benefiting from the deals.
It seems all sorts of worthy charitable groups
were included as members of the consortiums — including employee trusts, women and youth groups, and even a global fund for Christ. But the ones scrutinised by the commission so far appear to have superficial ownership: they promise to distribute profits at some future point, and this is entirely conditional on the benevolence of the consortium leader. In essence, they simply appear to be an extension of the interests of the dealmaker, and the PIC has not disclosed any mechanism to monitor or audit the outcomes promised to the various constituents.
Another common feature concerns how the terms were seemingly skewed to favour the deal beneficiaries. Excluding the Ayo and Sagarmatha transactions, in most of the deals the PIC lent the consortiums money to buy stakes in established businesses. But the only security the PIC appears to have taken were the shares. Most of the consortiums were not required to put in their own money as a condition for accessing PIC funds, and this in many cases extended to borrowing money to pay transaction advisers.
The result was that stakes in companies worth hundreds of millions of rands — billions in some cases — were given to very narrowly controlled consortiums that had all to gain and virtually nothing to lose by entering Evidence is mounting that suggests Dan Matjila organised ludicrously favourable PIC deals for friends into such transactions. It was tantamount to rolling the dice with PIC money.
But things appear to have reached even more ridiculous proportions. The PIC, it seems, was willing in some cases to let some of the recipients of these one-sided deals benefit immediately by allowing them to charge advisory and facilitation fees on the money invested — of which they were already the main beneficiaries.
In the case of Ayo, African Equity Empowerment Investments — Ayo’s largest shareholder, and a company also controlled by Survé — earned R57m on the grounds that it provided corporate finance services to Ayo ahead of the company’s listing.
In another example, Maponya, who borrowed money from the PIC to buy 25% of SA Home Loans, claims he is owed R45m for arranging a facility for the mortgage lender shortly after he became an owner in the business. The PIC went so far as to request that SA Home Loans pay a fee owed to the Government Employees Pension Fund (as the lender) to Maponya.
The issue is the subject of litigation.
While no-one has yet suggested a reason that these people were so favoured by the PIC, one man makes no bones about how they became the “chosen ones”.
Standard Bank special counsel Ian Sinton, who testified at the commission in his capacity as shareholder representative for the bank’s 50% interest in SA Home Loans, recalled his memorable first encounter with Maponya: “When I asked Mr Maponya how he, out of millions of South Africans, came to be chosen as the person the PIC chose to support for the acquisition, he simply replied: ‘Due to my relationship with Dr Matjila.’”
What Maponya and Matjila make of that has yet to be told: Matjila has not yet testified, and Maponya is expected to give his account shortly after the commission resumes hearings at the end of the month.
What it means: