The Funding Challenge: Kholofelo Sekepe Maponya vs. the PIC

    Kholofelo Sekepe Maponya, a man who is acknowledged for his business exploits and last name, found himself contending with an imposing giant in the Public Investment Corporation (PIC) when he turned to them for funding a few years ago. 

    Maponya has expressed complaints about his unpleasant dealings with the institution which have not been unfounded. The PIC has entangled itself in several controversies over the years and continues to do so. It has experienced deteriorating performance due to increasing bureaucracy and indecision, which is coincidental with the time of Maponya’s transactions with the corporation. 

    Controversies Surrounding the Public Investment Corporation (PIC)

    Since 2017, scathing allegations have arisen against the state-run asset manager by opposition parties and the private sector. From that time, businessmen such as Maponya made appeals to the former Minister of Finance for intervention. The concerns raised centred around the conduct of the board and executives at the PIC. Matjila was suspended, and the board was dissolved due to suspicions of mishandling funds and irregular investment decisions. 

    The claims led President Cyril Ramaphosa (who previously held the positions of Deputy President and State Head of Business) to appoint a Judicial Commission of Inquiry in October 2018 to investigate accusations of irregularities at the corporation. The commission, chaired by Justice Lex Mpati, concluded eight months of its public hearings into the PIC in August 2019. 

    The PIC Inquiry: A Deep Dive into Irregularities

    The inquiry’s report noted the following:

    “There has been substantial impropriety at the PIC, poor and ineffective governance, inadequate oversight, confusion regarding the role and function of the Board and its various sub-committees, victimisation of employees, and a disregard for due process.”

    “There are clear instances where the Commission found that directors and/or employees benefited unduly from the positions of trust that they held.”

    According to a March 2020 article by Reuters, the report to President Cyril Ramaphosa showed findings that “are a blow to the reputation of the Public Investment Corporation (PIC), one of Africa’s largest fund managers…”

    Given the outcome of the inquiry, Justice Mpati concluded that:

    “The PIC is an organ of state which manages the funds of a very large number of South Africans, in an amount of R2 trillion. It exercises considerable power through the investment decisions which it makes. There is a risk that the PIC function may be compromised if it exercises its financial muscle in a manner which favours selected people, or which is perceived as doing so. This goes to the heart of the PIC’s functions and the need to ensure its probity and integrity. I recommend that the PIC adopt clear rules which prohibit members of its staff from approaching investees or would-be investees for favours, whether for themselves or for any other person.”

    The president expressed his concerns over the allegations, saying that the report required the immediate deliberation of the criminal justice system, finance ministry, and PIC board of directors. Although Matjila denied any wrongdoing, he resigned shortly after the commission.

    Misconduct of the Executive Members of the PIC

    The report emphasized Matjila’s complete disregard for transparency, and his constant failure to take penitent accountability for material errors or mistakes. Matjila was found to be dishonest both at the inquiry and in regular decision-making at the PIC. A finding, he is seeking review on.

    The commission’s report was specific about Matjila’s solicitation of donations and large fee payments to “privileged insiders,” who were often former employees of the PIC.

    The long and harrowing list of revelations from the hearings includes:

    Misconduct of Executive Members at the PIC

    Daniel Matjila

    AYO Technology (AYO)

    The commission highlights Matjila’s “gross negligence” in a R4.3 billion deal to buy a 29% stake in Iqbal Surve’s AYO Technology in 2017. AYO is alleged to have materially misrepresented its valuation.

    The PIC is still in the process of trying to recover the controversial investment, and according to court documents, is seeking to set it aside. AYO was fined by the JSE to the tune of R6.5 million for publishing incorrect financial results and failing to comply with International Financial Reporting Standards as well as listing requirements.

    Independent News and Media South Africa (INMSA)

    Reports indicated Matjila showed “complete disregard of the PIC’s investment processes” in signing an agreement that allowed the PIC to swap its debt and shares in INMSA for a stake in another Survé company, Sagarmatha, in December 2017. Also, INMSA was not repaying a loan from the PIC.

    “The proposed Sagarmatha transaction, including the suspected share price manipulation and essentially attempting to use the PIC’s own investment to pay the debt INMSA owed to the PIC, demonstrates a lack of ethics, lack of compliance with laws and regulation, and a disregard for the best interests of the PIC and its clients,” the document reported.

    Steinhoff Investment and Allegations of Collusion

    The commission discovered possible irregularities in Matjila’s oversight of the R9.4 billion transaction involving purchasing shares in Steinhoff.

    There was a suspicion of “collusion” between Lancaster’s chairperson and sole shareholder, Jayendra Naidoo, and Matjila because there was ultimately no reason for the PIC to invest in Steinhoff via Lancaster’s subsidiary, L101.

    Pretty Louw and Influence Over Investee Companies

    Matjila authorised a payment of R500 000 to Pretty Louw for work related to a CSI project after a request from the former Minister of Intelligence, David Mahlobo. Matjila was introduced to Louw by Mahlobo.

    Businessman Lawrence Mulaudzi – whose association with the PIC was a clear conflict of interest – testified that Matjila asked that he pay money to Louw.

    “Dr. Matjila’s repetitive efforts to have Mr. Mulaudzi provide financial assistance to Ms. Pretty Louw reflects the abuse of his office and influence over investee companies,” the commission stated.

