The Government Employees ‘Pension Fund (GEPF), of which R18 trillion of civil servants’ pension funds are managed by the Public Investment Corporation (PIC), has suggested it was caught off guard by the decision of the fund manager to invest a cool R4.3 billion in AYO Technology Solutions in December 2017.
Abel Sithole, the senior managing director of GEPF, testified Monday July 15 during an investigation into governance issues and irregularities at PIC that the fund manager had not involved or informed him when he made an investment in AYO.
AYO is majority owned by Sekunjalo Investments, itself owned by Iqbal Survé, also chairman of the Sekunjalo group.
Sithole said the PIC, whose largest source of funds is from GEPF, did not highlight AYO’s investment in its subsequent reports to GEPF.
His testimony is another indication that the PIC has given up on the due diligence and consultation process required on certain investments, plunging the fund manager deeper into governance scandals. PIC’s investment in AYO is one of the most controversial the fund manager has made in recent months.
AYO’s deal has been controversial due to the high valuation it commanded when it went public in 2017 on the JSE, which saw PIC take a 29% stake in R43 / share. AYO’s illiquid shares have remained at the R9 level since June 25, meaning PIC has lost around R3 billion of its initial investment.
PIC’s suspended deputy portfolio manager Victor Seanie said during the investigation that former PIC CEO Dan Matjila was a close friend of Survé, which influenced the fund manager’s decision to invest. in AYO.
Seanie also told the inquest that Matjila insisted on driving PIC’s investment in AYO on short notice, despite objections from Seanie and his colleagues that the valuation was overkill. PIC invested in AYO, flouting governance and approval processes.
No more quarrels
As a fund manager, the PIC invests in entities listed and unlisted on the JSE to obtain returns for the members of the GEPF. Of the R18 trillion of civil servants’ pension funds managed by the PIC, about 70% of the funds are allocated to entities listed on the JSE.
When the GEPF asked the PIC about the investment in AYO, Sithole said that “the deed was done and the horse had run away,” meaning the R 4.3 billion investment had already been made. realized.
The PIC responded to GEPF’s inquiries about AYO’s investment, with the fund manager stating that he considered the investment to be listed investments, therefore not requiring GEPF approval.
Sithole said he disagreed with PIC’s reasoning, given GEPF’s definition of listed and unlisted investments. According to an agreement between PIC and GEPF, PIC is required to seek approval from GEPF for any one-time investment above R 2 billion for unlisted investments. Unlisted investments above the R2 billion threshold must be submitted to the GEPF board of directors via its investment committee.
Sithole said that prior to AYO’s listing on the JSE, it could be classified as unlisted. Thus, the valuation of 4.3 billion rand on the AYO transaction exceeded the investment threshold of 2 billion rand, which required the approval of the GEPF.
“It is not clear why the funding agreement would be considered on the list. In my opinion, this should have fallen under unlisted investments and therefore the above limit of R 2 billion on unlisted investments beyond which the PIC must involve the GEPF.
In another surprising revelation, Sithole said that GEPF learned of the potential funding of Surv’s PIC.éthe technology company of Sagarmatha Technologies through media reports. In fact, the funding for Sagarmatha has been withdrawn.
Despite serious governance issues and poor investment decisions, Sithole believes the PIC has not acted negligently.
“We believe there has been no willful wrongdoing [at the PIC] encourage GEPF to act [against the PIC], “he said.” If there is negligence, then the negligence will have to be proven. It can be proven in court. The GEPF will exercise its rights of action. [if it believes there has been negligence]”.