South Africa’s Public Investment Corp. moved too quickly when it agreed to invest in a local technology company and the deal is an example of how sound investment advice was often ignored at the continent’s biggest money manager, a suspended employee said.
The institution has a culture of intimidation and coercion and the people who write investment reports often have no control of the valuations and recommendations contained in them, Victor Seanie, who was an assistant portfolio manager at the PIC before he was suspended last week, told a commission of inquiry on Wednesday.
The inquiry has heard that the deal in question, in which PIC took all of Ayo Technology Solutions Ltd.’s R4.3 billion ($316 million) private placement of shares in December 2017, was flagged for potentially having flouted processes.
This was found in a routine audit of the Pretoria-based fund manager’s listed investments in May. The PIC’s investment valued Ayo at R14.8 billion even though its assets were estimated at R292 million.
A breakdown by investigative reporters at amaBhungane put the scandal into perspective: the PIC bought the Ayo shares at R43 a share, when the group’s Net Asset Value was only 15 cents a share. Several unions were also given shares at R1.50 a share – a far lower price than the PIC, but still ten times the group’s NAV.
In recent trade, Ayo shares were valued at R20 – kept artificially high, according to amaBhungane, considering buy offers are only at R4.00 a share.
In effect, the PIC has lost more than half of its investment – R2.3 billion – with the company valued at R6.9 billion (R7.9 billion less than the PIC’s valuation).
Seanie said then-Chief Executive Officer Daniel Matjila as key to signing off on the deal before the PIC’s portfolio management committee had held its first meeting. That was “highly irregular,” he said.
Seanie was suspended last week, along with Head of Listed Investments Fidelis Madavo, after the PIC said there’d been a “blatant flouting of governance and approval processes.” Seanie also named Madavo as one of the main people involved in the deal.
Further, Seanie said Madavo had indicated in December 2017 that he wanted a favourable Ayo investment report. Ayo executives seemed assured of a favourable outcome, Seanie said.
In the past year, half of the PIC’s executive committee have been suspended or resigned. This includes Matjila, who quit in November, and the executive heads of risk, legal, listed investments, information technology and the company secretary.
Ayo last week released a press statement welcoming the inquiry. Matjila declined to comment when contacted by Bloomberg News because he’s yet to appear before the commission.