South Africa\u2019s Treasury is pressuring the continent\u2019s biggest money manager to provide as much as R100 billion ($7.6 billion) to fund struggling state companies, according to two people with knowledge of the situation.<\/p>\n
The Public Investment Corp, which manages state-employee pension funds and has about R1.86 trillion in assets, has been asked by the Treasury to buy its entire R12 billion stake in Telkom to pay for a bailout of South African Airways, said the people, who asked not to be identified as the talks are private.<\/p>\n
PIC chief executive officer Daniel Matjila has rejected the request, saying a purchase of the 39% shareholding would leave the company overexposed to the landline provider, they said.<\/p>\n
After a bailout for SAA, which is technically insolvent, the government needs cash for state power utility Eskom Holdings, oil company PetroSA and defense firm Denel, according to the people.<\/p>\n
The companies have been beset by allegations of mismanagement and corruption and the running of state firms was cited by rating agencies when they cut South Africa to junk in April.<\/p>\n
Matjila is willing to buy about R2 billion worth of Telkom shares, which would boost the PIC\u2019s stake to about 18%, the people said.<\/p>\n
\u2018Clients Mandate\u2019<\/strong><\/p>\n The PIC will make investment decisions in terms of the clients\u2019 mandate, it said in an emailed response to questions.<\/p>\n PIC Chairman Sfiso Buthelezi, who is also deputy finance minister, isn\u2019t currently taking questions on the PIC, the National Treasury said in emailed comments. He gave his full support to the board and CEO last week, it said.<\/p>\n The PIC has helped the government raise money before. In 2015 it bought the state\u2019s R25 billion stake in wireless carrier Vodacom Group to raise funds for Eskom, which was struggling at the time with countrywide blackouts.<\/p>\n The money manager has holdings equivalent to about 13% of the market value of companies that trade on the Johannesburg Stock Exchange.<\/p>\n The battle over the PIC\u2019s leadership and funds represents the latest struggle over the management and independence of a state-owned company, with the pensions of public-sector workers including nurses and teachers at stake.<\/p>\n On Thursday, the Federation of Unions of South Africa, the country\u2019s second-biggest labor union grouping, said it would consider replacing the PIC with privately owned money managers if its members\u2019 savings are used to bailout state entities.<\/p>\n The impasse between the finance ministry and Matjila was behind last week\u2019s accusation that the CEO used PIC funds to finance a personal project, the people said.<\/p>\n Matjila, 55, denied the allegations, and his response was accepted by the board after a lengthy meeting. Buthelezi wanted to suspend Matjila and replace him with a more co-operative candidate and the board continues to investigate the CEO and deals he has overseen, the people said.<\/p>\n After the meeting, the PIC\u2019s board said it had confidence in the ability and integrity of Matjila and rejected allegations it wanted him removed.<\/p>\n \u201cWe are not aware of any new CEO being sought,\u201d the PIC said.<\/p>\n The running of businesses including SAA led to clashes between President Jacob Zuma and former finance ministers Nhlanhla Nene and Pravin Gordhan, both of whom were fired. At Eskom, acting CEO Matshela Koko and chief financial officer Anoj Singh have both been suspended after being linked to questionable contracts.<\/p>\n An internal report found that Trillian Capital Partners, linked to the politically connected Gupta family, and US consultant McKinsey & Co made R1.6 billion\u00a0 in fees, according to amaBhungane and Scorpio, two investigative journalism groups based in Johannesburg.<\/p>\n The Guptas are friends with Zuma and in business with his son. They are alleged to have used their connections to influence government appointments and the award of state contracts.<\/p>\n Public Enterprises Minister Lynne Brown said Thursday Eskom should begin legal action against Trillian and McKinsey, which denies it has engaged in corruption.<\/p>\n In August, Finance Minister Malusi Gigaba told executives of the Congress of South African Trade Unions, the largest labor federation, that he can\u2019t guarantee the government won\u2019t attempt to make use of funds held by the PIC to recapitalize state-owned companies and fund other projects, Business Day newspaper reported, without saying how it obtained the information.<\/p>\n That\u2019s caused concern among labor unions.<\/p>\n \u201cThe union reserves its rights while considering options to stop any public servants\u2019 pension fund money being wasted into SAA,\u201d the Public Servants Association said in a statement on Friday.<\/p>\n
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