PIC investment into Ecobank was speculative, inquiry witness suggests
Investment into West African financial services group was a poor one, down $165m, or 66%, over the last seven years, former exec testifies
One of the Public Investment Corporation’s (PIC’s) first investments outside SA pushed the limits of responsibility and undermined its role as the steward of millions of civil servants’ savings.
This follows from the testimony at the commission of inquiry into the PIC on Tuesday by Altu Sadie who was employed as the CFO for cards and electronic banking at the West African financial services group Ecobank Transnational.
Sadie described how the PIC initially invested $250m in April 2012, equivalent to R2bn at the time, into Ecobank, based in Togo and active in 37 countries globally including Nigeria.
The PIC’s investment was augmented by a $98m annual revolving loan in December 2016 and the purchase of a $250m convertible bond in September 2017, Sadie said.
The PIC’s initial investment, through which it acquired an 18% stake in Ecobank, caused it to receive the right to appoint a director to the board. PIC CEO Dan Matjila took up the board appointment and according to Sadie was paid directors’ fees of $100,000, and sundry allowances of about $3,000, along with an allowance of $20,000 to purchase a pair of first-class airline tickets.
The commissions’ investigative team has been instructed to establish whether the fees were paid to Matjila, or to the PIC, as company policy dictates.
“Does the PIC mandate allow it to invest in highly speculative investments while suitable alternatives, for example, Stanbic IBTC with AAA [credit] rating exists?,” Sadie asked hypothetically during proceedings at the Mpati commission of inquiry into the asset manager.
Stanbic IBTC is a Nigerian holding company for a financial services conglomerate majority owned by Standard Bank and was listed on the Nigerian Stock Exchange in November 2012.
Sadie was contrasting the range of options available to the PIC when it chose to invest in financial services companies outside SA. In comparison to Stanbic IBTC’s top-tier AAA credit rating, Ecobank was rated at B, a much inferior rating to Stanbic’s.
Sadie said the investment into Ecobank was a poor one, down $165m or 66% over the last seven years until Wednesday last week.