Economy / 21 November 2019, 08:00am / Sizwe Dlamini
CAPE TOWN – The Conundrum faced by Sekunjalo Investment Holdings (SIH) executives and some of its subsidiaries has presented the companies with the daunting task of fending off attacks from various quarters controlled by anti-transformation entities who are hell-bent on seeing this black-owned conglomerate crumble.
Why the Public Investment Corporation (PIC) has opted to tear its investments down, after so much hard work putting it together in the spirit of transformation, is not such a mystery. It is a clear indication that if you don’t play ball, the powerful elite will take you out.
Investor, economist and professor Benjamin Graham once said: “The investor’s chief problem – and his worst enemy – is likely to be himself. In the end, how your investments behave is much less important than how you behave.”
The moves by the PIC are not characteristic of an investor that cares to back its investment. The PIC, which is clearly under political pressure, is publicly making factually incorrect utterances as well as court applications with questionable facts and citing the wrong entities as it succumbs to political pressure.
The SIH-related companies that the PIC invested in have been the subject of a bear raid since the creation of Sekunjalo Independent Media, the special purpose vehicle that acquired Independent News and Media SA (INMSA).
A bear raid, which is akin to a smear campaign, is the practice of ganging up to push a stock’s price lower through concerted short selling and spreading adverse rumours about the targeted company. A bear-raid target is generally a company that is going through a challenging period since its vulnerable position makes it easy fodder for short-sellers.
While short selling may be legal, co-ordinated short selling is viewed as market manipulation, and spreading false rumours is tantamount to fraudulent activity.
JSE-listed AYO Technology Solutions initially commissioned the Financial Services Conduct Authority (FSCA) to investigate market manipulation and the shorting of its shares.
The FSCA is governed by the Financial Sector Regulation (FSR) Act, which extends its jurisdiction to include oversight of financial products and services such as banking, services related to credit and the buying and selling of foreign exchange.
Crucially, the FSR Act includes financial inclusion and transformation of the financial sector in its objects. AYO is a black-owned entity.
AYO and Sagarmatha Technologies, both of which SIH has an interest in, got considerable attention at the PIC Commission of Inquiry which aided to fuel the smear campaign driven by the company’s detractors.
Sagarmatha never listed on the JSE – on a technicality – and the PIC did not invest in Sagarmatha. However, the tech firm managed to raise the money required for it to list without the PIC’s investment.
The Times Media Group, among other media, ran articles deliberately pushing a narrative that portrayed INMSA – and related companies – in a negative light in order to try and force the PIC to consider merging the two media houses. This move had a nasty effect on related companies, with AYO bearing the brunt of the attacks.
Since the PIC was a common investor, they pushed the narrative further to destroy AYO, therefore, extending the negative sentiment. The PIC now faces political pressure to exit from the investment.
One of the main arguments put forward was the drop in AYO’s share price. The reality, however, is that this is not due to AYO underperforming, but to the whispers and rumours about the company spread by “unknown sources”.
The erstwhile PIC chief executive Dr Dan Matjila’s submission to the commission makes it clear the share price is not what determines the true value of a company.
Matjila also submitted that political interference had a significant effect on the asset manager’s decision-making processes.
It is now up to the newly appointed PIC board to steer the organisation in the right direction through sound investment decisions, but the political pressure has clearly left Africa’s largest asset manager caught between the devil and the deep blue sea.