Magda Wierzycka: Unpacking PIC whistleblower’s document which names the plunderers
BIZNEWS / 06 FEBRUARY 2019 - 15.55 / ALEC HOGG
LONDON — Polish-born Magda Wierzycka has the drive and patriotism often evident in immigrants. And as a qualified actuary and successful entrepreneur, she possesses the technical skills to understand financial complexities others struggle with, and the independence to speak out on it. So when a whistleblower at the PIC decided on the recipients for the dynamite disclosures which follow, it was rational for them to include Wierzycka on their distribution list. South Africa’s most recently opened Pandora’s Box is baffling the casual observer. In the 800 words that follow, in a way we can all understand, Sygnia’s founder unpacks what was going down at the institution entrusted with managing the retirement savings of millions of State employees. Superb. – Alec Hogg
By Magda Wierzycka*
An incredible document found its way into my inbox. So incredible, in fact, that I had to get my thoughts on paper as I scrolled through the pages.
Let me state upfront that it is a Public Investment Corporation (PIC) document marked “Private and Confidential”. However, as it has obviously been circulated widely, the confidentially part is moot.
The document summarises the transactional and advisory fees paid by the PIC from 2014 to 2018 to various financial firms in relation to various transactions. The total comes to a staggering R960m.
To be fair, many of those costs relate to legitimate brokerage fees and JSE trading costs incurred in the purchasing and selling of shares, and were paid to well-known stockbrokers. For instance, and as a representative benchmark, JP Morgan was paid R6.2m, Investec R6.1m and HSBC R300,000.
The black economic empowerment (BEE)-rated stockbrokers got a bigger slice of the pie, with Taquanta earning R10.2m, Vunani R25.2m and Legea R27.5m. But all of this was chump change relative to other amounts paid to completely unknown entities for a range of questionable and badly defined services.
Let’s start with the highest number, R192.8m paid to that “eminent” firm, Symphony Capital Advisory Services, for “structuring, advisory, execution and implementation” services. In my 20 years in financial services, I have never come across Symphony in any shape, size or guise. The website is worth a visit though, as it looks like a ready-made template one can purchase for $60 online. Not a word about who is behind Symphony. Lots of verbiage about “the art of structuring”. Art indeed. For the price they charged, it must have been a Picasso.
Symphony CEO Jonathon Tyler’s LinkedIn profile
Next down the line is R110m paid to Mergence Africa Capital for “deal structuring and derivative structure”. I know Mergence as a small, boutique BEE asset manager. I have never encountered them as corporate deal structurers of anything. Another flimsy website. A few pages of nothing. You would think that, after earning R110m, they could at least afford a graphic designer. Symphony and Mergence pocketed R203m for advising the PIC on its clearly “very complex” investment in Vodacom.
The next “advisor” is more sneaky. So sneaky, in fact, that it deserves a separate section in the report. The section, headed Transactional Advisors (Listed Investments), refers to a committee requesting details of all fees paid to Nana Sao, Sao Capital and any related entities, in relation to the MTN Nigeria, Angola Government Bond, the Kenyan Energy Fund Company and other transactions.
I assume the committee is a standing committee on public accounts, a possible procurer of the report.
The amounts are detailed in a table and come to R367.7m, with R64.2m going to Sao. Some camouflage is attempted in presenting the number as “other advisors” are also listed, namely Symphony, Lancaster, Renaissance Capital, Mergence and the obscurely named DM5, White & Case and Templers. Needless to say, not one of these names rings any bells in this church. The fees are described as being “advisory and referral fees”.
The mysterious Nana Sao
Former Public Investment Corporation (PIC) CEO Dan Matjila.
The payments to Sao are annotated as having taken place between 2015 and 2017, a period that coincides precisely with Dan Matjila’s tenure as the PIC’s CEO. He assumed the position in December 2014. Rumours of a link between a London-based former Goldman Sachs banker, Nana Sao, and Matjila have circulated in financial circles for years. I have been told independently by two investment banks that if you wanted to secure funding from the PIC for a transaction, such as a JSE listing, you were pointed at Nana Sao. After an “advisory fee” had been negotiated, the funding would materialise. Essentially, he seemed to act as a fixer. Some investment banks walked away, others didn’t. As a disclaimer, all this is unverified.
But the litany of misspent public servants’ money continues. Next comes the Lancaster Group headed by Jayendra Naidoo. The Lancaster Group, with PIC’s backing, became the BEE partners of the ill-fated Steinhoff in October 2016, acquiring R4.6bn worth of shares. Lancaster was also listed as an adviser to the deal, earning R22.9m in fees. The same model was subsequently used by AEEI in the listing of Ayo Technologies, with AEEI paying itself a handsome advisory fee of R57.7m for securing a R4.3bn PIC investment in Ayo. Rinse and repeat.
An R11.4m “referral fee” was also paid to an anonymous Thirdway Group for an investment in Novare Africa Properties Fund. Novare, last time I checked, marketed itself as an independent consultant to pension funds.
The document details a sad litany of plunder of the PIC’s assets. In all, almost R1bn. By my estimate, more than half unnecessary and unwarranted.
But let me stop for now. I have run out of words, literally and figuratively. I had to limit this article to 800 words – at 799, the words failed me.
Magda Wierzycka is the founder and CEO of the Sygnia Group. You can follow her on twitter at @Magda_Wierzycka
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER