Assistant commissioner Gill Marcus, left, chairperson Justice Lex Mpati and assistant commissioner Emmanuel Lediga during the PIC Commission of Inquiry being held at Sammy Marks Square, Pretoria. Photo: Thobile Mathonsi African News Agency (ANA)
CAPE TOWN – In the 39 days that the Commission of Inquiry into alleged improprieties at the Public Investment Corporation (PIC) has been running, at least 20 days have had some focus on AYO Technologies and Sagarmatha in which Sekunjalo - owned by Dr Iqbal Survé - has an interest.

Would it be safe to say that the commission led by Judge Lex Mpati, assisted by Gill Marcus and Emmanuel Lediga, has so far spent half its time probing the PIC’s dealings with the two entities? 

The terms of reference are succinctly clear … The commission must inquire into, make findings, report on and make recommendations on the following:

  • Whether there was any alleged impropriety regarding investment decisions.
  • Whether there are any findings of impropriety following the investigation.
  • Whether any PIC director or employee used his or her position or privileges, or confidential information.
  • Whether there is any legislation or PIC policies concerning the reporting of alleged corrupt activities.

Even when reading through the full terms of reference for the commission nowhere does it state that the commission should probe the operations of its investee companies.

So one is left wondering why the focus on these entities. AYO has reportedly been making profits and effectively delivers value to the PIC and other shareholders. The PIC never invested in Sagarmatha and Survé is on record stating that Africa’s largest asset manager missed an opportunity by not investing in this entity. Maybe the focus is really on how these companies were valued by the PIC?

The PIC’s portfolio manager of non-consumer industrials and listed equities, Sunil Varghese, told the Mpati-led commission that the enterprise value-to-earnings before interest, tax, depreciation and amortisation (EV/Ebitda) valuation method put AYO Technology Solutions’ actual value as high as R47 a share at the time of the company’s initial public offering.

Varghese said EV/Ebitda was a popular valuation multiple used in the finance industry to measure the value of a company and was the most widely used valuation multiple based on enterprise value and often used in conjunction with or as an alternative to, the price-to-earnings (P/E) ratio to determine the fair market value of a company. He said the P/E gave a base case value of R43 a share, which was derived from earnings a share of R2.68 a share multiplied by 16 x P/E. He said the key assumption was that the fundamental or fair value was discoverable using the tools: discounted cash flow (DCF), internal rate of return (IRR), exit P/E, price to book and EV/Ebitda.

Varghese said the PIC assistant portfolio manager Victor Seanie was very familiar with the normalised P/E valuation methodology, and it was his preferred approach when he valued companies.

Sagarmatha, while raising questions about its valuation, got more than R3billion worth of investment commitments from private investors in the build-up to its listing, which was, in an unprecedented move, thwarted by the CIPC. The PIC was not part of these investors. This is just a small section of how the commission has focused on these two entities.

Meanwhile, the PIC has lost more than R100bn in various corporate investment including MTN, Steinhoff and several other entities. It has not lost a cent in the AYO investment and - at the risk of overemphasising - did not invest in Sagarmatha.

One of the key things that brought about this commission was the allegations made by whistleblower James Nogu/Noko. Noko made a rather serious allegation that there was a PIC top brass triad that was involved with businessperson Lawrence Mulaudzi in corrupt practices that led to the questionable approval of transactions at the PIC. According to Noko’s allegations when an entity applies for PIC funding that entity is referred to Mulaudzi, who then advises it and negotiates terms, such as shareholding and kickbacks for himself and the PIC triad.

Mulaudzi is the live-in lover of PIC non-executive director Sibusisiwe Zulu who, according to Noko’s claims, is part of the corrupt triad along with PIC chairperson, Deputy Finance Minister Mondli Gungubele, and suspended PIC chief financial officer Matshepo More, who was acting chief executive at the time of her suspension.

Mulaudzi appeared before the commission to explain how and why he was made to avail R300000 to one Pretty Louw. Mulaudzi also explained his dealings with the PIC and how he managed to get R6bn funding for his companies interests without the involvement of Zulu, his live-in lover, as alleged by Noko. Mulaudzi’s emotional testimony drew sympathy from assistant commissioner Marcus, who felt the need to apologise to Mulaudzi for what he was going through.

Meanwhile, that testimony by Sekunjalo’s Survé struck a nerve with the very same Marcus, who not only addressed Survé’s attorney in a rather condescending manner, but also rebuked Survé for the way he was raising issues about the lack of transformation in the PIC’s investment decisions.

The commission also seems to be trying to establish if there is indeed a relationship between Survé and former PIC chief executive Dr Dan Matjila. This I believe is to find out if the PIC’s involvement with the companies in which Survé has an interest had anything to do with a personal relationship between him and Matjila. Nothing has come to the fore even after the commission has spent half its time probing this through numerous witnesses that have appeared before it.

Mulaudzi, on the other hand, received a handsome R6bn investment from the PIC and is in a love relationship with a PIC director. While there may be nothing sinister here, the question that arises is that of which deserves to be probed deeper.

We still have the one-man show at Lancaster, where its owner Jayendra Naidoo reduced his application from R10.4bn to R9.4bn after realising that the initial amount would require the approval of the PIC board. This, according to associate principal in Isibaya Private Equity & Structured Investment Products Botsang Morobe, was because the board’s process would miss the deadline Naidoo was faced with to invest in Steinhoff.

That investment went spectacularly wrong when Naidoo’s acquisition of 2.75 percent of Steinhoff through Lancaster the Steinhoff share price began to decline and this impacted on the PlC’s security package.

This still leaves the one question: Why spend half the time discussing one entity that has even availed its executives to testify before the commission? MTN shares declined due to its issues in Nigeria and the PIC opts to increase its interests in the company. Survé and his investment decisions make for interesting reading, but are not always of public interest and not in this commission’s interest.

What is of public interest and this commission’s interest is how the PIC came to making investment decisions involving hundreds of companies. Yet so far we have had an overdose of its dealings with Survé-owned entities.

I strongly believe the PIC executive would do themselves and the public at large a lot more justice by giving us a wider picture of how they come to investment decision involving a much larger basket of entities. This would also help the commission make a fair comparison, fair findings and ultimately fair recommendations.

It would also be in the PIC’s best interest to address the allegations made by Noko, bearing in mind that it was those allegations that got the board fired.

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