Has the PIC invested R586 million in a piece of empty farmland?
Economy / 10 February 2020, 08:30am / Sizwe Dlamini
CAPE TOWN – Finance Minister Tito Mboweni has been called on to probe a more than half-a-billion-rand land deal by the Public Investment Corporation (PIC) on behalf of the Government Employees Pension Fund.
The PIC appears to have invested R586.5 million in a piece of empty farmland between Klerksdorp and Stilfontein in North West Province, which it hopes to turn into a mixed-use residential area, according to Geordin Hill-Lewis, the DA’s spokesperson on finance.
The value of the transaction raises questions, with claims that the price that the PIC paid for the land was grossly inflated. “It is difficult to imagine how the valuation could be justified, even if future development is possible, which there is doubt about,” said Hill-Lewis.
When reached for comment, the PIC’s head of corporate affairs, Deon Botha, said the asset manager acquired a 60 percent undivided share in the properties. He said the valuation was done by an independent property valuator on these properties, without revealing the name of the evaluator.
“In conducting the valuation, the independent evaluator used the comparable sales method of valuation and considered the property's highest and best use. The comparable sales used considered that the land has the approval to establish a township comprising retail, office, industrial, low to medium density housing, schools and healthcare facilities. They also considered the available bulk infrastructure on the land. Development rights and availability of services play a crucial role in land valuations for development purposes,” he said.
The transaction also raised questions of whether this was potentially a bailout of another pension fund, the Municipal Councillors Pension Fund (MCPF), as they were involved in this land deal before they were put under curatorship. Botha refuted this claim, saying the issue with the MCPF came to the PIC’s attention after the approval of the transaction was granted.
“[email protected] made representations about that matter. It should be noted that the land that the MCPF acquired from [email protected] is not part of the PIC transaction. Therefore, the suggestion that the transaction has something to do with MCPF is misplaced,” he said.
The MCPF bought 11 vacant stands in Klerksdorp, North West, from [email protected] Development for R120m, and MCPF paid about R17m in VAT for the deal before being put under curatorship. This deal was referred to the Hawks by MCPF curators Juanito Damons and Thabang Kekana in terms of the Prevention and Combating of Corrupt Activities Act.
In July 2018, The Star reported that Damons and Kekana instituted legal action to recover the R120m purchase price and the R17m MCPF paid for VAT, as no acceptable settlement could be reached with Isago for the repayment of the money.
MCPF documents state that the 11 Isago properties were bought for more than R137m, when they were valued at R46.6m – an overpayment of R90.4m, according to the report. The fund also bought the 12th property for R65m, when its assessed value was about R40m – overpaying by R25m.
Botha said the PIC was first presented with the transaction in 2016 for funding to acquire the land and following an assessment, the PIC decided to instead participate as an equity partner by acquiring the land.
“Given that the PIC is a 60 percent undivided shareholder on the land, they will co-develop the land with Isago Holdings in various phases and at the opportune time. The types of development will be in line with the regulatory approvals granted resulting in a mixed-use precinct.
“The transaction was subjected to thorough investment process before being approved. The Property Fund Investment Panel, which was a sub-committee of the board at the time of concluding the transaction, granted the approval in accordance with the delegation of authority.
“Before approving the transaction, the PIC conducted due diligence on the transaction. The due diligence entailed obtaining an independent valuation, an independent town planning report, environmental, social and governance due diligence, legal due diligence and risk due diligence,” said Botha.
Also involved in this transaction are two investment companies, which are reported to be the immediate beneficiaries. According to reports, they have gained value that sharply exceeds the purchase price paid by the pension fund, with both companies, Anglo Saxon Developments and Moedi Bosele Investors, jointly claiming R837m in value.
Hill-Lewis said this appeared to be a suspicious deal by the PIC, and their silence on key questions only raised more suspicion. This at a time when the PIC is at the centre of government plans to use pension funds to bailout government corruption.