- The Public Investment Corporation (PIC) board has roasted executives about a controversial settlement deal with AYO.
- The board said it was not kept in the loop about the deal.
- The PIC sank billions into AYO, but the settlement deal has netted it only R619 million so far.
- For more financial news, go to the News24 Business front page.
The Public Investment Corporation (PIC) board has roasted executives for not keeping it in the loop about a controversial settlement with IT group AYO.
A month ago, the PIC settled with AYO behind closed doors, abruptly ending the state asset manager’s legal battle to claw back the R4.3 billion it invested in AYO.
It is only set to receive R619 million as part of the settlement, although it has the option of selling more shares in three years’ time.
In a statement issued by board chair and Deputy Finance Minister David Masondo on Thursday, the board said it was “deeply concerned” about management’s handling of governance processes during the settlement, specifically that it was not informed “timeously” of the PIC’s intention to settle with AYO.
The statement was issued following a PIC board meeting. PIC CEO Abel Sithole is an executive director of the board.
“The PIC’s management has a duty of care to protect the company’s integrity and reduce the risk of reputational damage. This includes the responsibility of management to timeously inform the board of intended settlements.”
However, the PIC board believes the AYO settlement was nevertheless justified as “a good commercial decision”, saying:
This settlement seeks to recover money from a questionable investment, salvaging value for its client and its beneficiaries, whilst ensuring that Ayo Technologies remains a going concern.
The board said it would “continuously engage” with the management team to improve the governance processes.
“Good governance, appropriate transparency, accountability, and integrity should be principles embedded in every decision the PIC makes. This is more important in the light of the findings of the Mpati Commission chaired by [the] former president of the Supreme Court of Appeal,” said Masondo in a statement.
Long time coming
The asset manager had taken AYO to court in a bid to claw lack back its multibillion-rand investment, plus interest, arguing the IT group had engaged in “misrepresentation” six years ago when the share sale was clinched.
AYO is part of Cape Town businessman Iqbal Survé’s Sekunjalo group.
The PIC bought 29% of AYO’s shares in late 2017 just days before the IT group listed on the JSE in a rushed process that critics say short-circuited the PIC’s standard investment procedures.
Just two weeks into the civil trial that started in March, the two sides reached a settlement behind close doors.
The settlement, which both sides initially refused to comment on, stated that AYO would repurchase R619 million in shares from the Government Employees Pension Fund (GEPF) and grant it two seats on its board. The PIC invests on behalf of the GEPF and some other government funds.
Following the repurchase, the pension fund will retain a minimum shareholding of about 25% in the IT group.
The GEPF also has the option of sell another 5% of AYO’s shares after three years at least R20 pr share – or a higher figure based on the value of the shares at the time. AYO shares are currently trading at R4.78., down about 85% from when the group listed.