Gigaba vs Matjila: The scramble for pensioner funds – seeks $7.6bn SOE bailout

JOHANNESBURG — Events sparked by the KPMG-backed SARS Rogue Unit report are starting to come up for air. The 100 individuals who lost their jobs were safe-guarding the country’s revenue box from a Zuptoid onslaught. Fast forward and these funds are starting to dry up as the country battles anaemic growth. Hence other avenues are being sought. Former finance minister Pravin Gordhan was also a consequence of the report, he was reshuffled in the late hours of March 30 this year. And one of the many black marks against Gordhan’s name was his reluctance to keep bailing out state-owned entities like South African Airways. This was also a key consideration when Nhlanhla Nene was replaced by ‘Weekend Special’ David van Rooyen back in 2015. So where does government turn as this taxpayer money dries up to keep these loss-making state owned companies like SAA, Eskom, Denel and PetroSA afloat? All eyes have turned to the Public Investment Corporation, which it must be said has bought government held stakes in private companies to help boost revenue in the past. This time however it’s different as both parties don’t agree on the matter. And looks more like a potential raid than sound investment decision. And while the PIC board publicly backed CEO Dan Matjila last week, there’s still the allegations that he ‘misused’ funds hanging over his head which could be an arrow in the Zuptoid quiver. Look at the depths descended to eject those safeguarding SARS, who says the PIC won’t be next? A story all South Africans, and not just the trade unions, should keep a close eye on. – Stuart Lowman

By Loni Prinsloo and Janice Kew

(Bloomberg) – South Africa’s Treasury is pressuring the continent’s biggest money manager to provide as much as R100 billion ($7.6 billion) to fund struggling state companies, according to two people with knowledge of the situation.

Coffers may be running low but SAA has already received R14bn in taxpayer funded bailouts. More magic available at www.jerm.co.za.

The Public Investment Corp., which manages state-employee pension funds and has about R1.86 trillion in assets, has been asked by the Treasury to buy its entire R12-billion stake in Telkom SA SOC Ltd. to pay for a bailout of South African Airways, said the people, who asked not to be identified as the talks are private. PIC Chief Executive Officer Daniel Matjila has rejected the request, saying a purchase of the 39 percent shareholding would leave the company overexposed to the landline provider, they said.

After a bailout for SAA, which is technically insolvent, the government needs cash for state power utility Eskom Holdings SOC Ltd., oil company PetroSA and defense firm Denel SOC Ltd., according to the people. The companies have been beset by allegations of mismanagement and corruption and the running of state firms was cited by rating agencies when they cut South Africa to junk in April.

Matjila is willing to buy about R2 billion worth of Telkom shares, which would boost the PIC’s stake to about 18 percent, the people said.

‘Clients Mandate’
Daniel Matjila, chief investment officer of Public Investment Corp. Photographer: Dean Hutton/Bloomberg

The PIC will make investment decisions in terms of the clients’ mandate, it said in an emailed response to questions. PIC Chairman Sfiso Buthelezi, who is also deputy finance minister, isn’t currently taking questions on the PIC, the National Treasury said in emailed comments. He gave his full support to the board and CEO last week, it said.

The PIC has helped the government raise money before. In 2015 it bought the state’s R25 billion stake in wireless carrier Vodacom Group Ltd. to raise funds for Eskom, which was struggling at the time with countrywide blackouts. The money manager has holdings equivalent to about 13 percent of the market value of companies that trade on the Johannesburg Stock Exchange.

The battle over the PIC’s leadership and funds represents the latest struggle over the management and independence of a state-owned company, with the pensions of public-sector workers including nurses and teachers at stake. On Thursday, the Federation of Unions of South Africa, the country’s second-biggest labor union grouping, said it would consider replacing the PIC with privately owned money managers if its members’ savings are used to bailout state entities.

Biggest Africa Fund Manager May See Funds Pulled by Unions

The impasse between the finance ministry and Matjila was behind last week’s accusation that the CEO used PIC funds to finance a personal project, the people said. Matjila, 55, denied the allegations, and his response was accepted by the board after a lengthy meeting. Buthelezi wanted to suspend Matjila and replace him with a more co-operative candidate and the board continues to investigate the CEO and deals he has overseen, the people said. After the meeting, the PIC’s board said it had confidence in the ability and integrity of Matjila and rejected allegations it wanted him removed.

“We are not aware of any new CEO being sought,” the PIC said.

The running of businesses including SAA led to clashes between President Jacob Zuma and former finance ministers Nhlanhla Nene and Pravin Gordhan, both of whom were fired. At Eskom, acting CEO Matshela Koko and Chief Financial Officer Anoj Singh have both been suspended after being linked to questionable contracts. An internal report found that Trillian Capital Partners Ltd., linked to the politically connected Gupta family, and U.S. consultant McKinsey & Co made R1.6 billion in fees, according to amaBhungane and Scorpio, two investigative journalism groups based in Johannesburg.

The Guptas are friends with Zuma and in business with his son. They are alleged to have used their connections to influence government appointments and the award of state contracts. Public Enterprises Minister Lynne Brown said Thursday Eskom should begin legal action against Trillian and McKinsey, which denies it has engaged in corruption.

In August, Finance Minister Malusi Gigaba told executives of the Congress of South African Trade Unions, the largest labor federation, that he can’t guarantee the government won’t attempt to make use of funds held by the PIC to recapitalize state-owned companies and fund other projects, Business Day newspaper reported, without saying how it obtained the information. That’s caused concern among labor unions.

“The union reserves its rights while considering options to stop any public servants’ pension fund money being wasted into SAA,” the Public Servants Association said in a statement on Friday.

South Africa $7.5 billion pensions bid `untrue,’ Gigaba says

By Ana Monteiro

(Bloomberg) – A Bloomberg News report that South Africa’s National Treasury is seeking as much as 100 billion rand ($7.5 billion) from the government workers’ pension fund to finance struggling state companies is untrue, Finance Minister Malusi Gigaba said.

The Public Investment Corp., which manages the fund and has about 1.86 trillion rand in assets, has been asked by the Treasury to buy its entire 12 billion-rand stake in Telkom SA SOC Ltd. to pay for a bailout of South African Airways, two people with direct knowledge of the situation told Bloomberg News last week. They asked not to be identified because the talks are private.

Malusi Gigaba, South Africa’s finance minister. Photographer: Halden Krog/Bloomberg

PIC Chief Executive Officer Daniel Matjila has rejected the request, saying a purchase of the 39 percent shareholding would leave the company overexposed to the landline provider, they said.

“The minister finds these reports malicious and unconstructive,” the National Treasury said in an emailed statement Monday. “No formal or informal request has been sent to the PIC for such funds.”

Gigaba has called an urgent meeting with the PIC board “to deal with this matter and other pressing issues,” the Treasury said.

State Companies

After a bailout for SAA, which is technically insolvent, the government needs cash for state power utility Eskom Holdings SOC Ltd., oil company PetroSA and defense firm Denel SOC Ltd., according to the people. The companies have been beset by allegations of mismanagement and corruption and the running of state firms was cited by rating agencies when they cut South Africa to junk in April.

Matjila’s refusal to authorize certain transactions because they don’t meet investment criteria has upset “politically connected people,” and when they try to use political pressure, “it doesn’t work,” the Johannesburg-based Sunday Times newspaper cited him as saying.

“I’ve got the keys — they’re looking for the keys to the big safe,” Matjila told the Sunday Times. “If we buy Telkom, we’ll be buying an asset that we believe in. If we were told to put money into an SAA type of asset, we would not do that. Unfortunately SAA does not meet the criteria set by our clients. So we will not be able to invest.”

This also applied to Eskom Holdings SOC Ltd., the state-owned power utility, he told the newspaper.

In August, Gigaba told executives of the Congress of South African Trade Unions, the largest labor federation, that he can’t guarantee the government won’t attempt to make use of funds held by the PIC to recapitalize struggling state-owned companies and fund other projects, Business Day newspaper reported, without saying how it obtained the information.