The PIC – Separating fact from fiction

By ADRI SENEKAL DE WET via www.iol.co.za
The Public Investment Corporation’s chief executive, Dr Daniel Matjila. File picture: Dean Hutton
CAPE TOWN – Just last week, I wrote about speaking truth to power as an Afrikaner woman and editor, and about exposing hidden agendas and networks.
I said that it might lose me many friends, especially in white circles. I was wrong. Overwhelmingly, white people have called to congratulate me and ask me to continue to speak truth to power.
Well here I am again, except this time more disgusted and more concerned than ever, at some of my journalist colleagues who work for our competitors, who have thrown all objectivity out the window in their attempts to discredit Dr Iqbal Survé, Independent Media and Sekunjalo. Their target is the PIC, and therefore, I now unpack for readers the reality of the PIC investments and separate fact from fiction.
The Public Investment Corporation (PIC) has come under scrutiny for its investment, or potential investment, in Independent Media, technology and platform companies Sagarmatha Technologies and AYO Technology Solutions, alongside companies in which Sekunjalo and Dr Survé, as a black entrepreneur, have invested significant risk capital over the last few years.
Let me give credit where credit is due. The PIC under its current leadership of Dr Daniel Matjila, has grown its investment portfolio from R600 billion over the last decade, to approximately R2 trillion, putting it among the top asset managers globally. This is phenomenal growth and has resulted in a high return for its investors, including the GEPF.
The PIC has had some notable successes, for example SAB Miller, Aspen and Naspers but, it has also suffered some setbacks such as Steinhoff. The PIC is the largest investor on the JSE with 12,5% (R1.6 trillion) of the market capitalization of all the companies listed on the JSE (R12 trillion) and one would argue, is the only investor that is capable of investing on a large scale for companies that have got ambitious plans to grow on the African continent. Some of those companies that require a capital injection are black-owned.
The PIC has tried to assist black business largely through the private equity unlisted portfolios, but has not really had the opportunity to invest in many listed companies started by black entrepreneurs. (The PIC is also limited in how it approaches its investments set down by the mandate of the GEPF and other pension funds whose assets it manages).
Recent reports have shown that the majority of asset management companies in South Africa remain mainly under white ownership and management, although there are exceptions.
The bulk of assets under management are in companies such as Investec, Coronation, Absa, Sanlam, Allan Gray and others – many of these companies’ asset managers have built networks with predominantly white entrepreneurs, individuals and companies in South Africa.
It is not just the technical valuations that prompt asset managers to invest in listed companies, but also the networks of these organisations that are developed over years, in many cases predating the new democracy, which give them social and economic currency.
This network influences investment into JSE listed companies. Not all these investments in JSE listed companies are always successful and in some cases, many of the investments have failed spectacularly, but almost no one writes about these failures.
As an example, household names, which failed to expand overseas (to Europe, America, Russia or Australia) and in the process, wiping off tens of billions in value to shareholders include: Standard Bank’s investment in Russia, Old Mutual’s investment in Skandia, Investec’s investment in the UK, Woolworths’ investment in Australia and so on.
This loss of value of tens of billions of rands excludes the R200bn destruction of Steinhoff. Notwithstanding the above, there is a misconception that all these companies only have “successful” investment strategies.
During the 2008 financial crisis, when the JSE stocks tumbled, in many cases it was the PIC that came to the rescue of many of these companies. Recently, with the resources slump, it is again the PIC that came to the rescue.
Virtually in all instances, these companies are white owned and managed. The PIC did so in the national interest and to ensure jobs were protected and it did so with full cognisance of taking a long-term view of its investment strategy.
Today, it is vindicated in this approach, in that most of these companies have recovered the values completely or partially, providing value to shareholders. Why then would the PIC’s decision to invest in two black-owned and managed companies instil such hostility and vindictive attitudes? What are the real issues at play here?
