PIC managers investigated over R9bn Steinhoff BEE deal

EDINBURGH — Africa’s biggest fund manager, the Public Investment Corporation, is being investigated in connection with a loan to Steinhoff, the global retailer that has been on the brink of collapse since this time last year. A commission of inquiry into the PIC has asked for detailed reports on recent investments involving politically connected individuals. The PIC’s R9bn loan in August 2016 to Lancaster 101 enabled it to acquire a 2.75% black economic empowerment (BEE) stake in Steinhoff International, BusinessLive has reported. The transaction “raised eyebrows because of its sheer size and the large holding by former trade unionist Jayendra Naidoo”. The inquiry is part of President Cyril Ramaphosa’s commitment to cleaning up on corruption. The PIC has been involved in several controversial deals, including providing billions to Iqbal Survé’s Ayo Technology Solutions.  SurvĂ© is the controversial boss of the Independent Media group. The state-owned PIC is tasked with managing assets mostly belonging to the government and its employees. – Jackie Cameron

By Loni Prinsloo and Janice Kew

(Bloomberg) – South Africa is investigating a R9bn ($629m) loan made by the Public Investment Corp. to a black empowerment partner of embattled retailer Steinhoff International Holdings NV, according to people familiar with the matter.

The probe will seek clarity on why Africa’s largest money manager decided to later sell its collateral on the loan to Citigroup Inc., said the people, who asked not to be identified as the details are private. The result was that the PIC was among those that lost heavily from Steinhoff’s share price collapse in the wake of an accounting scandal a year ago.

Dan Matjila
Daniel Matjila former chief investment officer of Public Investment Corporation. Photographer: Dean Hutton/Bloomberg

President Cyril Ramaphosa ordered a commission to investigate a number of investment decisions made by the PIC, which has more than R2trn under management and is the administrator of state-worker pension funds. Allegations surrounding some deals led to the resignation of Chief Executive Officer Daniel Matjila last month. The Government Employees Pension Fund, whose funds are administered by the PIC, has written off a R4.3bn investment in Lancaster, according to the people familiar with the matter.

“The commission of inquiry is running its own processes and the PIC is careful not to interfere with the commission’s work,” the PIC said in an emailed response to questions. Citigroup declined to comment.

“I assume this is one of the investments that the PIC made that will get attention at the inquiry as it was a big investment, rather than a specific probe into this matter,” said Jayendra Naidoo, founder of Lancaster.

Plunging shares

Steinhoff, like many South African companies, sought to sell a stake to a black-owned partner as the government pressures businesses to make up for discrimination during apartheid. The probe into the PIC loan to Lancaster was first reported by Johannesburg’s Business Day newspaper.

Lancaster took out loans to buy shares in Steinhoff to take part in the 2017 spin off of the retailer’s African operations, now known as Pepkor Holdings Ltd, said the people. Naidoo is chairman of Pepkor.

Steinhoff shares are down almost 97% since the owner of Conforama in France and Mattress Firm in the US announced accounting irregularities and the departure of its CEO in December 2017. The company is being sued by a number of investors, most notably former chairman and billionaire Christo Wiese.

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