A tangled web woven: The PIC and Independent Media

If the Public Investment Corporation (PIC) manages all of its assets the way it manages its investment in Independent Media and its loan to Sekunjalo Independent Media (SIM), perhaps the Government Employees Pension Fund (GEPF) should be worried.

Despite owning 25% of Independent Media, which has been losing money for years, the PIC does not have a representative on the board. As a major shareholder, it is entitled to this.

Dr Trueman Goba, who was the PIC’s representative on the board, and who is still on the Independent board according to CIPC filings, resigned from the PIC, alongside the rest of the board on 19 February, 2019.

This means the PIC has no, or very little, independent insight into what is happening at the ailing firm.

In addition, SIM stopped servicing its debt to the PIC and missed a loan repayment due in August 2018, yet the PIC has been exceptionally slow to take action.

This is despite the fact that SIM’s management of Independent News Media has been publicly questioned for years and the media company’s dire financial status was made public in 2018 when the pre-listing statement of Sagarmatha Technologies spelt out the reality in its grisly glory.

This is hardly what one would expect of the custodian of the country’s biggest pension fund. When a loan is not serviced it is standard practice for the holder of the loan to move swiftly to secure the assets used to back that loan. This is to ensure the quality of the assets does not deteriorate further.

In this case, the assets would be SIM’s 55% stake in Independent and its subsidiaries.

The loan in question dates back to 2013 when the Government Employees Pension Fund, on whose behalf the PIC invests, provided about R1.27-billion worth of funding to the Sekunjalo-led consortium for the acquisition of Independent Media, as documented in this amaBhungane article.

Some of this was direct – the PIC acquired a 25% stake in the media business – but the balance was debt funding to Sekunjalo itself. Sekunjalo Independent Media (SIM), controlled by Survé, owns 55% of Independent Media.

The other 20% of Independent was picked up by a consortium consisting of the China Africa Development Fund and China International Television Corporation.

SIM did not service its debt and by the end of September 2018, after interest, owed the PIC R1.35-billion, according to evidence provided at the Mpati inquiry into the PIC.

It could be closer to R1.5-billion, the inquiry heard.

Had the PIC acted sooner, it may have had a better chance of restoring Independent to profitability, or of selling it to a third party for cash.

On top of this, it now transpires that there is a dispute over who owns what.

This emerged on Tuesday 12 November 2019, after the PIC filed liquidation proceedings in the High Court Western Cape division against SIM because it had not honoured its loan repayment obligations.

Both the chairman of Sekunjalo Investment Holdings, Iqbal Survé and SIM director Takudzwa Hove maintain there is no loan outstanding. They say the PIC’s former CEO Dan Matjila wrote the debt off by exchanging it for shares in Sagarmatha.

A letter to this effect was sent to the PIC’s attorneys on 30 September 2019, which explained that SIM is not indebted to the PIC for any sum. SIM has, to date, not received any response from the PIC in this regard, Hove says.

In March 2018, when the Sagarmatha pre-listing statement was issued, selected investors were invited to subscribe for a “private placement” of shares ahead of the planned listing of the firm on the Johannesburg Stock Exchange.

At the time amaBhungane theorised that the private placement was engineered to allow the PIC to come to the rescue with more government pensioners’ cash. The PIC would not confirm or deny whether it would take up any of the shares on offer, according to the article.

However, if Matjila did swop the debt for equity in Sagarmatha as alleged, it would rate as one of the dumbest deals ever. This is because Sagarmatha was built using assets, staff, contracts and budget that belonged to Independent Media.

For instance, 75% of e-commerce company Loot was acquired in a trade exchange that saw up to R420-million worth of Independent advertising given to Loot.

Similarly, IOL was acquired for R19-million, yet the online engine was built using Independent assets and the website utilises content sourced from the likes of Cape Times, The Star and Cape Argus. In other words, it cannot exist separately from Independent.

This means that if the PIC did exchange loans for Sagarmatha shares, they were essentially buying assets in which they already held a stake.

Meanwhile, SIM has instructed its attorneys to oppose the PIC’s “frivolous application”.

Should the proceedings for the liquidation of SIM go ahead they may shed more light on a company that holds the fate of Independent Media in its hands, and that is not a matter to be taken lightly. BM