How politics felled PIC boss
Masilela is said to have been under pressure from players close to Zuma
THE sudden resignation of South Africa’s most powerful investment official, Elias Masilela, as CEO of the Public Investment Corporation (PIC) has fuelled talk that a clash over several dubious investments was behind his unexpected departure.
The state-owned PIC invests R1.6-trillion in assets on behalf of government pensioners, and owns about 11% of all stocks on the JSE, making it the most influential power broker on the local market.
However, news of Masilela’s abrupt departure on Friday, taking all his leave and stepping down from the end of this month, means this was no ordinary handover of responsibilities.
Masilela is understood to have come under increasing pressure from the PIC’s chief investment officer, Daniel Matjila, and others regarded as close to President Jacob Zuma to relinquish one of the most powerful financial jobs in South Africa.
Rumours of tension between Masilela and Matjila escalated in recent months, with the focus centred largely on several of the PIC’s more recent investments. Matjila was seen as the more influential power broker at the PIC, so Masilela’s departure did not entirely surprise some analysts.
However, it is understood that the PIC’s $270-million purchase of 30% of oil and gas explorer Camac in November in particular sparked clashes between the two.
The PIC paid more than five times the market value for its stake in Camac, which produces oil in Nigeria and holds exploration licences in Ghana, Kenya and the Gambia.
The PIC’s investment took place two months after Camac warned that there was “substantial doubt” over whether it could continue as a going concern.
When the PIC invested, Camac’s total market capitalisation was $150-million.
Masilela, who did not respond to calls and messages on Friday, defended the transaction at the time, saying the PIC paid 30% less than Camac’s net asset value.
Camac has a market value of $768-million, valuing the PIC’s stake at $230-million. Camac reported a loss of $4.6-million in the first quarter, and produced a mere 1 700 barrels of oil a day over the period.
This raised concern that the deal was based on political, rather than investment criteria.
Camac CEO Kase Lawal, a Nigerian-American, is seen as close to Zuma, and Camac has made donations to the Jacob Zuma Education Trust, the Mail & Guardian reported earlier this year.
Pension funds typically steer clear of risky investments in penny stocks on the verge of bankruptcy — as was the case with Camac, before the PIC bailout.
Further questions over potential political interference were also raised recently over the PIC’s decision to provide R500-million in funding for Sekunjalo’s purchase of Independent Newspapers and its R19-billion investment in South African National Roads Agency (Sanral) bonds.
The PIC, and Matjila in particular, was also instrumental in blocking a bid by Chile’s CFR Pharmaceuticals to buy control of South Africa’s second-largest pharmaceutical group, Adcock Ingram. This led some to suggest it was “anti-foreign investment”.
Speaking last week at the Gordon Institute of Business Science, Masilela did nothing to dispel this view when he said that while foreign investment was “good” in the short term the jury was out on the long term.
If there is tension between the Government Employees Pension Fund (GEPF) and the PIC over the fund’s deals, GEPF acting principal executive officer Joelene Moodley was determined not to let it show on Friday.
Ignoring questions about Camac, Moodley said Masilela provided a “firm and steady hand at the helm” of the PIC.
Moodley praised Masilela for overseeing growth in the PIC’s assets under management and for being a “major driver of the GEPF’s developmental investment policy”.
Matjila said in a text message on Friday he was travelling abroad, and referred questions
Three years really is not a long time at all to be at the helm of the PIC, which needs real stability at the top
to the PIC’s spokesman. The PIC, however, refused to answer questions, and gave no reasons for Masilela’s abrupt resignation.
Shareholder activist Theo Botha criticised the lack of transparency over Masilela’s departure, given the role that the PIC plays in lobbying for good corporate governance at the JSE-listed companies in which it invests.
“I always found Elias to be a very open and accommodating person, and it’s quite sad that his resignation has come so soon. Three years really is not a long time at all to be at the helm of the PIC, which needs real stability at the top,” Botha said.
Masilela’s departure comes days after the PIC’s chairman, Nhanhla Nene, was sworn in as finance minister. In this position, Nene now has the authority to hire and fire the head of the PIC.
While individuals close to the PIC believe Masilela had a difficult relationship with Nene, it was unlikely Nene’s appointment was responsible for his departure.
One analyst said: “If Nene wanted Masilela out, it would have taken at least a year.”
With Masilela’s departure, two of the most powerful positions in South Africa’s investment landscape — the CEO of the PIC and the principal officer of the GEPF — are held by acting executives.
The GEPF’s principal officer, John Oliphant, was suspended last October, and the complaints against him have still not been made public.