Considered from any angle, the decisions taken by the Public Investment Corporation (PIC) to invest in Iqbal Survé’s media and technology companies have been financially disastrous.

A 2013 loan of R1.3-billion from the PIC to Survé’s Sekunjalo group to prop up Independent Media currently has R888-million outstanding.

The R43 a share that the PIC paid for a 29% stake of Survé’s Ayo Technology in 2017, meanwhile, has now dissipated in value to just R9 a share.

The question that the PIC inquiry is currently grappling with is why the supposedly seasoned investment professionals at the body would have been willing to stake out these high-risk positions?

Former PIC CEO Dan Matjila himself admitted to the inquiry on Tuesday 23 July that Independent had performed “very poorly”. Matjila could also not refute commissioner Gill Marcus’ assertion that the Independent loan must always have been viewed as risky due to the current financial challenges facing South African media.

Matjila’s defence on this score was twofold.

First, that despite the moribund status of South African print media, the PIC believed that Independent’s digital strategy was potentially promising.

And second, that in supporting Independent, the PIC was doing its job to protect democracy in South Africa.

In backing Independent, Matjila claimed, the PIC was attempting to mount opposition to the Gupta family’s “propaganda machinery” – particularly in the form of its New Age newspaper, which had gobbled up the majority of government advertising.

Survé critics might point out that if Matjila’s aim was truly to combat “propaganda”, the PIC chose a surprising media outlet to back – given that the Independent newspapers have frequently been accused of operating as a rather unsubtle mouthpiece for their owner and the political forces he chooses to support.

Indeed, Marcus questioned why the PIC did not support other media outlets, to which Matjila shot back that the body does indeed have investments in rival media houses Naspers and Tiso Blackstar.

Despite the bath that the PIC already looked likely to take on its Independent loan, the body would go on to give further lavish financial backing in 2017 to another Survé venture, investing R4.3-billion in ICT company Ayo Technology.

There is widespread consensus that in paying such a price for the Ayo shares, the PIC was being taken for a ride.

In May 2019, Ayo’s former chief investment officer Malick Salie agreed with the commissioners that the valuation of Ayo was effectively a “thumbsuck”. At that point, the value of Ayo shares had fallen from R43 to R11. By Wednesday 24 July, when Matjila was called upon to account for the Ayo investment, the price was down to R9 a share.

Matjila insisted that the Ayo investment was “very strategic” for the PIC: the body wanted to get into ICT investment, he said, and the fact that Ayo was black-owned was an additional enhancement to its appeal.

But he personally had no skin in the game, Matjila said.

“I have not put any pressure on anyone to make specific recommendations, including the valuation to make sure the deal worked,” Matjila told the inquiry.

This flatly contradicts the testimony of several previous witnesses, including PIC assistant portfolio manager Victor Seanie, who told the inquiry that Matjila was insistent on driving through the PIC investment in Ayo within an inadequate timeframe against the objections of colleagues.

Matjila said he was “not surprised” by such contradictory testimony, saying that PIC employees were “scared” and desperate to apportion blame to clear themselves.

“I would have been the easiest to point fingers at for all of this,” he said.

Matjila pointed his own finger at the “technical teams” who he said had done the necessary due diligence on Ayo and produced a “positive assessment”.

The former CEO said that the investment process was concluded swiftly because all the required information was in place and the vetting teams were “comfortable” and “happy” with the deal.

When it was put to Matjila that the PIC had not even received audited financial statements for Ayo for the previous year, he claimed that the stringency of Ayo’s pre-listing statement – a draft pre-listing statement, Marcus repeatedly corrected him – was such that it was unnecessary for the financial statements to be consulted.

On the topic of the inflated valuation of Ayo, Matjila said that there was “nothing” to make him doubt the valuation in the information he received from the technical teams.

He acknowledged, however, that in sectors such as ICT, “there are businesses where some of these things [assets] are not tangible… So it becomes a guessing game, and you just have to rely on certain metrics, unfortunately”.

Matjila suggested that if Naspers were to evaluate a business like Tencent purely on the basis of its tangible assets, it would not have invested in the Chinese tech company.

Earlier in the day, Matjila had dismissed the suggestion that he had a “close personal relationship” with Survé which may have swayed his investment decisions.

This suggestion was attributed to “media reports” but in fact it stems from the testimony of former PIC witnesses, including Ayo’s former chief investment officer Salie, who told the inquiry that Survé and Matjila were in discussion about the valuation of Ayo before its listing was made public.

Matjila did acknowledge that he had a “continuous engagement” with Survé, however.

“The reason for this was not because of friendship per se, but because I and my colleagues were worried that the PIC was being increasingly exposed to high risk and I needed to be closely involved with the major players so as to be able to continually assess the situation,” Matjila said.

It’s unclear how this matches the former CEO’s subsequent claims to the inquiry, on the same day, that he merely relied on the advice of his technical teams and saw nothing in the Ayo proposition to cause doubt.

Matjila takes up his position in the hot seat on Thursday 25 July for his 11th day of testimony at the PIC inquiry. DM