The PIC’s great SA Home Loans shakedown
CEO describes the enormous pressure he was put under to pay an 'arranging fee'
The CEO of SA Home Loans, one of the country's largest mortgage lenders, has described the immense pressure he was placed under to pay an enabling fee demanded by the company’s empowerment partner.
Kevin Penwarden on Wednesday described how Kholofelo Maponya threatened and coerced the company to pay a R45m “arranging fee” he believed he was owed in relation to the provision of a R9bn facility by the Government Employees Pension Fund (GEPF). The facility, which advanced home loans to government employees, was made available to SA Home Loans in 2015.
In addition to acquiring 25% of SA Home Loans from JP Morgan, the PIC had facilitated the acquisition of a 25% stake on behalf of Maponya's consortium in 2014. As stipulated in the agreements between the PIC, the GEPF and SA Home Loans, the GEPF as lender was entitled to a 0.5% fee, amounting to R45m, on the full drawdown of the facility.
But according to Penwarden, Maponya based his claim to the fee on a discussion he had with PIC CEO Dan Matjila. After being initially informed of Maponya’s claim, Penwarden “could not understand the commercial logic or rationale for such a payment to Mr Maponya as a third party”.
Maponya began to up the ante in 2016, informing Penwarden that the facility agreements had “a mistake” as they did not stipulate his entitlement to the fee.
Penwarden’s testimony at the PIC hearing on Wednesday seems to support that of Standard Bank special counsel Ian Sinton. Sinton in April said his bank’s CEO, Sim Tshabalala, scuttled the R45m payment from SA Home Loans to Maponya.
Describing the engagements with Maponya during 2016, Penwarden said he was “placed under immense pressure” to pay the fee. He said the PIC also put pressure on him. Penwarden said the asset manager’s assistant to the CEO, Wellington Masekesa, contacted him and appeared to support Maponya’s claims that there had been a “loose arrangement” to pay him a fee. Masekesa also promised Penwarden the PIC would provide a “side letter” to SA Home Loans indicating Maponya’s entitlement to the fee.
“I indicated to Mr Masekesa that SA Home Loans was not a party to such an arrangement and that SA Home Loans could only comply with the contractual arrangements in place,” said Penwarden.
Another PIC executive, Thipano Mongalo, then attempted to add an addendum to the original facility agreement by inserting clauses “that didn’t make any sense to us”, said Penwarden. These were “alarmingly vague, with no reference to when the arranging fee was due, to whom the payment would be made and what the process of payment authorisation would be”, he said.
SA Home Loans rebutted these efforts. The PIC tried again, this time providing a letter signed by Matjila that instructed the company to cede the fee that was due to the GEPF to Maponya.
But a meeting between executives from Standard Bank (in their capacity as shareholder representatives in SA Home Loans) and Matjila saw Standard Bank CEO Sim Tshabalala threaten to report the PIC CEO to regulators over the letter unless he could provide evidence that the GEPF had consented to foregoing its fee.
Matjila opted to rescind the letter of cession shortly after the meeting with Tshabalala.
Things apparently got worse, according to Penwarden. After SA Home Loans had exhausted the R9bn facility in its business activities, it approached the PIC in late 2017 for a further R10bn. Positive discussions took place between the two institutions, but no agreement was forthcoming by September 2018.
Penwarden was informed by another SA Home Loans executive, Zakheni Dlamini, of a meeting he had been called to by Masekesa and Maponya in which the two informed Dlamini that the R10bn had not been forthcoming because “of the absence of arranging fees”, which included not only the purported original R45m fee owed to Maponya but a further R50m in relation to the new R10bn facility.
Dlamini, in the words of Penwarden, “was clear, categorical and unequivocal” in his description of what happened, which indicated that Masekesa and Maponya were attempting to extort the company.
Penwarden stated categorically that the company would never accede to such a request, and sought legal opinion on how to deal with the issue, given that Maponya (on behalf of his consortium’s shareholding) and Masekesa (as the PIC’s shareholder representative) were nonexecutive directors of the company and owed it a duty of care to act in its best interests.
At a board meeting earlier in May, when Penwarden tabled a report on the matter, the two directors mounted a “vigorous rebuttal and denial” by his account, with one of them accusing him of lying. (It was unclear which one.)
Penwarden said the company has since reported the matter to the Hawks and a case has been opened.
Dlamini is expected to testify at the commission when it resumes on June 18. Maponya is also expected to testify. Masekesa has already testified but could be called to return to provide his account of events.