GEPF was ‘uncomfortable’ with PIC’s Indy Media investment

On Monday, the judicial commission of inquiry investigating issues of impropriety at the Public Investment Corporation (PIC) heard that the Government Employees Pension Fund (GEPF) was “uncomfortable” with the state-owned asset manager’s R2-billion investment into Independent News and Media.

Thipana Benedict Mongalo, a senior credit risk analyst who was assigned to assist the PIC’s transaction team between 2012 and 2013, told the commission that despite the GEPF’s reservation on the transaction, “it acknowledged and asserted that the PIC had a fully discretionary mandate that empowered it to decide whether to invest or not”.

The investment saw PIC take a 25% stake in the media group.

Mangalo who was responsible for conducting a due diligence analysis on the transaction and provide a risk assessment, said the investment into the media house was considered a high risk investment.

He said in the risk report they complied concerns spanning from the print and media outlook and Independent media’s sporadic involvement in litigation: “This was a significant legal risk because it could be damaging both to reputation and financially [because the group ] was before the competition commission for investigation of anti-competitive practices,” said Mangalo.


Other concerns were that the main sponsor Iqbal Surve did not have previous experience in the industry but “comfort was however, derived from the various interventions proposed and also the fact that he was running a diversified investment holding,” he added.

Asked by investments expert Emmauel Lediga, an assistant to the commission, if the PIC usually put money in risky investments, Mangalo said it does, but the media group was a different kind of venture.

“There are instances that the PIC will invest in risky projects such as companies that are starting out, but with the Independent Media, [risk] was slightly different because it was a pure acquisition deal which was an existing business”.

Mangalo said he is not sure what prompted the PIC to proceed with the transaction even though there were red flags: “It would seem to imply that they believed in the transfer.”

Before the transaction went ahead, there PIC board chair who was at the time Nhlanhla Nene invited the members of the board to vote on the proposed transaction which all members approved except Jan Strydom, the chair of the investment committee.

According to an actuarial valuation prepared by Alexander Forbes Financial Services in November last year, the GEPF faces a record long-term funding shortfall of R583-billion, partly due to bad investment decisions.

Tshegofatso Mathe is an Adamela Trust business reporter at the Mail & Guardian.

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Tshegofatso Mathe
Tshegofatso Mathe
Tshegofatso Mathe is a financial trainee journalist at the Mail & Guardian.

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