Ayo bringing down PIC house; key officials suspended

LONDON — The Public Investment Corporation inquiry announced by President Cyril Ramaphosa to investigate allegations of poor governance, kickbacks and dodgy investment decisions headed by Judge Lex Mpati kicked off in Pretoria on Monday 22 January. Two senior officials testified that they have seen no evidence of impropriety at the PIC, which invests R2trn worth of assets on behalf of civil servants. In November last year former PIC CEO Dan Matjila was the first to resign and in an open letter he defended his track record, regretted the losses through its investment in Steinhoff, denied using his position to arrange employment for his son and welcomed the Mpati commission. Barely a day into the commission comes the news that the PIC has suspended another two officials after an investigation into a transaction with Ayo Technology Solutions Ltd. One of the officials, Fidelis Madavo was given his suspension letter on the eve of his testimony before the Mpati Commission – Linda van Tilburg

By Renee Bonorchis

(Bloomberg) – South Africa’s Public Investment Corp., the continent’s biggest money manager, said it has suspended two employees after an investigation into a transaction with Ayo Technology Solutions Ltd.

The PIC suspended Fidelis Madavo, the head of listed investments, and Victor Seanie, an assistant portfolio manager, the Pretoria-based fund manager said in a statement. Madavo gave evidence Tuesday before a commission that’s probing allegations of impropriety at the institution, saying there was no impropriety related to Ayo.

“The preliminary report clearly reflects a blatant flouting of governance and approval processes of the PIC,” the money manager said about the Ayo investment in the statement. “Employees of the PIC have also been implicated in these irregularities. It is for this reason that the board has resolved to suspend” Madavo and Seanie immediately, it said.

Last year, the PIC spent R4.3bn ($309m) to back Ayo’s initial public offering, valuing Ayo at R14.8bn even though its assets were estimated at R292m.

The Government Employees Pension Fund, which is the continent’s largest such fund and is the PIC’s biggest client, is “extremely perturbed” by the suspensions and wants the PIC’s board to finalise its probe into the Ayo transaction, it said in a statement on its website.

“The PIC had assured the GEPF on numerous occasions and in correspondence that correct governance processes were followed with respect to the Ayo Technology Solutions transaction,” the fund said. “The GEPF views this as a serious breach of trust.”


Statement by the Government Employees Pension Fund on the suspension of PIC Officials

The Government Employees Pension Fund (GEPF) is extremely perturbed by the latest announcement by the Public Investment Corporation (PIC) that it has suspended its Executive Head of Listed Investments, Mr Fidelis Madavo and the Assistant Portfolio Manager, Mr Victor Seanie, following a preliminary investigation report that reflects the flouting of governance and approval processes with respect to the Ayo Technology Solution transaction.

Of serious concern to the GEPF is that the PIC had assured the GEPF on numerous occasions and in correspondence that correct governance processes were followed with respect to the Ayo Technology Solutions transaction. The GEPF views this as a serious breach of trust.

The PIC invested in Ayo Technology Solution as part of the listed portfolio mandate. Thus at the time of its listing, the investment in Ayo fell outside of the unlisted investment portfolio within which there are set governance processes and  there are limits set for the PIC to engage the GEPF.

Although the total unlisted investments portfolio comprises less than 5% of the total assets of the Fund, it represents a significant amount of funds. These are funds that the GEPF invests into, contribute to the real economy of the country and to drive transformation but still aiming to realise it main objective of maximising returns. When the actions of officials bring this intention into question, it undermines the objective to invest in the real economy of the country and may lead to a review that may deprive the economy of greatly needed investment.

Despite the apparent failures on this and other investments, the overall performance of the PIC as an asset manager remains positive and in line with agreed criteria. Nonetheless, the GEPF continues to heighten its monitoring and oversight.

The GEPF requests of the PIC Board to urgently finalise its investigations of alleged impropriety with respect to the Ayo transaction and others and take appropriate action where it is warranted.