The South African economy since 1994 has more than tripled to a GDP today of around R3.5 trln. This is evidenced with the ALSI index on the JSE, which in 1994 was in the region of 15 000 points and today, the All Share Index on the JSE approaches 60 000 points. This is a 400 percent increase in the value of the JSE ALSI.
It is a fact that the PIC has provided the capital base for many of these companies that are listed on the JSE in the last few decades – pre and post-apartheid.
Furthermore, the PIC continues to support many of these companies today, since the PIC with its R1.6trln makes up the bulk of the investments on the JSE (12.5 percent) and is the single largest investor on the local bourse.
Who has benefited from all of this? Well, in the first instance the PIC and its pension funds. But in the second, it is also an array of individuals, corporate entities, family trusts, and consortia.
A search into the founding controlling shareholders of the JSE listed companies shows that 99 percent of these beneficiaries happen to be white.
It is correct to therefore conclude that the PIC’s money has been used in the last two to three decades, to create and further enhance white wealth in this country.
As an example, prominent businessmen such as Stephen Saad, Johan Rupert, Christo Wiese, Jannie Mouton, Koos Bekker and many other family trusts have all gained significantly by the investments made by the PIC into their companies.
Essentially these businessmen utilised the capital markets, including the capital of the PIC, to create family wealth for themselves. Now, there is nothing wrong with that, since that is how a capitalist market economy works and these businessmen were entrepreneurial (sometimes with a bit of help from the state, as with Naspers), hard working and took risks building their businesses over the years. They deserve the success they have now achieved and we acknowledge them for this.
Herein lies the current conundrum. Does the media highlight that they are very significant beneficiaries of the PIC’s investment into their companies? – NO.
Rather than saying that the PIC has invested in supporting, for instance, the family trust of Koos Bekker, and the fact that their family trust controls these investments and are then seen to be unduly benefiting, they report on the company.
I am compelled to ask why it is that when the PIC invests in companies on the JSE that are controlled by white families, individuals, entrepreneurs or corporates, it is okay to talk about the organisation, but when the PIC invests in companies where black entrepreneurs are in the driving seat, or that have black control, ownership and management, the PIC is interrogated and the personalities themselves are targeted and their motives questioned?
This is a fact – the evidence is clear and incontrovertible, played out in the mainstream media many times over, and particularly in the past three weeks.
People such as Patrice Motsepe and Dr Survé have built their businesses with entrepreneurship and hard work and have given exceptional returns to investors over the years.
This criticism of black entrepreneurs is not just hypocritical, but has the tendency to lean towards strong racial overtones. As a citizen of South Africa – no matter my race, gender or age – I find this unacceptable and against the Constitution.
Recent reporting – packaged as “news” – by Independent Media’s competitors, have failed to uphold the Constitution and also the media code of ethics, that talks to balanced and fair reporting.
They have failed to tell their readers that the biggest beneficiaries – in terms of family trusts and entrepreneurs – of the PIC and of the JSE, remain white South Africans. Black entrepreneurs are only supported by the PIC to the tune of R24bn out of R12trln. This is manifestly unjust.
However, this media bias is unlikely to be corrected any time soon – I mean since when has the story of the hunt ever been told by the hunted? What then is the real agenda and what are they really hunting? Could it be the assets of Independent Media as our journalists suggested earlier this week?
I have to believe that if Dr Survé did not own and control Independent Media, which has influence and provides an alternative narrative to the other media houses, his investment strategies would have been welcomed and supported, not vilified as they are currently.
The JSE may argue that many pension funds beneficiaries are black, and they should be included in the calculation of black ownership, but this does not justify the lack of black entrepreneurs and their companies listed on the JSE.
This needs to be pointed out because, if you believe Sam Sole, you will believe that the PIC investments have only benefited black South Africans.
The PIC, of course, is trying to invest in black South Africans and has created a private equity fund, Isibaya, to do this, but the monies allocated to this fund and the processes to receive funding from that fund for black entrepreneurs, is not easy and the fund is small compared to what the PIC has invested in listed entities.
