PIC board plans to examine controversial Ayo investment
The public controversy and possible reputational risk of the Ayo transaction caused considerable consternation among the PIC board
The Public Investment Corporation (PIC), which paid R4,3bn to take up the full initial public offering of Ayo Technology in December 2017, says its board plans to examine the transaction in the light of the controversy it has stirred.
The decision to fund Ayo did not come before the board at the time of the decision as it was within the delegated authority of management to deliberate on the matter.
But "negative media reports" had caused some members of the board to request that the board investment committee examine the transaction at its next meeting, PIC spokesman Deon Botha said on Monday.
"The investment committee wants to ensure that all investment processes were followed and also ensure that the delegation of authority deals with matters like these in the correct way, in line with best practice."
Particularly controversial has been the PIC’s valuation of Ayo. At the end of August 2017, financial statements show that it had total assets of R292m and a book value of R67m. For its R4,3bn (a valuation of R43 a share) the PIC got 29% of Ayo, implying a valuation of R14,8bn.
The tech company has a portfolio of five software, advisory and consulting firms.
It also owns a headset distributor, Headset Solutions, with a presence in several African countries. The company is controlled by Independent Media head Iqbal Surve, who has defended the valuation on the grounds that tech companies frequently make large losses upfront but realise massive value down the line.
The size of the PIC with assets under management of nearly R2-trillion means that management committees have substantial delegated authority and can approve transactions in listed companies up to R10bn and investments of up to R2bn in unlisted companies.
All initial private offerings are dealt with as listed investments.
The public controversy and possible reputational risk of the Ayo transaction caused considerable consternation among the PIC board. As a result, it is also revisiting management’s delegated authority, in particular in the case of politically sensitive or controversial investments.
The heat over Ayo — and another Surve-controlled company Sagarmatha, which had also requested a R3bn private placement for its listing from the PIC — has placed the PIC under renewed public scrutiny. In the end, the PIC did not support Sagarmatha, which led to the listing being canned at the 11th hour.
The PIC has also been on the unfavourable end of press coverage after it emerged that the police were probing allegations of corruption by its CEO, Dan Matjila. The allegations relate to an incident in September 2017 when a whistle-blower accused Matjila of channelling funds to "a girlfriend".
The board dismissed the allegations on the strength of Matjila’s explanation and an internal audit report. However, as the matter was reported to the police at the time, the police have continued to investigate.
On Monday, United Democratic Movement leader Bantu Holomisa entered the fray, writing to Finance Minister Nhlanhla Nene to demand that he investigate the claims and place Matjila on suspension. Nene has requested PIC chairman Mondli Gungubele to furnish him with a report on the 2017 allegations and deliberations.
Holomisa’s lawyer, Eric Mabuza, said that should Nene not comply, Holomisa would approach the courts.