It says much that it took the JSE to remind South Africa’s largest investor, the Public Investment Corp (PIC), that it couldn’t keep the details of its “settlement” with Iqbal Survé-controlled Ayo Technology Solutions secret from 1.3-million government employees on whose behalf it invests.
The PIC, in case anyone needs to be reminded, has just emerged from a period during which its governance was shown to have fallen far short of what anyone would expect of a normal company, let alone a company that is in a fiduciary position, entrusted with looking after people’s pensions. Yet the “new PIC”, headed by Abel Sithole and chaired by deputy finance minister David Masondo, has raised enough red flags to suggest that few lessons may have been learnt after all.
The cautionary tale here is that back in December 2017, the PIC was duped into investing R4.3bn of pensioners’ money in Ayo at R43 a share. At the time it was a laughable valuation, given Ayo’s tiny R29m profit the year before. Few (outside of the PIC) were surprised when the stock cratered to R3.60 a share.
Chastened, the PIC then took Ayo to court to reclaim the R4.3bn, arguing that the agreement was “unlawful”, that Ayo had made “misrepresentations” and that its pie-in-the-sky profit projections “did not have a realistic prospect of being achieved”.
The import was immense: for the state-owned asset manager to be duped into ploughing billions into a thumb-suck valuation has implications for its stewardship of state pensions, the state balance sheet and governance at Africa’s largest asset manager.
Days into the court hearing the PIC and Ayo announced abruptly that the legal action had been “settled”, and that the terms of that deal would remain “confidential”. You’d expect as much from Ayo, given how poorly the sordid tale of broken promises reflects on the putative technology company.
However you slice it, getting R20 for a small portion of the shares you bought for R43 is hardly a victory
Yet how did the PIC and its “advisers” think it could take everyone for fools, given that this settlement was an order of court, and hence public? After all, the PIC is an institution that claims it is “accountable to our stakeholders in everything we do, as well as for every decision we make”.
Its clients were furious. The Public Servants Association, which represents 240,000 civil servants, vowed to go to court to get the details.
Inevitably, the PIC and Ayo were soon forced to backtrack. In an announcement teeming with ill-advised pique, Ayo said it had “voluntarily” chosen to release the details of the settlement — but this was only after it had been told to do it.
It’s senseless obfuscation; Daily Maverick had spilt the terms of that settlement into the public domain more than a week before. Had Ayo, and the PIC, any real commitment to investment transparency, they would have released the terms themselves. Daily Maverick can be commended for filling in the gaps.
In a nutshell, Ayo agreed to buy back 17.2-million shares for R619.4m (R35 a share), with the PIC’s client, the Government Employees Pension Fund, retaining 25% of the company. The fund has the option to sell another 5% back to Ayo for a minimum of R20 a share.
However you slice it, getting R20 for a small portion of the shares you bought for R43 is hardly a victory. For an organisation aiming at rebuilding trust, trying to hide this from its clients is pretty much the worst way to go about it.
There were high hopes for the PIC when the highly regarded Sithole took over in May 2020. But during his tenure the PIC has retreated further into the laager, defying the King code requirements to be “open, honest and transparent” with the public. Instead, it has delivered the opposite of the greater accountability and transparency that was needed.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.