The Public Investment Corporation (PIC), which manages R2-trillion in government employee pensions, could write off up to R1.4bn from a disastrous loan made to a private-equity firm started by two Americans, the latest ill-fated investment by the fund in the midst of restoring its image.
The write-off follows a successful application by four parties, including the PIC’s biggest client, the Government Employees Pension Fund (GEPF), to have Africa-focused private group Musa Group liquidated in the high court in Johannesburg earlier in February.
This development comes at an inopportune time for the
PIC, which under the leadership of a new board and chair Reuel Khoza is attempting to rebuild itself, following allegations at the Mpati commission of inquiry in 2019 of misusing funds and making careless investment decisions.
The loan, arranged by the PIC on behalf of clients that include the Compensation Fund and the Unemployment Insurance Fund was not the subject of scrutiny at the PIC commission of inquiry led by retired supreme court of appeal judge Lex Mpati so far as witness statements and testimony was concerned.
But the commission — which heard testimony on a host of what witnesses described as reckless investment decisions including the PIC’s investment in Ayo Technologies — was undertaking a forensic investigation in parallel with its hearings, and the deal might have attracted the attention of investigators.
Judge EF Dippenaar stated in her judgment ordering the winding up of the company that "there is merit in the applicants’ contention that the disbursement of the loan funds should be investigated", indicating that there may be suspicions relating to where and how the money was used by Musa, which led to such a large amount of outstanding interest being accrued on the capital amount.
If an investigation is conducted that indicates there may have been malfeasance, it asks questions about what else the Mpati commission may have missed, despite asking for, and receiving, multiple extensions to complete its work.
The commission completed hearings at the end of August 2019, and handed its report to the president in December. President Cyril Ramaphosa indicated in his state of the nation address that the report would be made public "within days".
According to the papers, the PIC advanced R950m in 2015 to Musa Group, a private equity outfit started in 1995 by William Jimerson and Antoine Johnson with offices in Namibia, SA
and Mauritius.
The fact that the investment manager is now seeking to recover R1.4bn suggests interest on the loan was not being repaid fully. The GEPF has already written off R368m relating to the transaction, according to its annual report for the year ending March 2019.
A staff memo seen by Business Day shows that Musa has been financially distressed since at least December 2017, and dozens of employees were laid off in June 2019, but have yet to receive their full severance packages.
The PIC and Musa Group declined to comment.
Correction: February 20 2020
An earlier version of this story incorrectly said that Musa Group is headquartered in New York. It is, in fact, incorporated and headquartered in SA.
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