    An Imposed Merger and Transaction Fees

    In 2015, the PIC agreed to fund an empowerment consortium that wanted to buy a 23% stake in the South African arm of the oil company Total. The report found that Matjila “imposed” a merger on Kilimanjaro Capital and Sakhumnotho as part of the transaction and PIC employee Tshepo Rapudi acted inappropriately by giving instruction that the transaction amount be increased from R1.7 billion to R1.8 billion.

    The additional R100 million was allegedly funding for transaction fees. The commission wants the PIC to determine who received the money, and what it was paid for.

    Sibusisiwe Zulu and Her Lover’s Business Deal

    The inquiry found that PIC board member Sibusisiwe Zulu promoted an investment deal with Ascendis Health, which would have benefited her lover businessman Lawrence Mulaudzi. The commission showed that R100 million which was approved by the PIC for the purchase of shares in Ascendis, was instead added to transaction fees and paid to two entities of Mulaudzi. 

    Mulaudzi was also involved in other PIC deals for which the PIC must account. A forensic audit of the utilisation of the funds provided to Ascendis must be completed.

    Ernest Nesane and Paul Magula’s VBS Involvement

    Reportedly, two PIC executives – Ernest Nesane and Paul Magula – “egregiously violated their fiduciary duties” after their appointment to the VBS board. They lobbied for a revolving credit facility from the PIC to the VBS; Nesane and Magula received R16.7 million and R14.8 million from the bank, respectively.

    “They seem to have been handsomely rewarded for turning a blind eye, …Both men used their positions of trust and responsibility to unduly enrich themselves at the expense of the depositors, clients, and investors of VBS, including the PIC.”

    Investment in a Bankrupt Nigerian Oil Company

    The PIC went against the advice of the PIC’s own energy experts and internal team by providing a financial guarantee to a group that explored oil in Nigeria, despite it being technically insolvent.

    “The question has to be asked as to how appropriate it is for an asset manager of a pension fund to invest in oil exploration, which is a high-risk endeavour,” the commission said.

    Harith’s Conduct and Government Employee Pension Fund

    Harith was created to manage two PIC funds. The former Deputy Finance Minister and former chair of the PIC, Jabu Moleketi, was appointed chairman of Harith.

    “Harith’s conduct was driven by financial reward to its employees and management, and not by returns to the GEPF [government employee pension fund] …In essence, the PIC initiative, created in keeping with government vision and PIC funding was ‘privatised’ such that those PIC employees and office bearers originally appointed to establish the various Funds and companies reaped rich rewards.”

    The commission recommended that the GEPF and the PIC should jointly appoint an independent investigator to Haith and examine Moleketi’s conduct.

    Edcon Transaction and Adviser Fees 

    The PIC paid almost R33.7 million to two advisors in a deal to facilitate its investment in Edcon – Kleoss Capital and former PIC employee Koketso Mabe of Keletso M Squared.

    “The terms of the above agreement significantly disadvantage the PIC, to put it mildly.”

    The commission suggested that the Edcon transaction be reviewed, to see whether the advisers did indeed earn the money.

    IT Infringements and Consequences

    The commission found that Simphiwe Mayisela, the former PIC senior manager of information security, obtained access to emails and other information of the PIC illegally. Mayisela got hold of privileged information and passed such information on to third parties, “with severe consequences for the PIC.”

    SA Home Loans (SAHL) and Controversies

    The role of Wellington Masekesa, executive assistant to Matjila, was to be investigated following the accusation that he asked SAHL to ‘regularise’ ‘arranging fees’ of R95 million in a funding deal between the PIC and the company. A fact Maponya disputed in his answering affidavit and had in fact taken to the courts and a fact that Justice Mpati agreed to when he concluded that Maponya’s deals were not included within the scope of the commission and that he had taken it to the right forum. Maponya contends that the allegations were in fact made for other covert commercial reasons.

    Consequences of PIC’s Actions on Entrepreneurs Like Maponya

    The self-enriching actions of entitled giants like the PIC have far-reaching and detrimental consequences on enterprising and aspirational entrepreneurs like Maponya. Maponya is still trying to salvage his reputation from the harm of the malicious allegations made against him and his businesses at the commission just five years ago. The sting remains despite no wrongdoing found on his part by the commission.

    Maponya’s Ongoing Struggle Against the PIC

    Maponya contends that he was/is in fact being targeted. Deals such as the Magae Makhaya Housing (Pty) Ltd project (created to raise a fund to develop low-cost housing targeted at government employees such as nurses, police officers, and teachers), with a proven business model, are unquestionably innovative, profitable, and high performing. The PIC recognized the opportunity by investing in it but incredulously sabotaged Maponya’s involvement and contravened a related court judgment. Maponya believes that it is a miracle that he stands to fight another day with a predatory giant that ruthlessly gambles using pensioner money.


    (For more information about the strenuous relationship between Maponya and Matjila, visit our article here.)

    The Ongoing Battle: Maponya vs. Matjila

    The PIC is not new to controversy, and it boggles the mind that they still defend and implement detrimental decisions against those who were victims of fallouts in decisions taken by Matjila, his board, and executives five years after his resignation. 

    2U Foods: Maponya’s Vision for the Future

    Maponya on the other hand, in keeping with his mission and values, has partnered with Inkosi (King) Sipho Mahlangu to establish 2U Foods. 2U Foods will be a revolutionary retail group that will reach into an untapped yet lucrative territory by servicing the most marginalised of the South African population. 



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