The “listed” environment has historically been the domain of white companies, individuals, family trusts and entrepreneurs as mentioned before.
The point about all of this is that there are two standards, one for white South African entrepreneurs and one for black South African entrepreneurs. These standards do not talk to the innovativeness or creativity of the people or companies themselves. They speak to the racial prism or lens which is used to identify these entrepreneurs and their companies.
Let’s for the moment take Sagarmatha Technologies Ltd or AYO Technology Solutions Ltd (AYO). Had the founding shareholder of Sagarmatha Technologies and AYO been a white entrepreneur, the listing would most probably have been welcomed and feted and the PIC investment would be applauded.
Hypothetically, if it was a Koos Bekker, Stephen Saad or Jannie Mouton, non-financial journalists would hardly question its valuation.
If they did question the valuation, the first port of call would be the management teams to try and understand the company. Instead, a 212-page PLS document was distilled to only a few points – out of context and factually incorrect as a result.
It does not help that afterwards those that had erred, admitted in print, radio and online they had made mistakes, having misinterpreted the financials and admitting (post fact), that they are not experts in this field and had incomplete information. Too late she cried.
Basic journalism is to ask the person or company being written about – specifically the board or the management – for their point of view and to check facts.
It is not enough to say that the PLS was public and fail to mention that global experts specialising in the valuation of technology companies, provided an expert, fair and reasonable valuation asked for by the JSE as a stringent listing requirement.
They further fail to point out that a range of local and international investors subscribed for R4.2bn worth of shares in Sagarmatha Technologies, one of the largest subscriptions in recent years on the JSE. Furthermore, Sagarmatha had seven dollar billionaires as part of its advisory board. Why would internationally successful businessmen lend their names to such a company if they did not believe its valuation?
In the case of AYO, it was oversubscribed by more than R1.2bn. AYO’s PLS is very clear – all funds raised are to be used for organic growth and acquisitions and not dividends to shareholders.
AYO’s management has set out the profit forecasts for the next few years. Why not wait and see if they achieve these forecast?Is this not the way other companies that have listed are treated? Why seek to cast doubt on the company less than six-months into its listing?
Why is AYO and its independent board and management team not accorded the same benefit of the doubt, as others? What has any of this got do with Dr Survé or Sekunjalo who are not even direct investors in AYO?
JSE records
It needs to be stressed that the Survé family are NOT direct investors in AYO and have only invested via AEEI, which only owns 49 percent of AYO.
I have checked the JSE records and I can’t see that Sekunjalo has ever sold any shares in AEEI in 20 years and they have reinvested all profits to grow the company and create jobs.
The Sekunjalo Group has invested in more than 200 other investments and I doubt that the company needs dividends from AEEI or AYO, other than in the normal course of business.
For any journalist reporting on this to omit these facts is dishonest and is misrepresentation.
There is a further problem here. We can argue whether the “attack” on Dr Survé has merit or not, but the fact is that Dr Survé’s family trust is a shareholder in Sagarmatha, AEEI and through AEEI, into AYO – not directly.
He is not part of the management or on the board. Therefore, to ask a single shareholder their views or to provide answers to questions, is somewhat disingenuous.
It also undermines the integrity of those management and boards – some have proven their success in the numbers they are posting and others are yet to be given the opportunity to provide the results.
But if we are to focus on one person, what has been conveniently disregarded is the fact that Dr Survé is a shareholder and board member participating in 12 multinationals in Africa, serving on many of the World Economic Forum boards, serving in Task Teams of the G20, and in numerous multinational organisations, including as chairperson of the Brics Business Council.
He has also been the recipient of several business excellence awards, including being the first black businessman to receive the “Afrikaanse Handelsinstituut Sakeleier Van Die Jaar”.
It seems strange that outside of the borders of this country he is highly regarded – professionally and personally – yet at home he is regarded with deep suspicion, because of his connections and success.
I thought we always enjoyed a rags-to-riches story. Oppression to succession. But it appears that champion acknowledgement is selective. Dr Survé came from a humble background, is a self-made entrepreneur who has never had access to established networks.
He is a medical doctor with South African and American qualifications (three degrees, an alumnus of Harvard and UCT and, has won many prestigious business awards for his acumen and success).
He should be applauded for his innovation, hard work and for taking the entrepreneurial risk to get to the top, rather than being castigated because the PIC took a decision to invest in some of his companies.
Aside from this, Dr Survé is often taken to task for his networking. He has long-standing relationships with many individuals, institutions and unions, who all have the common goal of creating a sustainable economic democracy.
South Africa actually needs more of such socio-economic constructs (between business and the unions and civil society), not less.
Over the years there have been numerous attempts to discredit him, particularly around the time of the Independent Media deal. The attempted listing of Sagarmatha Technologies has stirred things up again. There has been an attempt to portray Dr Survé and his family as self-enriching. Nothing could be further from the truth.
Yes, if the management performs and the investments grow, Dr Survé as an investor, would benefit, as would all other shareholders, including the PIC.
To infer otherwise, is mind boggling. In fact, it is quite the contrary. Dr Survé through his various companies and his family Trust, has invested his own capital into the likes of Independent Media and a number of other companies in which he has shareholding. In so doing, has increased the ‘value’ of these companies. In addition, Dr Survé is known to be a significant philanthropist of seven foundations. (Just last week, he was the recipient of a global award for his commitment to philanthropy from Queen Sylvia of Sweden, who hosted the World’s Children’s Prize for the Rights of the Child).
One explanation for the media’s current almost unhealthy obsession to paint Dr Survé and the various businesses in which he has a stake in a poor light, is held in the idea of this being an intimidation campaign.
It has a clear agenda designed to stop the PIC from supporting black businessmen today and in the future. The message is simple, cut off access to the capital markets.
By denying black businessmen and entrepreneurs (or only allowing those that meet media approval), access to the PIC or to similar capital markets, you force them to come with a begging bowl to the “establishment” and then, South Africa repeats the cycle of the first 20 years of black economic empowerment, where black companies don’t really benefit meaningfully, since the “Golden Rule applies, in that those who have the gold make all the rules”.
In this case, it is still predominantly white-owned companies that make the rules for any black company’s participation in the economy.
The current narrative being peddled seems to infer that black-owned and run companies will only be permitted access to meaningful capital to scale, at the behest and grace of the majority white-controlled capital.
This doesn’t seem equitable or fair, but then I guess, business rarely is. So, is it a case of those who shout the loudest will remain at the top?
The “noise” around the PIC and its investment strategies could be easily mistaken for an attempt to subvert economic and social justice redress in South Africa.
That being the case, I urge the PIC to resist such attempts and to invest in black-owned companies. We do not need fewer investments in companies such as Sagarmatha Technologies and AYO, we need more investments with black entrepreneurs.
At present though, this seems like a pipe dream, as when black companies go directly to the source of capital for the capital markets such as the PIC, whose policies actually include transformation, they are criticised.
This access has to be disallowed by the establishment, because if it allows black companies to have access to the capital markets, it permits black people to shape their own independent future in South Africa.
Economic independence is a dangerous concept for those who wish to monopolise economic power, as it would mean they would no longer have leverage. No leverage means no economic participation and a dilution of control.
Today, the intimidation is against Dr Survé and the companies he is involved in such as Sagarmatha Technologies and AYO. Tomorrow it will conceivably target other black companies supported by the PIC.
Corporate bullying, economic thuggery, crude racism, monopolistic agendas – are they aimed at denying access to capital to black companies in the listed capital markets? You decide.
We need more black entrepreneurs to have the conviction to list their companies on the JSE. The way in which the media has treated Sagarmatha, AYO and others can be described as a means to shatter the confidence of black companies so that they will never think of listing on the JSE.
This dichotomy is what is dividing this country and it must stop.
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