In late 2017, the then-Public Investment Corporation (PIC) chief executive Dr Dan Matjila signed a contract to swop the PIC’s 25% stake in Independent Media and at least R1.2-billion in debt for practically worthless shares in Iqbal Survé’s aspirant tech “unicorn”, Sagarmatha Technologies.
Sekunjalo Independent Media (SIM), controlled by Survé, owns 55% of Independent, while another 20% is owned by SIM’s Chinese backers, Interacom. The Independent group has some 20 publications.
SIM chief financial officer Takudzwa Hove has stated that the contract is the foundation of SIM’s defence against a liquidation application that the PIC, now freed of Matjila, brought against SIM early this month.
If the contract holds up, then Survé’s companies really do not owe the PIC a cent. While this is unlikely, the contract and the motive for entering it begs scrutiny.
It was an attempt to plug the giant hole in Independent’s accounts with state pensioners’ money and package the whole mess as a stupendous new business the PIC was buying into, thereby also releasing Independent (and Survé) from all debt and sureties.
Matjila signed the contract on 13 December 2017, while he was also moving mountains to invest R4.3-billion of pensioners’ money in another Survé venture, AYO Technology Solutions. Like Sagarmatha, AYO was massively overvalued and the investment is now all but worthless. The PIC has also launched a court bid to get that money back.
The terms of the Sagarmatha contract, not previously made public, are astonishing. They demonstrate beyond doubt that bailing out Survé’s companies was always the point of the Sagarmatha scheme.
In exchange for Sagarmatha shares, the PIC was to give up R262-million directly owed to it by Independent, R467-million in loan debt owed to it by SIM as well as preference shares in Independent worth R472-million. On top of that, it would surrender the 25% of Independent that it owns directly.
Survé’s family holding company, Sekunjalo Investment Holdings, owns 73.3% of Sagarmatha and, without the PIC deal, controls 55% of Independent. Were the deal to be consummated, it would make Survé the 80% owner of Independent without the massive debt hanging around his neck.
The plan was for the PIC to invest at least R3-billion in Sagarmatha on top of the R1.5-billion in debt it would write off. After that, Sagarmatha would buy SIM and pay off all its remaining debts, including R1-billion owed to the Chinese via Interacom.
Matjila has told the Mpati Commission of Inquiry into the PIC that he would never do something this foolish. He maintained the contract had lapsed because it was conditional on Sagarmatha being listed on the JSE.
The listing failed in April 2018 after the Companies and Intellectual Property Commission and the JSE raised technical concerns.
Despite Hove’s strident assertions – faithfully reported by Independent titles – the contract does not afford Sagarmatha much wriggle room. Whether the PIC will win this one appears to depend on whether conditions precedent were fulfilled and the interpretation of the effective date.
Alternatively, the PIC may very well take the route it took in the AYO matter where it argued that its investment was null and void because its internal approval processes were flouted with the knowledge of Survé and his subordinates.
The conditions precedent were painless and all within Sagarmatha’s, and hence Survé’s, control.
Condition one was that Sagarmatha buy out the SIM shares owned by three “broad-based” consortia. Survé has a controlling vote in all three.
Condition two was that Sagarmatha’s board approves the deal, which is a no-brainer.
Condition three was that SIM (Survé) waive its pre-emptive rights to buy the shares in Independent instead of Sagarmatha doing it. Again, a no-brainer.
If any of these conditions had not been met, Survé would have been extremely lax in looking after his own interests.
Then there is the hurdle presented by the definition of “effective date”.
The contract states: “‘Effective Date’ means either the date on which the SENS Announcement is to be released, as notified by the Purchaser [Sagarmatha] to the Seller [the PIC] in writing or, if no such SENS Announcement is to be released, the second Business Day following the date on which the Purchaser notifies the Seller in writing that the Listing will proceed.”
The SENS announcement referred to is a JSE news service announcement which had to set out the total number of shares that Sagarmatha would issue after investors (read the PIC) had put in bids to buy them. Because the listing was scuppered, there was never an announcement to this effect.
This leaves Sagarmatha with only one possible avenue: showing that it had notified the PIC that the listing would proceed, even if it did not. That seems like a feeble basis for the argument that the deal is in fact in operation.
Matjila has admitted to being friends with Survé, but told Mpati that this is not “per se” why Survé had such remarkable luck in securing PIC funding. This time around it may turn out Matjila did not quite manage to sell the family silver. DM